Electrical Equipment / Components & Telecoms

According to industry experts, China's plan to restrict the export of key solar energy manufacturing technologies may affect the U.S. solar energy supply chain.

According to Huacheng Import and Export Data Observation, the Ministry of Commerce and the Ministry of Science and Technology of the People's Republic of China are considering the inclusion of advanced technologies used to manufacture silicon ingots and silicon wafers in the Catalogue of Technologies Prohibited and Restricted from Export in China. Silicon ingot and silicon wafer are the basic elements of solar panel production.

At present, almost all solar silicon ingots and wafers and most of the equipment used in the relevant manufacturing process in the world are produced in China, especially for the large size solar panels that increasingly dominate the photovoltaic market.

According to the Notice of the Ministry of Commerce of the People's Republic of China for Public Consultation issued on December 30, 2022 (read the original text), the proposed adjustment is one of the dozens of potential amendments on China's export control list, which are aimed at "strengthening the management of technology import and export".

If the plan is adopted, China's photovoltaic enterprises must obtain the permission of the provincial competent commercial department to export such technology.

The manufacturing process of solar panels is to extract high-grade silicon from quartz and make it into cylindrical silicon ingots, then cut it into thin slices and conduct chemical treatment to produce cells that can convert sunlight into energy. The export control proposed by China will target the key equipment and technology involved in the middle stage of the process.

The International Energy Agency (IEA), headquartered in Paris, estimates that Chinese enterprises now control about 80% of the global solar manufacturing supply chain, and nearly half of the equipment needed to manufacture solar panels and their components are produced by Chinese enterprises. 97% of the world's solar-grade silicon ingots and wafers are produced in China.

According to Huacheng Import and Export Data Observation, industry insiders said that at present, only Chinese enterprises can manufacture 182 and 210 mm silicon wafers with larger dimensions. It is expected that the global market share of such silicon wafers will reach 96% in 2023. The solar panels with lower cost and higher efficiency can be produced by using larger silicon chips.

Last year, the United States passed legislation encouraging the establishment of solar energy manufacturing facilities in China, prompting some companies to launch billions of dollars of factory investment plans.

At present, there are no factories producing solar silicon ingots or silicon wafers in the United States, but at least two companies - the Qcells division of the Korean conglomerate Hanwha Group, and CubicPV Inc., a start-up supported by Bill Gates - have announced an advanced plan to fill this gap. It is expected that relevant facilities will be online in the next few years.

Industry analysts said that China's plan to revise the list of restricted export technologies does not seem to be a counter-measure against the U.S. policy of restricting semiconductor exports.

However, Ilaria Mazzocco, a senior researcher at the Center for Strategic and International Studies, a think-tank in Washington, said that China's move would still bring trouble to the United States. Huacheng Import and Export Data Observation reported.

Dan Wang, an analyst at GaveKal Dragonomics, a consulting company, said that because solar energy technology has been widely commercialized, cost competitiveness has become one of the key advantages held by China's solar energy industry. He said that if the manufacturing technology of these large size components could not be obtained, the production cost of solar energy in the United States might be further increased. This will also force potential manufacturers in the United States to find equipment in other places, or wait for the production expansion of these machines in the United States, which may take several years.

In response to the tariffs imposed by the United States on Chinese-made solar panels, some Chinese enterprises have set up factories in Southeast Asia, and about 80% of the solar panels imported by the United States come from Southeast Asia. In December of last year, a survey conducted by the US Department of Commerce reached the preliminary conclusion that some Chinese solar panel companies circumvented US tariffs by conducting business in Southeast Asia, but still carried out most high-value production in China, such as silicon ingot and silicon wafer production.

The process of manufacturing silicon ingots and wafers is similar to that of manufacturing semiconductors. The United States plays a leading role in the semiconductor supply chain. The Biden government imposed more extensive export controls on advanced semiconductors last year. If China imposed export restrictions on key solar energy manufacturing technologies, this marked that the conflict between China and the United States in the science and technology supply chain would become increasingly fierce. Huacheng Import and Export Data Observation reported.