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Associated Press
Workers install solar panels at a power plant in northwest China. Solar panel makers that grew fast over the past decade are suffering big losses from slumping global sales and a price war.

China solar sales go cold

Industry faces weak demand and price war

– Chinese solar panel makers that grew fast over the past decade are suffering big losses due to slumping global sales and a price war that threaten an industry seen by Communist leaders as a role model for hopes to transform China into a technology leader.

Another looming challenge: Moves by the United States and Europe toward imposing possible anti-dumping tariffs on Chinese-made solar panels that might further depress sales.

Financial problems are likely to force painful changes in the Chinese industry including possible mergers, bankruptcies, factory closures or layoffs, industry analysts say.

“The next 1 1/2 years will be very challenging,” said Frank Haugwitz, a renewable energy consultant in Beijing.

Companies have been hurt by weak sales, especially in debt-crippled Europe, the leading global solar market, but also by Chinese government policies that encouraged hundreds of small companies to rush into the industry. They flooded the market and depressed prices.

Five major Chinese manufacturers, including industry leaders Suntech Power Holdings Ltd. and Yingli Green Energy Ltd., reported total losses of nearly $250 million in the latest quarter. One of them, LDK Solar Co., also reported an eye-popping loss of $588.7 million the previous quarter.

Pioneers such as Suntech, Yingli and Trina Solar Ltd. that were founded before 2005 grew to become some of their industry’s biggest competitors as Germany, Spain and other European countries promoted solar power with subsidies and low-cost loans.

That success encouraged Communist authorities who saw solar, wind and other renewable energy as a way both to curb China’s growing reliance on imported oil and gas and to take the lead in an emerging industry without established competitors.

Solar power, along with such fields as biotechnology and aerospace, was declared a “strategic emerging industry” targeted for development as part of efforts to transform China from a low-wage country of farmers and factory workers into a creator of technology.

Beijing provided grants and low-cost loans. Local leaders encouraged companies to start producing solar panels or components to make them.

Producing the basic element of a solar panel – the hand-size black solar cell made of polysilicon that converts the sun’s light into electricity – is relatively simple using equipment that a new company can buy as a kit from European suppliers. That allowed novices to start production quickly, while bigger manufacturers also assemble the cells into power-generating modules.

New companies still were springing up in 2011 even after Western countries that were hammered by the global crisis cut subsidies and other support. Supplies surged as sales growth stalled, forcing sellers to slash prices to unprofitable levels.

Since 2010, the price of polysilicon wafers used to make solar cells has plunged by 73 percent, according to Aaron Chew and Francesco Citro, analysts for Maxim Group, a financial firm in New York City.

The major Chinese manufacturers have accumulated a total of $17.5 billion in debt.

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