By kotoyamagami @ Adobe Stock
It turns out, as anyone who has read George Orwell’s Animal Farm knows, attempting to manage industry via government isn’t so easy. China has been heavily intervening in its own solar industry, and despite achieving global dominance, the industry is in freefall. Sha Hua explains in The Wall Street Journal:
This should be a shining moment for Longi, one of the biggest makers of solar-power equipment in the world.
Longi and a few other Chinese companies dominate the solar business globally. Their home nation is in the midst of an unprecedented installation boom, with more than 100 gigawatts of capacity added in the first half of this year alone.
Yet in the upside-down world of the Chinese solar industry—and many other industries in the country—the boom is a bust for the companies involved.
Longi’s chairman, Zhong Baoshen, is fighting to reverse losses amid the bloodbath he predicted last year, when he saw that a glut of capacity would soon overwhelm the industry.
In the U.S., the one global market where prices remain high, Zhong is confronting suspicion about China’s national aims. His earlier initiatives to tap U.S. demand hit geopolitical obstacles.
“We paid billions in tuition fees” to learn how to navigate U.S. politics, he said.
The 56-year-old businessman’s life has been a lesson in China’s industrial triumphs as well as its perils. With two college friends from the physics department, he built a company that was valued at $80 billion at its peak. Longi didn’t just copy Western or Japanese technology—it took risks on innovation that changed the industry.
Whipsawing government policy, while helping to create a market for solar panels, has brought Zhong’s company to its knees twice, the first time more than a decade ago and again this year.
The pattern is the same: Beijing throws its support behind renewable energy, prompting local governments to pile on subsidies for new entrants in the hopes of creating a hometown champion. Capacity balloons, competition becomes cutthroat and the industry becomes unprofitable.
In the first half of 2024, the price of polysilicon, the building block for solar panels, dropped more than 40%. The price of wafers and cells halved.
In the half-year, Longi lost $740 million, and its stock price at one point this year was down 80% from its peak before recovering somewhat. Zhong believes it can survive the inevitable shakeout. Many others won’t.
Read more here.
If you’re willing to fight for Main Street America, click here to sign up for the Richardcyoung.com free weekly email.
