A new report from Wood Mackenzie points out that from 2023 to 2026, China will account for over 80% of global production capacity for polysilicon, wafers, cells and modules. In 2023, China’s investment in its domestic solar industry will exceed $130 billion.
The report, titled “How will China’s PV capacity expansion impact the global solar module supply chain?”, believes that by 2024, China will have over 1TW of wafer, cell and module capacity coming online, meaning China’s capacity alone can meet global annual demand from now until 2032.
Huaiyan Sun, Senior Consultant at Wood Mackenzie and report author, said “High polysilicon profits, technology upgrades and policy support are driving the expansion of China’s solar manufacturing, and despite governments strongly advocating for local manufacturing growth in overseas markets, China will continue to dominate the global solar supply chain and further widen the technology and cost gap with its competitors.”
Chinese module prices much lower than Europe and U.S.
While strong government policies overseas have begun driving local solar manufacturing growth, their costs remain uncompetitive compared to supply from China. The report said modules made in China are 50% cheaper than those made in Europe, and 65% cheaper than those made in the U.S.
Take the U.S. for example, it lacks production capacity for wafers, cells and PV glass, still relying on imported upstream materials. With advanced technology, cost advantages, and a complete supply chain, modules made domestically in China are 65% cheaper than the U.S.
Modules made in Europe are twice the price of Chinese modules, also lacking market competitiveness and obstructed sales.
In PV manufacturing capacity, driven by the U.S. Inflation Reduction Act (IRA) and India’s Production Linked Incentive (PLI) scheme, the U.S. and India have jointly announced over 200GW of planned module capacity since 2022.
Huaiyan Sun said, “Despite considerable module expansion plans, overseas markets will still be unable to eliminate reliance on China for wafers and cells in the next three years.”
By 2024, domestic capacity for wafers, cells and PV modules will all exceed 1TW, continuing to lead globally in technology, meaning China’s capacity alone is 17 times that of all other countries combined.
Looking at capacity expansion across the PV industry chain, one thing to note is that capacity growth for cell manufacturing will outpace increases in wafer and module segments. The firm thus expects cells to become the most competitive part of the module supply chain.
Looking beyond China, the report expects India to overtake Southeast Asia as the number two module producer by 2025, aided by its strong PLI incentives.
P-type cell lines will gradually shut down as new competition begins
The report also pointed out that oversupply and fierce competition will characterize the solar supply chain going forward, already leading to cancelled expansion plans.
Concerns about oversupply mainly target older production lines making low-efficiency products (like p-type and M6 cells). Demand for p-type cells will decline from 2023, with WoodMac analysts forecasting p-type cell demand to be just 17% of supply by 2026.
This also means p-type cell lines will need to urgently transition to n-type TOPCon lines, or face gradual shutdown.
“There’s no denying oversupply will hamper some current expansion plans. Over 70GW of capacity has been cancelled or paused in China in the past three months alone, marking the start of a challenging period for China’s solar manufacturing industry.”
