NEW DELHI

A significant shift has occurred in the global solar panel industry. For the first time since 2018, a US company, First Solar Inc., has ascended to the position of the world's most valuable solar manufacturer. 

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This development comes amidst a confluence of factors impacting China's previously dominant solar sector, including internal price wars, external trade barriers, and geopolitical tensions.

China has long been the undisputed leader in solar panel production, boasting control over more than 80% of every step of the supply chain. However, the rapid build-up of manufacturing capacity in China has outpaced global demand, leading to a fierce price war among Chinese companies. 

This price war has severely impacted profit margins, with Longi Green Energy Technology Co., a major Chinese player, incurring a net loss of 2.35 billion yuan (USD 325 million) in the first quarter after netting a profit of 3.64 billion yuan in the same period of 2023.

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Furthermore, Chinese solar giants are encountering increasing geopolitical scrutiny. The US and other countries have criticised China's overcapacity, arguing that it hinders the development of robust solar panel production facilities in other regions. This criticism has translated into concrete actions, with the Biden administration recently implementing higher tariffs on Chinese solar panels. This move aims to bolster domestic US manufacturers and reduce dependence on Chinese imports.

First Solar, the Arizona-based company that has now claimed the top spot, is a prime beneficiary of the current situation. The US tariffs on Chinese solar panels have created a more favourable market environment for domestic producers. First Solar can now sell its panels at significantly higher prices within the US market compared to the global average. 

Additionally, the Inflation Reduction Act, recently passed by the US government, includes provisions for subsidising the expansion of domestic solar panel production. 

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When considering the critical goal of combating climate change by increasing clean energy production, First Solar still has a gap to bridge compared to its Chinese counterparts. In 2023, First Solar produced 12 gigawatts of solar panels, while Jinko Solar Co., a leading Chinese manufacturer, produced a staggering 79 gigawatts. This highlights the disparity in terms of overall clean energy generation capacity.