When LDK Solar (NYSE: LDK) announced an equity investment by an investment firm that was partly controlled by the government, it became clear that the consolidation phase in the solar industry may take longer than it should. Chinese banks have given billions in loans to Yingli Green Energy (NYSE: YGE), Suntech Power (NYSE: STP), and LDK to name a few, and the funding has propped these companies up. In fact, it's unlikely any of these companies would survive in a normal capital market, given their debt loads and low margins.
The impact has already been felt by companies going bankrupt in the past year. What should concern investors is the impact on companies such as First Solar (FSLR -1.39%) and SunPower (SPWR -3.09%), which have a fighting chance to survive the shakeout in solar. If China continues to fund unsustainable companies, these U.S. companies may not stand a chance.
