PV industry analysis: full analysis of photovoltaic industry chain

**Abstract** The growth of the photovoltaic power generation market demands that the photovoltaic manufacturing industry deliver low-cost, high-efficiency solar modules. As the photovoltaic industry matures and finds broader applications, the era of easy profits has ended. The days when companies could simply invest in production lines and hire expensive teams to generate profit are gone. Today, only those who adopt advanced technologies, efficient layouts, and modern manufacturing methods can produce high-quality, cost-effective, and energy-efficient photovoltaic products. Whether the manufacturing supply chain is efficient, and whether it can maintain high conversion efficiency and stable quality at low costs, remains the key foundation for the widespread adoption of PV technology. After all, the cost of solar power is still slightly higher than that of thermal power, which continues to be a major barrier to its large-scale application. **7.1 How Does the PV Industry Chain Implement "Vertical Integration"?** Currently, Chinese PV companies have gained strong global competitiveness, which is why the U.S. and EU repeatedly use "anti-dumping" measures to impose sanctions on them. The photovoltaic industry is now at a critical stage—facing price competition and an industry-wide shake-up. With the upcoming boom in PV development, many traditional manufacturers struggle with heavy debt and outdated equipment, making it hard to recover. For others, however, this is a golden opportunity. In other words, "anti-dumping" policies present both challenges and opportunities. Since 2008, many PV companies have discussed "vertical integration," driven by shortages in polysilicon, ingots, and cell production. Companies realized they needed to integrate the entire supply chain. One PV company once proudly stated on CCTV, "We are the most complete and longest photovoltaic enterprise in the world." But does a complete industrial chain automatically mean a competitive advantage? In today’s growing PV market, the completeness of the industrial chain isn’t the most important factor. Instead, it's more crucial for Chinese PV companies to build each link of the chain into highly skilled, competitive manufacturing units. By fostering collaboration, they can achieve low-cost, low-material consumption, high-efficiency production. This will help create world-class photovoltaic brands. It requires careful planning, effective management, and the establishment of a smart, advanced, and lean manufacturing system, ensuring that Chinese PV companies remain globally competitive despite international pressures. **7.2 Production Capacity of the PV Industry Chain** If a PV company aims to control the entire supply chain, the production capacity of each segment must align with the upstream and downstream needs. Table 7-1 illustrates the capacities of each link in the PV manufacturing chain, assuming a 1 GW component output. While it's possible to produce the full chain internally, this approach can increase systemic risks during industry downturns. Therefore, it's often better for a company to focus on one or two links, adjusting production based on market demand. A fine division of labor can lead to greater efficiency. If a company wants to go full chain, it may be wise to expand the production of scarce resources like polysilicon or ingot slicing, rather than internalizing everything. This approach reduces risk and ensures stability. For example, even though China claims overcapacity in some areas, it still imports significant amounts of polysilicon, showing that focusing on strategic segments can yield better returns. Moreover, the production capacity of the industry chain is not fixed. Flexible manufacturing technologies allow for variable-capacity production, which is essential in a rapidly changing market. This adaptability is vital for modern PV companies aiming to stay competitive. **7.3 Spatial Layout of the PV Industry Chain Planning** Figure 7-1 shows the entire PV industry chain, from ore to photovoltaic power plants. The chain includes metal silicon smelting, polysilicon production, wafer cutting, cell production, module assembly, and inverters. However, vertical integration poses challenges because each segment has different geographical requirements. For instance, metal silicon production should be near silica mines, while polysilicon purification and ingot casting need low electricity costs and proximity to markets. Battery production requires good raw materials, and modules benefit from being close to end markets due to high transportation costs. Thus, it's more efficient to disperse factories across regions where each segment can operate optimally. This allows companies to leverage local resources, policies, and markets to achieve the best overall performance. For example, polysilicon production might be concentrated in resource-rich central and western regions, while module manufacturing is located closer to end users. Additionally, with rising trade barriers in Europe and the U.S., setting up overseas factories is becoming necessary. This not only helps avoid tariffs but also allows access to foreign technology and innovation. Companies can acquire or partner with local firms to establish a global presence and improve their technical capabilities. When building overseas facilities, companies should take advantage of local incentives, such as land, tax breaks, and talent support. They must also develop a collaborative "cloud manufacturing" system to enhance coordination and competitiveness across the global supply chain. **7.4 Time Expansion of the PV Industry Chain** From a macro perspective, the production capacity of the PV industry chain should align with the construction of photovoltaic power plants. No single company can expand the entire chain at once. Instead, the process should start with key segments, gradually expanding as conditions allow. Initially, companies should focus on areas where there is a shortage, such as polysilicon or ingot slicing. Building a component factory alongside power plant operations can offer cost and service advantages. However, not every power station operator needs its own manufacturing facility; it’s better for those planning long-term investments to consider this carefully. As the first phase expands, future growth should depend on market conditions and the company’s strengths. For segments with strong manufacturing potential, priority expansion is advisable. For weaker or over-supplied areas, an OEM (Original Equipment Manufacturer) model can help reduce risks and optimize capital use. Flexibility in manufacturing is crucial, especially in a volatile market. Companies must be able to adjust production quickly to meet changing demands. Information technology also plays a key role in monitoring and optimizing the entire supply chain, enabling real-time decision-making and enhancing competitiveness. **7.5 Auxiliary Links That Cannot Be Ignored** While most investors focus on the main PV industry chain, the auxiliary material industry is equally important. These include materials like bismuth, graphite, EVA film, silver paste, ultra-white glass, and copper foil tape. Their production and quality directly impact the performance of PV systems. China’s auxiliary material producers have made significant progress, competing successfully against foreign giants like DuPont and Vesuvius. Now, the focus should be on improving R&D and developing internationally leading products. For materials still imported, efforts should be made to fill the gaps. Beyond materials, there are also emerging areas like BIPV (Building-Integrated Photovoltaics), including solar tiles, curtain walls, and multi-functional brackets for greenhouses. These represent a growing market that is yet to be fully recognized. Finally, the recycling of silicon and auxiliary materials after the lifespan of PV systems is another important area. Recycling processes for waste materials, such as silicon scraps, graphite, and back sheets, will become increasingly relevant as the industry scales. With abundant quartz, graphite, and aluminum resources, China has the potential to establish large-scale production bases for these materials. This will play a crucial role in supporting the sustainable development of the PV industry.

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