January 12, 2012

The U.S. Photovoltaic Manufacturing Consortium: Lessons From The Semiconductor Industry

By: Unnikrishnan Pillai, Nicholas Querques, Pradeep Haldar


In April 2011, the U.S. Department of Energy awarded a grant totaling US$57.5 million to support the formation of the Photovoltaic Manufacturing Consortium (PVMC) at the College of Nanoscale Science and Engineering (CNSE) of the University at Albany.


The manufacturing initiative is the result of a joint collaboration between CNSE and SEMATECH and envisions a revitalization of the domestic photovoltaic industry in the face of stiff competition from other countries. The initiative mirrors a similar effort undertaken in 1988 in the semiconductor industry. The semiconductor industry stands out as an example of an industry where U.S. firms successfully adapted to changes in the global economic environment and reclaimed market leadership after facing a decline in their fortunes, which resulted from competition abroad.




Revival of U.S. Firms in the Semiconductor Industry



As can be seen in Figure 1, U.S. firms occupied over 60% of the market (in terms of revenues) in the early 1970s. This share steadily declined over the second half of 1970s and most of 1980s. Starting in 1988, U.S. firms gained lost ground and by mid 1990s the U.S. re-emerged as the leader in the semiconductor industry, a position it has held since then. There are two factors that contributed to this revival.


First, U.S. firms in the semiconductor industry have continuously adapted to the changes in the global environment, moving out of product segments like memory and discrete devices where their technological advantage was competed away by lower cost competitors from countries like Japan, Korea, Taiwan and China. Existing memory firms shifted to product segments like microprocessors that were rapidly growing, and new firms emerged that successfully targeted new product markets made possible by rapid advances in the underlying semiconductor technology. Second, the revival in the semiconductor product industry was accompanied by a revival in the U.S. semiconductor equipment industry, which supplies the product firms with the equipment necessary to manufacture products.


The re-emergence of U.S. semiconductor equipment firms, which could effectively compete with rivals in Japan, ensured U.S. product firms access to local suppliers who could provide the most technologically advanced equipment. The revival of the U.S. equipment industry was facilitated by the activities undertaken by SEMATECH, established in 1988 with support from the government to help U.S. firms compete effectively with international competitors.


The fortunes of the U.S. in the solar industry in many ways mirror that in the semiconductor industry.





U.S. in Solar and Lessons from Semiconductor



The U.S. held a dominant position in the solar industry in early 1990s. In the last few years, solar firms from China and Taiwan have grown rapidly and China has emerged as the market leader in solar production since 2007. As can be seen in Figure 3, the U.S. market share, however, has started picking up since 2006. The pickup in U.S. share is owed entirely to the rise of a single company, First Solar, which uses a technology more advanced than its competitors from other countries. Figure 4 shows the share of leading solar companies in output (MW) of the industry, with the U.S. companies marked in blue. The rapid growth of First Solar, the only U.S. company among leading solar producers, is evident in the graph.


The firms in Japan, China and Taiwan manufacture solar cells primarily based on older crystalline silicon technology, whereas First Solar uses the new Cadmium Telluride technology. New U.S. startup firms focused on more advanced technologies are beginning to take off, a trend that reflects the pattern in 1990s in the semiconductor industry when U.S. firms moved to the more sophisticated technology segments in the industry.


However, the solar industry has yet to develop a full-fledged base of equipment suppliers in the U.S. The emergence of the supplier base can help U.S. product companies compete more effectively with their competitors from other countries, by providing U.S. companies close access to technologically advanced production equipment, in the same way that the revival of the U.S. equipment industry in semiconductors facilitated the revival of the U.S. semiconductor product industry. The Photovoltaic Manufacturing Consortium fits well into this position, and can play an important role in developing a robust local equipment supplier industry in the U.S.

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