Seven American solar panel makers are filing a trade case on Wednesday against top competitor China. High price competition undercuts American solar's profit margins and has already led several large companies including Solyndra and Evergreen Solar to file for bankruptcy.
The trade complaint, filed at the Commerce Department, accuses the Chinese industry of profiting from heavy government subsidies and "dumping" its products in the United States at prices that undercut American producers.
According to the trade complaint, Chinese state-owned banks have extended nearly $41 billion in loans and lines of credit to the country's solar panel manufacturers. The complaint asks the government to impose tariffs of more than 100%.
The New York Times likens the case to Detroit automakers taking on Japanese producers in the 1970s and 1980s, but similarly, an American win may not translate into business success. Like the Japanese automakers who circumvented legislation and tariffs by simply building factories on U.S. soil, Chinese solar companies have already begun to do the same.
Setting up solar panel factories is a relatively quick process, taking anywhere from six months to a year depending on the task it is designed for. For example, many Chinese solar power manufacturers may find the initial steps, including the production of a polysilicon wafer, cheaper to do in China before shipping to the U.S. for final production.
Industry analysts warn the consequences of the trade complaint will only accelerate the Chinese manufacturers expansion into the United States. It can also lead to Chinese retaliation. According to The New York Times, "the country might, for example, shift more of its hefty annual purchases of solar panel manufacturing equipment to German suppliers instead of American ones."
These shipments to China total nearly $2 billion in raw materials and equipment every year. Tom Zarrella, a former chief executive of GT Solar, said the loss "would be a travesty for the solar industry."
A significant Chinese solar presence in the United States could be good news for American solar consumers who will find themselves with a more diversified solar panel market. And according to the Times, such demand "could benefit American consumers of solar power if it helps propel the technology beyond its current niche status."
In all, American solar companies will have more difficult times ahead of them despite what many believe is a sure win in the case against Chinese producers.
Interested in following the trend? Here is a list of the two largest U.S. solar companies trading on the stock market to keep an eye on, as well as China's three biggest solar power companies. (Click here to access free, interactive tools to analyze these ideas)
1. First Solar
3. LDK Solar
4. Suntech Power Holdings
5. Trina Solar
Interactive chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data from Finviz.
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