Supply chain diversification trend is clear, Overseas PV module production capacity starts to rise

Some countries have started to restrict the country of origin of photovoltaic products in recent years, to ensure their energy independence, and they are trying to establish local production capacity through policies such as the US's Inflation Reduction Act (IRA), Anti-circumvention Investigations in Southeast Asia, and India's BCD Tariffs, ALMM List, and Production Linked Incentive Scheme (PLI). Europe is also reviewing the need for restrictions on imported products due to the impact of Chinese PV module prices.

However, capacity of all aspects of photovoltaic industry is still highly concentrated in China, with the concentration of silicon material, silicon wafers and cells reaching 93%, 97%, and 90% respectively, and PV module also accounting for 82%. Existing non-Chinese capacity is still insufficient to meet market demand. If large-scale restrictions on imports are implemented without ensuring a certain supply source, it will make it difficult to meet potential demand and cause a decline in installed capacity. For example, in 2022, the US implemented UFLPA and prohibited the import of PV modules made from Xinjiang silicon materials, as a result, installed capacity decreased by 16% in that year, seriously affecting the development process of photovoltaic.

Driven by various subsidy policies, a large number of overseas expansion plans emerge in 2023, especially in the United States and India, many new capacities will be launched in 2024. According to incomplete statistics, by the end of 2024, overseas PV module production capacity will grow by at least 78% to 270 GW, compared to the beginning of 2023. Some manufacturers are still evaluating the possibility of expanding their factories in Europe, the Middle East and etc. regions, which will change the competitive landscape in which Chinese PV modules occupied largest market in the past.

It is worth noting that considering the capital investment amount, technical difficulty and other barriers to entry in the industry, the current overseas expansion plan is highly concentrated in the part of PV modules. There are a small number of expansion plans for solar cells, but compared to PV modules, there is still a shortage, and the expansion plans for upstream silicon material and silicon wafer are extremely few currently. For these new solar cells and PV modules manufacturers, it is still difficult to completely get rid of the dependence on the Chinese supply chain in the short term.

Overall, the photovoltaic industry will continue to grow in 2024, even though the limitations of grid carrying capacity, installation manpower and etc. will have a certain impact on the growth rate. However, capacity expansion and price reduction will effectively drive demand, which is a promising prospect for the power plant development. For the supply side, it will be more challenging. With the significant increase in production capacity, fierce price competition, and product technology iteration, it will be more challenging for manufacturers to control costs, develop technology, and implement sales strategies. The overall supply pattern will also become more complex due to the landing of overseas production capacity, and the changes in overall industry will become more diverse and rapid.

Cherry Wang

Nov.17, 2023