China-based solar firms have been beating peers around the world with its low product costs. However, competition among the China-based makers in the domestic market is a different game. Comparing with Europe- and US-based firms, China-based solar firms have strong competitive advantages such as low costs and support from the government. But once the firms have to compete with one another in the domestic market, the game has becoming "a hunger game."
China's domestic solar market is a playing field that has been leveled for China-based solar giants. The less competitive firms in China have been suspending productions due to low demand in 2011. Hence the battle is solely between large-size, vertically integrated solar firms.
The debate over vertical integration has been ongoing in the solar industry. China-based firms have been aggressively integrating from polysilicon to solar modules in hope to avoid being hijacked by firms in other countries. Some even have gone as far as developing and financing projects in the international market. With prospects in Europe starting to look bleak, China-based firms have been shifting their focus back to the domestic market.
Some research institutes predict that China is soon to be the second largest solar market in the world, beating Italy.
Now may be a good time to see the true competitive advantages of China-based solar giants as they fight over the domestic market and compete with each other. Nevertheless, China's solar industry may need to find ways to lower its dependence on imported polysilicon from international firms because as long as international firms control the supply of solar materials, solar firms in China may find their hands tied by foreign firms.
Ties with the government are also crucial for a business to succeed in China, and may become the key factor for the winner.