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Solar Economics, Part 2: Mapping the Global Value Chain

22.09.2017 — 0

Now it is time to look at the solar value chain globally. How different activities are distributed across regions — Asia, Europe, and North America.

We have considered the principal structure of the solar value chain, including its upstream (manufacturing) and downstream (services and use) parts. There are different kinds of organizations in the photovoltaics market, most partially vertically integrated, although none controls the whole of the value chain. It is time to look at how they can be mapped in terms of their locations and markets.

Solar photovoltaics is a global industry, and its value chain involves multiple organizations located in multiple countries. We will look at the most important downstream companies, including the top ones, as well as at different upstream activities, including silicon production, wafers production, electrical components and cells manufacturers, as well the suppliers of chemicals and equipment. To do so, we will use the data published by Green Rhino Energy.

Upstream Activities

  1. There are 25 companies shortlisted by Green Rhino Energy that produce crystalline silicon. Of them, USA, Germany, Norway, and Japan occupy the top-7. In total, there are 5 Japanese, 4 Chinese, and 4 US companies, 3 German ones, 2 Norwegian, 2 South-Korean, 2 Canadian, while Russia, Italy and Spain have 1 company each.
  2. There are more firms in **the wafers production business. **The top-5 is shared among Japan (2 firms), Germany, USA, and South Korea. Of the total 40 companies shortlisted, the Asian ones clearly dominate: 4 firms are from Japan, 4 from South Korea, 2 from Taiwan, and China has the spectacular score of 17 companies producing silicon wafers! The shares of Europe are more modest, with 6 German companies, 2 Norwegian ones, and 2 USA-based firms, while Russia, UK, Greece, and Switzerland each have 1 company in the list.
  3. The list for cells****manufacturing companies is the longest one and the most diverse in terms of the countries. The top-10 is divided between Germany, Japan, China, and Taiwan. The whole list consists of 63 companies, and they distributed as follows: 24 firms are Chinese and 10 Taiwanese, 9 are from Germany, and the rest is again dominated by Asia. South Korea has 4 companies shortlisted, Japan has 3, while USA, Spain, and India have 2 firms each, and Canada, UAE, Norway, Greece, and Netherlands all have 1 company each.
  4. In the field of electrical components manufacturing, the top-2 firms come from Austria and Germany. The whole list consists of 27 companies, of which 11 are German, 2 US- and Spain-based, China, Japan, and South Korea have 2 each, while the rest — Denmark, Switzerland, France, Netherlands, and Austria (included in the top) — each have just 1 one company shortlisted.
  5. When it comes to the equipment manufacturers, European companies begin to dominate, although the top-3 firms are based in the USA, Japan, and Switzerland. The list includes 24 firms, of which 13 are German, 3 are from the US, 2 from Japan, and 2 from Switzerland, while the rest — Canada, South Korea, Norway and China — have one company each.
  6. There are less firms active in the chemicals production, only 19 companies are shortlisted by Green Rhino Energy. The top-6 is occupied by the USA, Japan, South Korea, and Germany. The total shares of the countries are 5 US, 4 German, 4 Japanese, 2 Canadian firms, and 1 firm from each South Korea, China, Russia, and Italy.

Downstream Activities

The situation here is completely different. According to the Green Rhino Energy shortlist, **solar downstream activities **are a German business: the top-6 firms are all from Germany, and the country’s share in the total 47 shortlisted companies is the spectacular 30! The rest is divided between USA (4), Spain (4), UK (3), Italy (2), Sweden, Norway, Netherlands, and Switzerland (1 firm each).

A clear pattern emerges if we look at these (although obviously incomplete) data. First, as we have written about before, Germany and China have been the most important national players in the solar industry over the recent years. In 2000s the favourable solar tariffs set by the German government fueled the growth of the national industry there and across Europe. Since the early 2010s, the Asian countries — first and foremost China, but also Japan, Taiwan, and South Korea — made a breakthrough in terms of their solar industries development. In 2015–2016, China, Germany, and Japan occupied the top 3 places in the global ranking of installed solar capacity.

Germany and China clearly stand out in total terms

On the global scale, however, the dominance of Germany is evident with 76 companies in all categories, including both upstream and downstream. China occupies the second place with its 50 firms, but most of them are in the upstream segment. The US is third (22) and Japan fourth (19). The other two big players in terms of the total number of firms in all categories are Taiwan and South Korea, 14 companies each. European companies feature not as prominently and concentrate mostly on downstream activities or higher value-added upstream segments: Spain (9), Norway (7), Switzerland (5), Italy and UK (4 each). Canada is at the median level of Europe with its 6 companies engaged across different segments of upstream and downstream activities.

**Picture credit: **https://en.wikipedia.org/wiki/List_of_photovoltaics_companies#/media/File:Largest_Producers_of_Solar_Cells_by_Country-Market_Share.svg

Japanese champion in the production of crystalline silicon with the highest number of firms in this category, although the range is rather small. China is absolutely dominating the wafers production segment, having as many as 17 companies engaged in this activity out of 40 total shortlisted. However, as we move forward down the value chain, from lower- to higher-value-added parts, the Asian dominance gradually vanishes, and the European and North American firms possess larger shares. In Europe, Germany is on top in every segment, excluding the chemicals production, where the US is ahead of it. In sum, while the established players like Germany and the US continue to be in a good health, the Asian companies are looming large, especially in the upstream activities.

We have not covered several important hotspots of solar energy that emerged recently — Latin America, Africa, and parts of Europe (Portugal) and Asia (Kazakhstan). Read our next posts to learn how PV solar is developing there!

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