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China to dominate global solar supply chain

China is forecast to dominate global solar manufacturing capacity from 2023–2026 and is expected to continue to widen the technology and cost gap with competitors, despite local manufacturing policies in overseas markets.
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After investing over $130bn into the solar industry in 2023, China will hold more than 80% of the world’s solar polysilicon, wafer, cell and module manufacturing capacity from 2023–2026, according to recent report from Wood Mackenzie.


More than 1 TW of wafer, cell and module capacity is forecast to come online by 2024, meaning China’s capacity is sufficient to meet annual global demand now through to 2032, says the study.


Although strong government policies in overseas markets have started to increase local solar manufacturing, they are still not cost-competitive compared to Chinese supply. A module made in China is reported to be 50% cheaper than that produced in Europe and 65% cheaper than the US.


The US and India have announced more than 200 GW of planned module capacity since 2022, driven by the Inflation Reduction Act (IRA) in the US and the Production Linked Incentive (PLI) in India.


‘Despite considerable module expansion plans, overseas markets still cannot eliminate their dependence on China for wafers and cells in the next three years,’ comments Huaiyan Sun, Senior Consultant at Wood Mackenzie and report author.


China is expected to continue to be the global technological leader with announcements to build more than 1,000 GW of N-type cell capacity, the next-generation technology after P-type. This represents 17 times more capacity than the rest of the world, according to the report.


Looking outside China, India is forecast to overtake south-east Asia as the second-largest module production region by 2025, which will be driven by India’s strong PLI incentives.


Oversupply and intense competition will characterise the solar supply chain going forward, notes the report, and is already driving cancellations of some expansion plans. Concerns about the market’s oversupply are mainly aimed at old production lines that produce lower efficiency products, such as the P-type and M6 cells. Demand for P-type cells began to decline in 2023 and Wood Mackenzie analysts expect it to be only 17% of supply by 2026.


Sun adds: ‘Oversupply will undeniably hinder some of the current expansion plans. More than 70 GW of capacity in China has been terminated or suspended in the past three months.’


The solar manufacturing industry in China is entering a challenging time. Module manufacturers will be forced to take orders at a loss, reduce capacity or shut down entirely, warns the study. 

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