Janet Yellen is currently traveling to Beijing to discuss the US need repatriate its supply chains. In light of that trip, we present you with a detailed view as to how dominant China has become in this key emerging industry.
In doing so the reader will see not just the current situation, but the preternatural patience and methodical approach used for over a decade to accomplish the task. Thus we ask Janet Yellen; What took you so long? [EDIT: Part 1 can be found here]
- Value-Chain (Sweet Spot) Analysis
- What Else the Value Chain Says
- SOLAR CELLS/PANELS>
- PASTE> All buy locked up
- POWDER> The last piece
- Bottom Line: China Not Likely an Exporter
- Original PDFs
1- Value-Chain (Sweet Spot) Analysis
In breaking down the Solar Supply-chain into component parts we note the middle sections as the Value-added parts of the chain.The subtitle uses the word sweet-spot because the value-added section has the highest profits as a function of needing the most technological expertise. It is where human ingenuity does its best work and where the most money is made. Humans add the value here. From this we surmise China's value-chain dominance destroys western illusions that China is lacking in high-end technology skills for production.
Sweet-spot in red rectangle...
As we go backwards (travel upstream in the value-chain section) from finished product back to raw material we can also get a better feel for several aspects of Silver use.
China seemingly dominates most of the value-added section of their domestic production value chain ( “vertical integration” applies here) with powder being the only exception. For powder, we shall see China has taken measures (for now) to make that part of the chain as reliably secure as possible through inter-dependency. We will come back to that in a bit.
2- What Else the Value Chain Says About China's Approach
The value chain also tells a story about industrial progress in China. Simply put: whereas China manufacturing once was relegated to the non-value portions of many supply chains, we now see not only that they dominate some value added portions, but it reveals a timeline of their progress getting there.
By examining various points we can see the amount of metal used, the cost inputs, and the marketshare in that process2 We can also get an evolutionary view of how Chinese industry has grown into providing much if not all of the added value in the finished goods it now sells to the west.
Here is the value-added portion of that supply chain again
Refining>Powder>Paste >Solar Cell>Solar Panel
We will start on the right of this flow chart and work left now.
3- SOLAR CELLS> SOLAR PANELS
Working backwards (upstream) we start at Solar Panels and Solar Cells. According to Bai, China accounts for a large part of this value-added piece.
China is the world's largest manufacturer of photovoltaic panels [Solar Panels] and modules [Cells], with a global market share of 70%; 90% of China's photovoltaic panels and module products are exported to European and American countries.
Working upstream from there towards the Paste section, we see China’s presence in Paste manufacture is also massive. The detail by Bai here (pdf at bottom) is impressive. But for summary purposes: Silver Paste is very expensive. Photovoltaic silver paste is the second largest cost and key material for photovoltaic panels, accounting for approximately 10% of the total cost.
In 2010, China did not have the production capacity for silver paste and relied entirely on imports. By 2021, China had already produced 1934 tons of high-temperature silver paste annually, basically achieving self-sufficiency…
Again, we see value-added dominance growing in a portion of the chain traditionally not even Chinese 10 years ago.
Foreign manufacturers like DuPont are relocating there. Organic growth is also happening. As it stands now, China operates 5 of the 10 largest Silver paste facilities in the world. If current plans bear fruit, within 5 years China will be the world’s largest manufacturer of Silver paste and be 100% self-satisfying in its own demand. If successful, they will have vertically integrated most of the value-added part of the supply chain for Solar power.
Before we go upstream one more time to the Powder section here again is the detailed supply chain for Solar Silver broken out as Bai listed it.
①Silver Mining → ② Silver Refining → ③ Silver Powder (High Purity Silver Powder) → ④ Photovoltaic Silver Paste (High Temperature Silver Paste and Low Temperature Silver Paste) → ⑤ Photovoltaic Panels → ⑥ Photovoltaic Modules → ⑦ Photovoltaic Power Stations
China dominates every part of the value chain that can be dominated except Installation which is overseas, and Powder which we will get to next.
The takeaway for Paste is, China has almost completely removed reliance on outside sources on this part of the chain and is moving to secure the remaining piece of the Paste puzzle. That leaves Powder.
China currently does not have the production capacity for this product and relies entirely on imports. The products mainly come from Japan's DOWA Hi-Tech, accounting for 91.48%, while the rest come from the U.S at 6.81%.
But it is here that we also see China’s progress and foresight in planning for contingencies.
Let’s assume for the moment that China is unable or unwilling to break into the Powder part of the supply chain. As substitute, they have fostered a symbiotic relationship with their main powder supplier to minimize dependency risk...