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Chinese Solar Manufacturers Refocus On Asia

China’s big solar panel manufacturers are pushing hard for market share in Japan, threatening to edge out local manufacturers as cost-conscious solar plant operators are enticed by the lower prices Chinese producers offer.

Companies such as JinkoSolar Holding and Trina Solar sense an opening for their low-cost products, as plant operators in Japan look to cut spending in response to a change in the country’s feed-in tariff system in October. The operators must now compete against one another to qualify for subsidies.

Chinese players are also looking to open new doors as others begin to close. The U.S. International Trade Commission on Oct. 31 recommended restricting imports of solar panels and cells to protect the domestic industry. The trade body is to submit a report to President Donald Trump by Nov. 13; assuming its recommendations are adopted, Japan’s importance as an export destination is likely to increase, since it does not have such restrictions.

One recent entrant into the Japanese market is Risen Energy, the world’s No. 8 solar panel maker, based in Zhejiang Province. The company set up an office in Tokyo and began sounding out operators of big solar power plants on the possibility of doing business. Risen Energy’s main selling point is affordability. Industry insiders say Chinese solar panels go for about two-thirds the price of Japanese products.

Japan as battleground

Wang Hong, Risen Energy’s president, said the company does not pay attention to the pricing strategy of his Japanese rivals. He predicts the battle in Japan will be fought mainly between Chinese manufacturers and other overseas panel makers.

Risen Energy can offer much lower prices than domestic companies, even taking into account the cost of importing products, thanks to the economies of scale it generates from its much higher production volumes.

The company makes 4.5 million kilowatts worth of panels annually, equivalent to 60% of Japan’s yearly demand. It also makes its own solar cells, the key component of solar panels, which helps lower costs. Risen Energy hopes to sell 300,000kW to 500,000kW worth of panels annually in Japan.

Shanghai-based JinkoSolar Holding and Trina Solar from Jiangsu Province, the world’s largest and second-largest manufacturers, have already been in Japan for a few years. Risen aims to differentiate itself from its bigger rivals by offering long-term guarantees and better customer support, Wang said.

Chinese products used to have a reputation for poor quality, but no longer. Longi Solar, for example, which began sales in Japan this past spring, has grown rapidly thanks to its advanced monocrystalline solar modules, which offer a generating efficiency about 10% higher than standard modules.

Li Wenxue, president of Shaanxi Province-based Longi Solar, said during a recent visit to Japan that the company annually spends 5% of its revenue on research and development, and that its technology is no less advanced than that of Japanese manufacturers.

The company plans to double its current staff of five in Japan by the end of the fiscal year, aiming to sell 400,000kW to 500,000kW of panels in Japan in 2018.

Market meltdown

Solar power plants mushroomed in Japan after the government introduced feed-in tariffs in 2012. But with the purchase price for electricity from these operators falling by about half over the next five years, the number of solar panel shipments has dropped as well.

Business is even tougher for operators of plants with more than 2,000kW of capacity. These large-scale producers must bid to supply electricity at the lowest cost before they qualify for price supports. Before, they could sell all their output at a fixed price of 21 yen (18 cents) per kilowatt-hour.

The change is forcing operators to look for cheaper solar panels. That plays to the strengths of Chinese panel makers, with their rock-bottom prices.

The cost of introducing solar power in Japan is said to be double that of Europe, a problem made worse by plant operators’ heavy reliance on subsidized purchases, a complex power distribution system and pressure on the plants to buy Japanese solar panels.

But the switch to competitive bidding for supply contracts has shifted priorities said an executive at a plant operator. “There’s no longer the idea of favoring domestically made panels” under the new system, the executive said.

Japanese solar panel makers, which were among the world’s biggest until the latter half of the 2000s, have been overtaken by Chinese rivals. Kyocera has halted production at its panel assembly plant in Mie Prefecture, in western Japan. Solar Frontier, an affiliate of oil wholesaler Showa Shell Sekiyu, has combined operations at its Japanese plants and is looking to cut its payroll by 10% through an employee buyout program.

One area where Japanese manufacturers remain strong is in solar panels for homes. Consumers in Japan still prefer domestic products.

But the overall outlook is grim. “The only Japanese products that can survive are specialty products, such as panels that can serve as construction materials, such as roof tiles,” according to an executive at a Japanese homebuilder.

Japanese solar panel makers are in a position similar to that of German manufacturers, which used to lead the world but were edged out by more cost-efficient Asian rivals. One German company, SolarWorld, filed for bankruptcy this past May, while Q-Cells, once the global leader, went belly-up in 2012 and was subsequently bought by South Korea’s Hanwha group. Now Q-Cells has only a research and development facility in Germany. Its domestic plants have all gone dark.

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