Solar Panels 2007

China's production of solar panels is estimated to have more than doubled to 400MW in the past two years, making it one of the world's largest providers of the line. The country now accounts for approximately 20 percent of global solar panel output, up from 10 percent in 2004.

Output growth rate, however, will be slower in the next few years. In 2007, annual production is expected to increase by a modest 20 to 30 percent to reach about 500MW, still leaving much of capacity unutilized.

The main constraint to higher growth is the shortage of polysilicon, the main raw material of wafers and cells. While the supply situation is expected to improve, it is still projected to fall short of demand in coming months since most of the expansionary activities of polysilicon companies are expected to take effect only in or after 2008.

China is now capable of producing 1,500MW of solar modules, five times its capacity at the end of 2004, as many suppliers established new facilities or upgraded production lines to take advantage of the high demand coming from the EU and the US.

The following are some of the other key trends that we see in China's solar panel industry:

- Overall capacity will continue to expand, but not as fast as it rose in 2005. Most companies will increase capacity by only 20 percent or less.
- Prices will increase further as polysilicon remains in short supply. The majority of companies will limit adjustments to within 10 percent, however, to keep quotes competitive.
- The amorphous segment will continue to grow as more mono- and polycrystalline panel makers venture into the line. Crystalline panels, on the other hand, will adopt thinner, more efficient cells.
- More companies will vertically integrate their production facilities to improve their control over costs along the supply chain, and to ensure a stable supply of components, especially cells.