China solar giant faces glare of US trade war
March 12, 2012 2 Comments
In the eastern Chinese city of Wuxi, home to the world’s biggest maker of solar panels, labour is so cheap that workers carry out jobs by hand while machines designed to perform the same tasks sit idle.
The low cost of labour, coupled with the massive scale of production at its 14,000-person plant, have enabled China’sSuntech to become the global industry leader in just a decade.
Chinese producers now dominate the global solar power business. But their success has become a major global trade issue as American companies accuse them of dumping in the US market and receiving unfair subsidies from Beijing.
The US government is due to announce findings on the issue later this month, which could result in duties against Chinese manufacturers.
Suntech denies unfair business practices have helped make it the world’s largest producer, but it makes no secret of its strategy of keeping prices low to boost sales and make solar power available to more people.
“We don’t believe we have any unfair subsidies or anything like that,” said Suntech’s vice president for global marketing Edwin Huang. “We just hope it doesn’t turn into a full-scale trade war. It’s not good for anyone.”
US companies have accused China of improperly subsidising its solar sector as part of a no-holds-barred commercial battle for supremacy over an industry experts estimate will be worth trillions of dollars in the future.
They say Chinese competitors have access to cheap financing from state-owned banks and outright government subsidies aimed at building up the industry, as Beijing makes alternative energy a priority.
At least three US solar companies collapsed last year as global prices slumped, among them Solyndra, which had a $535 million loan guarantee from US President Barack Obama’s administration.
Evergreen Solar, once listed on the Nasdaq exchange, and high-profile Intel spin-off SpectraWatt also shut down.
One of the firms which lodged the complaint to the US government, SolarWorld Industries America, has said Chinese producers are boosting output to dump “enormous quantities” of solar cells and panels in the US market.
At Suntech’s factory, workers are not focused on politics, but on the task at hand — making a “sandwich” of solar cells, plastic sheeting and glass which will become the finished solar panel.
“The cells are easy to break. You have to be careful,” said one.
Workers on this assembly line receive a base salary of 1,500 yuan to 1,800 yuan ($240 to $290) a month and the factory runs 24 hours a day.
Access to an army of workers has helped Suntech lower production costs, passed on to customers in lower prices. A collapse in the price of silicon — the raw material for making solar cells — has also slashed costs.
Still, with global solar panel prices at around $1.0 per watt of generation, profit margins for Suntech have been squeezed. Some blame Chinese producers themselves for flooding the market and pushing prices down.
“In the long term, yes, lower prices are good for everyone. Our aim is to get more people to use solar energy. It’s a volume game,” Huang said.
China is the world’s second biggest oil consumer, but it is making large strides forward in clean energy.
To promote solar power, the Chinese government last year started to offer a guaranteed price to producers, which made it more attractive to generate electricity from solar energy.
With the US market in question and the European market expected to grow little this year due to the sovereign debt crisis, Suntech expects its home territory of China to make a greater contribution this year.
“By next year, China will become the largest single market in the world,” Huang said.