China now produces more than 80% of the world’s solar panels and cells, a concentration that is reshaping the global renewable energy market. This dominance lowers costs and speeds deployment, but it also creates strategic and supply-chain challenges for governments, utilities, developers and investors.
How China built its lead
China’s rise in solar manufacturing was not sudden. A combination of policy support, industrial strategy and private-sector scale created a dense, efficient supply chain that stretches from raw materials to finished modules.
- Scale and investment: Large-scale investment in factories and equipment brought down per-unit costs and allowed rapid capacity expansion.
- Vertical integration: Many firms operate across the full chain — from polysilicon and wafers to cells and modules — which cuts costs and improves coordination.
- Government backing: Long-term industrial policy, subsidies and access to financing helped manufacturers grow quickly and compete globally.
- Supply-chain ecosystem: Dense supplier networks and a skilled workforce reduced lead times and increased production efficiency.
- Manufacturing learning curve: Continuous improvements in process and technology drove efficiency gains and lower prices for end buyers.
Why this concentration matters
For the clean-energy transition, cheaper panels are a clear benefit. But heavy concentration of manufacturing in one country creates risks that businesses and policymakers can’t ignore.
Supply-chain resilience
A disruption — whether natural disaster, industrial accident, trade restriction or export control — could slow module shipments worldwide. That would push up prices and delay projects, especially where margins are already tight.
Geopolitical exposure
Solar trade has become entangled in broader geopolitical tensions. Dependence on a single source increases leverage in diplomatic disputes and can prompt sudden policy responses such as tariffs, quotas or controls on key inputs.
Market competition and innovation
While dominant producers drive down costs, concentrated markets can also limit competition over time and reduce incentives for geographic diversification of manufacturing and R&D.
How other countries and companies are responding
Awareness of the risks has spurred a range of responses aimed at diversifying supply and building domestic capacity.
- Building local capacity: Several governments are offering incentives to attract panel and component manufacturing back home.
- Regional production hubs: Investment is shifting toward Southeast Asia, India and other regions as companies look for alternative manufacturing bases.
- Trade measures: Tariffs, anti-dumping duties and stricter procurement rules are being used to protect or develop domestic industries.
- Strategic stockpiles: Some buyers are securing longer-term contracts or stockpiling key components to smooth supply.
What businesses should consider now
Companies in the solar value chain should treat supply concentration as a business risk and take practical steps to manage it.
- Conduct supply-chain stress tests: Model the impact of delays or tariff changes on project timelines and margins.
- Diversify suppliers: Where possible, build relationships with producers in multiple countries and at different tiers of the supply chain.
- Lock in contracts wisely: Balance price savings from spot purchases with security from medium- and long-term agreements.
- Invest in flexibility: Design procurement and logistics to switch suppliers or reroute shipments quickly if needed.
- Monitor policy developments: Track trade measures, export controls and incentive programs that can affect costs and availability.
Longer-term dynamics to watch
The current picture is unlikely to stay static. Several trends could reshape where and how solar panels are made.
- Technology shifts: New cell types and manufacturing techniques could lower barriers to entry or change where value is captured.
- Recycling and circularity: As old panels reach end-of-life, recycling capacity will become an important part of the supply chain and domestic material security.
- Policy and subsidy cycles: Continued public support for clean energy manufacturing can spur more geographically balanced capacity.
- Market concentration responses: Corporate procurement policies and investor pressure may accelerate diversification efforts.
Bottom line
China’s production of over 80% of the world’s solar panels and cells has driven down costs and helped scale up renewables rapidly. That same concentration, however, creates strategic vulnerabilities. Businesses and governments will need to balance the benefits of low-cost supply with actions to reduce risk — through diversification, policy measures and investments in new technologies and recycling. The path the market takes next will shape how resilient and sustainable the global solar industry becomes.