We know what the competition is doing – subsidies to Asian tech companies, free land in Germany, oversupply to dominate the market, and competition-crushing, low prices in China. We can either complain about it, or we can do something about it.
Steve Papa, co-founder of Parallel Wireless, and Mark Widmar, CEO of First Solar, gave their thoughts on the roadblocks from the front lines on day three of the CPA Annual Conference. Both were confident their companies have the chops to compete on innovation, and in solar in particular, can out-innovate China.
But without safeguards against Chinese mercantilism in the clean energy technology space, and without innovation capital from Silicon Valley, state and federal governments may be the final arbiter of whether companies can manufacture these things in America.
“We compete with Huawei in world markets and even though I can make the same product at the same price, China’s product comes with $100 billion in financing,” said Papa. “How do you compete with that?”
Widmar didn’t know. He said First Solar won bids to put up solar installations in Dubai. Then China’s Belt and Road Initiative (BRI) kicked off. “We have been shut out of that market because [it] has brought in subsidized, low-cost capital to fund the projects awarded to Chinese companies. We don’t come in with that funding. We don’t have a full package like that.”
Then there are our friends in Silicon Valley. They’re not investing in new solar technology companies. Investors have strong memories. They have watched that sector get wiped out one by one for years as China increased their chokehold on the industry. First Solar is the only American firm in the global top 10. The other one is South Korea’s Hanwha Q Cells. The rest are Chinese-owned. Europe sold out their solar to China years ago.
“The reality is that Silicon Valley invests in innovation in China because the benefits all come from being there, as China has set it up that way,” Papa said. “I regularly run into someone setting up a fund in the Caymans and they are just investing it all in China. China has the innovation capital and we do not.”
Thursday’s tech panel was the biggest of the four-day conference so far.
It started off with CPA chief economist Jeff Ferry discussing his findings from a recently published white paper on solar.
The U.S. slapped a 30% tariff on solar panels for four years and during that time the U.S. gained substantial market share at home. “As of 2019, the U.S. share of the domestic market hit nearly 20%,” Ferry said. “Ten years ago it was nearly zero. The reason why this happened is because solar module companies were willing to invest once they knew there was a tariff and they had a four-year runway.”
Solar module prices fell despite the noise from the usual suspects that a tariff would make solar expensive and kill demand. Solar installations, which are final sales and deployment of solar, grew in 2020 to an all-time high of 16 gigawatts.
Widmar said that in the first 16 months of those safeguard tariffs against solar imports, the U.S. added around 4GW of new capacity. First Solar accounted for almost half.
“We added about two gigawatts and I would have loved to put another three gigawatts,” he said. He didn’t because double-sided solar panels got an exemption from the safeguard duties so they said forget it.
“This is not a short game. This is a long game. We have to innovate or you lose your green tech industry,” he warned.
CPA is speaking to members of Congress and the Biden administration on this. We support a tax credit that would go to any domestic manufacturer building capacity and selling solar equipment made in the U.S. It would be complementary to the existing tax credit that goes to the consumer. “We need one that goes to the manufacturer now,“ Ferry said.
Roslyn Layton, a Ph.D. and co-founder of China Tech Threat, said from Copenhagen during the live stream panel that the U.S. needs to change its strategy on these new and important technologies – whether it’s the memory chips in your laptop or the solar panels powering a municipal utility.
“Cutting edge manufacturing is all happening in South Korea, in Taiwan, and in Singapore where you get all sorts of subsidies, tax incentives,” she said, focusing on the semiconductor space. “They really provide a turn-key package. We just don’t think about it that way in the U.S.”
Layton teamed up with Ferry to produce a new white paper on the semiconductor industry this week.
Market leaders like Intel have been warning about the U.S. falling further behind to the Asian manufacturers of chips because most companies, including Intel, have spent years outsourcing the manufacturing of their chip designs to companies like Samsung and Taiwan Semiconductor (TSMC). Taiwan Semiconductor is particularly troubling because its biggest client is Huawei and one can only imagine the leverage Beijing must have over TSMC.
“What we learned in this report is that security matters,” she said. The auto industry is currently in the midst of a chip shortage, forcing some assembly lines to temporarily close. “We need to diversify our supply so it is reliable. Take our 12% production of chips today and we should set a goal to raise it to 50%, namely in memory,” she said.
Global Foundries is investing in a fabrication plant in New York. Intel has two new ones coming to Arizona. All positive developments.
“We need dozens more,” she said.
Papa wrapped up the back-to-back tech focused sessions today by telling attendees that we had to play the long game, like China does, and not leave everything up to the market, or a handful of multinationals. Intel is investing locally, but what about their rivals? Will their customers choose them, or stick with Asia if they can get it cheaper. None of that bodes well for reindustrialization.
“If you want your children to have a better society than we have today, it just doesn’t happen on its own, it’s not an entitlement,” he said. “You have to do something about it.”