The importance of efficiency in the solar industry has been highly debated over the past few years and most companies have spent their time lowering costs rather than getting more energy from each panel. But that dynamic is changing and SolarCity's recent acquisition of high efficiency start-up Silevo has given credence to the fact that efficiency will be extremely important long-term.

That's why JA Solar's (NASDAQ:JASO) announcement that it is starting mass production of PERCIUM solar cells with efficiency of up to 20.4% is so important. JA Solar's best cells are currently up to 19.5% efficiency, making panels that rate at 17.15% efficient. The new cells will bring that figure up to over 18% for the module, a key differentiator for the company. 

Higher efficiency modules pack more power from plants like this one built by Trina Solar. Source: Trina Solar.

Efficiency is becoming a differentiator
JA solar isn't the only one investing in efficiency to stay ahead of the competition. Trina Solar (NYSE:TSL) recently announced a new high efficiency Honey Ultra module, updating the 15.9% efficient Honey line. It's also developing a back contact product with the help of the Australian National University. That research product has reached 24.4% efficient on a cell level, which would be among the highest in the industry.

The other Chinese company to watch is Canadian Solar (NASDAQ:CSIQ), who may be in the best financial position of these three manufacturers given its high margin projects in Canada. Canadian Solar says its next generation ELPS technology can make 21.1% efficient cell, which would mean around 19% efficient module. 

The importance of previous efficiency and future efficiency can't be understated. JA Solar, Trina Solar, and Canadian Solar have all become profitable because of high demand but they need superior products to stay ahead of competition.

JASO Net Income (Quarterly) Chart

JASO Net Income (Quarterly) data by YCharts

Staying ahead in Chinese solar
The solar industry is just now starting to invest in the next generation of solar technology and these three companies are making incremental improvements to keep up with the industry. If they can do that and build new equipment that will make cells that are 23% efficient or more it will increase demand as well as profits.

Watch for not only press releases touting efficiency but more importantly the release of products that increase efficiency. That will keep these companies ahead of competitors and profitable as the solar industry grows.