We all know that new energy is the way of the future… but what comes next?

Even many investment promotion professionals only scratch the surface when it comes to this statement—they can’t really explain why.

Moreover, whenever people hear “new energy” or “solar industry,” they instinctively think of “scamming subsidies.”

However, having transformed from a “junk industry” into a “wealth generator,” China’s solar industry truly did rise to become the world leader through subsidies.

In a special live stream on August 25, Wang Tao, a consultant at the Guchuan Industrial Research Institute, provided an in-depth analysis of the photovoltaic industry, covering the industrial chain and development opportunities, addressing the pain points of investment promotion head-on.

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A "False Start"

Strictly speaking, the photovoltaic industry refers to the solar power generation sector. Its core product is the solar panel, and the core material of solar panels is crystalline silicon.

Mastering the production of crystalline silicon (polysilicon and monocrystalline silicon) means controlling the upstream segment of the photovoltaic industry.

However, the manufacturing of polycrystalline silicon is highly technical and tests a country’s chemical industry capabilities.

In terms of research into manufacturing processes, we began at roughly the same time as other countries, and the initial gap was not significant.

After 1987, everything changed.

That year, Ethyl Corporation in the United States successfully tested its production line, becoming the first to achieve industrial-scale production of polycrystalline silicon, and quickly entered an era of large-scale production with annual output reaching hundreds and thousands of tons.

Although China had solar power stations, they were essentially experimental in nature, lacked production capacity, and relied on imports for much of their equipment.

It wasn’t until 2005 that we established a demonstration production line with an annual capacity of 300 tons, marking the beginning of our industrial production capabilities. In 2007, the first thousand-ton-scale production line was completed, and industrialization officially began.

The driving force behind this came from preferential policies for solar cells in European and American countries such as Germany and Spain.

At the time, European and American governments were encouraging the public to use clean energy, causing a surge in demand for solar panels. Polysilicon supplies became critically tight, and prices skyrocketed, even exceeding $400 per kilogram.

Such high demand and premium prices attracted capital from all quarters.

Consequently, by 2009, 19 Chinese companies had begun producing polysilicon, with an annual output exceeding 30,000 tons, accounting for over 50% of global production capacity. At the same time, another 50 companies were in the process of constructing, expanding, or planning polysilicon production lines.

At this pace, China’s polysilicon output was projected to exceed 100,000 metric tons in 2010, yet domestic demand at the time was less than 20,000 metric tons, and global demand stood at around 40,000 metric tons.

Every company was scrambling to maximize capacity, creating an extremely chaotic situation.

Sure enough, just as numerous Chinese companies were frantically expanding their polysilicon production, the entire structure collapsed.

Misfortunes never come singly; a full-scale collapse ensued

The first blow came from the European debt crisis.

The 2008 U.S. subprime mortgage crisis dealt a severe blow to Europe, but since many European countries use the euro, they cannot independently adjust exchange rates and interest rates; they can only stimulate the economy through expansionary fiscal policies.

Simply put, it was a case of “paying debt with debt, borrowing to repay loans.”

With their debts exceeding their assets, European nations had no choice but to tighten their belts just to get by. When they could barely afford to eat, they certainly had no energy left for anything else.

Consequently, governments across the continent began cutting all kinds of “nice-to-have” subsidies.

China’s “polysilicon boom” stemmed from demand in the European and American markets, and that demand was driven by subsidies.

Once the subsidies disappeared, so did the demand.

Finally, the State Council declared polysilicon production an “industry with excess capacity,” bringing this frenzy to an awkward end.

The second blow came from sanctions imposed by European and American countries.

In the global market competition, China actually held a certain advantage. The ultra-low prices resulting from ample production capacity and large-scale manufacturing instantly shattered the barriers that Western manufacturers had spent years building.

Unwilling to watch Chinese companies gain ground in the global market, European and American nations sought every means to create trouble.

Specifically, they imposed “anti-dumping and countervailing” tariffs on Chinese products, forcibly raising prices to erode their cost advantage.

The destructive power of this tactic was staggering.

Since the market competitiveness of Chinese products originally stemmed from their ultra-low prices, the forced price hikes instantly wiped out their competitive edge.

In 2012, China’s photovoltaic industry faced a collapse; all 43 polysilicon manufacturers nationwide halted production, with not a single one spared.

The Counterattack Begins with Subsidies

In the first round, we suffered a complete defeat.

The defeat was to be expected; after all, at that time, Chinese companies’ only advantage was their low prices, and they lacked core competitiveness.

Even if European and American countries hadn’t imposed tariffs, our photovoltaic industry would still have collapsed—polysilicon materials require massive imports, and if foreign manufacturers collectively raised prices, our price advantage would have vanished just the same.

In 2010, China’s installed PV capacity stood at just 500 MW, while the small Eastern European nation of the Czech Republic had 1.5 GW—three times our figure.

With core technologies in others’ hands and the core market outside China, it was only natural that domestic manufacturers would remain underdeveloped.

Therefore, to fundamentally compete with European and American companies, we must not only master core technologies but also cultivate a vast domestic market.

Consequently, the Chinese government launched a major counteroffensive.

Since Western governments have chosen to view us as rivals, we must step up and play the role of a worthy opponent.

In the face of various “anti-dumping and countervailing” measures, China has also imposed reciprocal sanctions on products from European and American manufacturers.

The results were immediate:

U.S. polysilicon companies completely lost the Chinese market, while German polysilicon companies chose to compromise and reached a price agreement with the Chinese government.

Our second step was to provide subsidies openly and transparently.

The central government successively issued the “12th Five-Year Plan for the Development of Solar Power Generation” and the “State Council’s Several Opinions on Promoting the Healthy Development of the Photovoltaic Industry,” which clearly defined the standards and duration of electricity price subsidies and removed polysilicon production from the list of industries with excess capacity.

China’s photovoltaic industry was revived that very year, with 16 companies resuming operations.

With the support of official policies, Chinese products regained their “low-price advantage,” and their technological capabilities continued to strengthen.

In 2014, building on the first round of anti-dumping and countervailing duties, the United States initiated a second round of anti-dumping and countervailing duties.

We responded decisively: China’s Ministry of Commerce and General Administration of Customs issued an order prohibiting the import of polysilicon under processing trade arrangements.

The message was crystal clear:

First, Chinese companies could no longer earn “blood money”; the “both ends outside” model had to change.

Second, since they won’t let us profit from them, we won’t let them profit from us either.

The reason we had the confidence to engage in high-stakes confrontation with foreign companies was that we had mastered the core technology.

Compared to the “bloated” capital monstrosity of a few years ago, China’s photovoltaic industry has quietly undergone a “metamorphosis”:

Technologically: It has broken free from dependence on foreign countries and achieved self-reliance.

In terms of business models: We have moved beyond the “both ends outside” processing trade model and are now enjoying a larger, sweeter slice of the pie.

In terms of policy: We have received full support from the state.

Naturally, China has taken the baton from the West to lead the second wave of expansion in the solar industry.

Just how formidable is China’s solar industry?

Having broken free from the "both ends outside" dilemma, China’s solar industry now possesses not only independent technology but also a vast domestic market.

All that remains is to put on a show.

In 2015, China produced 165,000 metric tons of polysilicon, accounting for 47.8% of global output. It produced 79.8% of the world’s silicon wafers, 66% of solar cells, and 69.1% of other components.

Among the top 10 polysilicon companies, four are Chinese; among the top 10 wafer manufacturers, nine are Chinese; among the top 10 solar cell producers, seven are Chinese; and among the top 10 manufacturers of other components, six are Chinese.

By 2021, China’s polysilicon production had ranked first globally for 11 consecutive years, new installed capacity had ranked first globally for 9 consecutive years, and the total output value of the photovoltaic manufacturing sector had exceeded 750 billion yuan.

No further explanation is needed; the data speaks for itself.

More importantly, the equipment and raw materials used to achieve this installed capacity are all independently controlled by us.

Today, driven by the “dual carbon” goals, the new energy industry is entering another period of explosive demand.

From 2007 to 2017, the Chinese people spent a decade building an entirely new industry from scratch and rising to become the world leader.

The driving forces behind this were, simply put, the market and technology.

Technology is the very foundation upon which a company stands. Only by mastering technology can a company remain unflappable in the face of various threats from others.

The market, meanwhile, is a company’s home turf. Only with a market can a company have sufficient room to grow. In particular, a vast domestic market is crucial for the development of technology companies.

In today’s global industrial chain, a country without technology or a domestic market has absolutely no leverage; it has no choice but to meekly hand over its resources and labor.

We have experienced such times ourselves. Fortunately, however, we managed to survive.

So, in the end, it really comes down to “the strong must strengthen themselves.” Just like China’s photovoltaic industry: once technology, market, and policy were all in place, it naturally ascended to the pinnacle of the industry.