Business Impact
Chinese Solar Companies Thrive on Manufacturing Innovations
Suntech Power’s CTO argues that the secret to China’s success is not cheap labor but advanced equipment for making solar cells.
Five years ago only one of the 10 largest solar cell producers was based in China. But by last year, four of the top five were based there, and each is growing fast: all four doubled their production last year. It’s widely believed that this success is due to low labor costs, but Stuart Wenham, CTO of the largest solar cell maker in China, Suntech Power, argues that the real causes are advances in manufacturing technology that have improved solar cells’ performance and cut costs.
Labor accounts for just 3 to 4 percent of the cost of making solar panels. Other factors, such as materials and the cost of equipment, are more significant. And as a result of increased automation over the last few years, labor costs are going down. According to Wenham, in 2008 Suntech needed four workers for each megawatt of production capacity. Last year, it only took 1.49 workers to make the same amount. “Why would Suntech be doing this if their key advantage were low labor costs?” Wenham asks. U.S. energy secretary Steven Chu came to share Wenham’s view last year, after he visited Suntech’s main plant. “It’s a high-tech, automated factory. It’s not succeeding because of cheap labor,” he said.
Wenham says the top Chinese companies have been particularly good at identifying promising technologies—often concepts and prototypes that have been languishing in labs for decades—and finding ways to produce them at a large scale. For most of the last two decades, the solar cells that set world records for efficiency were made by researchers at the University of New South Wales in Australia. “They were trying to commercialize [that technology] the entire time,” he says. “It took Suntech to turn those laboratory processes into production processes.”
Wenham says that knowledge and experience in manufacturing were crucial to developing such advances. At UNSW, he explains, the researchers would use this “horribly sophisticated process,” including photolithography, vacuum deposition of “quite exotic metals,” and “all sorts of chemical processes,” to deposit the narrow metal contacts required for achieving high efficiencies. Suntech researchers, who were closely familiar with the needs of manufacturing, “came up with a simple, low-cost way to replace all of that while achieving the same results,” he says.
The other top solar manufacturers in China are also identifying promising technology and scaling it up. Recently, several of the country’s solar producers, including Suntech, adopted an idea for making silicon wafers that had been patented decades earlier; industry hadn’t found a way to use it at a large scale. Now that the patent has expired, at least four Chinese companies have engineered successful ways of scaling up this way of producing the wafers, which form the core of a solar cell. These innovative manufacturing processes could cut solar cell costs by 10 to 20 percent.
In turn, the Chinese companies have used their manufacturing success to try to seed a next generation of technology. This year Suntech put into service production equipment for new high-efficiency solar cells. At full capacity, the equipment will be capable of producing about 2.5 million panels’ worth of cells each year—enough to generate 500 megawatts of electricity. While commissioning the equipment, the company’s researchers took the opportunity to learn more about the technology and about the subtle interplay between such factors as the level of doping in the silicon wafers and the technology used to apply thin films of material to their surfaces.
“It’s very interesting doing experiments on a half-gigawatt facility,” Wenham says. “Once you have something in manufacturing, it creates a good environment where you have very good control of things, and you’re doing things in large numbers so that statistically, it’s very powerful. You can see the impact of changes which you wouldn’t be able to see if you’re doing things in the lab as one-offs.” As a result of these experiments, Suntech was able to make an already efficient design substantially more efficient.
Not all the manufacturing changes Chinese companies have made have improved the product—in some cases, cost reductions have produced products that don’t last as long or perform as well as solar cells made elsewhere, says Travis Bradford, a solar industry analyst. But the Chinese companies also have other, nontechnical advantages that have allowed them to succeed. The government assures cheap financing for expanding production and has reduced red tape for permitting. Its policies are also more stable than those of many Western governments, which helps the companies plan ahead. And while labor may account for a small fraction of the cost of producing solar cells, cheap labor does significantly reduce the cost of building new plants.
Some of China’s advantages, such as the price of currency, could be going away soon, Bradford says: “If the Western firms can survive until then, Chinese firms will find it uncomfortably competitive—a situation they are not familiar with.” But it’s not a situation they haven’t anticipated. Even as Suntech increases production of its new high-efficiency solar cells, it is already working on production processes that could help increase efficiency by another 10 percent. Wenham is keeping most of the details secret—the one part he can talk about is something he likens to a “squirt gun” for removing impurities from the silicon wafer.
“It’s simple yet effective,” he says. That simplicity keeps down production costs, while the higher efficiency will allow cells to generate more power, lowering their cost per watt. If the company is successful, advances in manufacturing will once again make solar power cheaper.
