Technology vs. China

China has been making low cost solar panels for a few years now. They mainly sell to sun-drenched Germany which has some crazy subsidy scheme for home owners installing solar panels.

This coupled with the rise of Green Technology as the new hot investment area has led to these companies in China absorbing massive amounts of capital. I believe one company raised US$ 2 billion in capital a year before they even produced a single product.

Obviously, China thinks it has some advantage for making solar panels, which I suspect probably involves the low cost of labor and perhaps some other factors. But we keep hearing how the Green economy is going to be GREAT for Western companies. Well, we shall see, because Nanosolar, a San Jose based company shipped their first commercial product. Their factories are in California and Germany.

Oh, and if I appear cynical about the West's chances, keep these figures in mind:

IPod - Where the money goes.

The retail value of the 30-gigabyte video iPod that the authors examined was $299. The most expensive component in it was the hard drive, which was manufactured by Toshiba and costs about $73. The next most costly components were the display module (about $20), the video/multimedia processor chip ($8) and the controller chip ($5). They estimated that the final assembly, done in China, cost only about $4 a unit.

This their analysis of the value added amounts, though:

The researchers estimated that $163 of the iPod’s $299 retail value in the United States was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Japan contributed about $26 to the value added (mostly via the Toshiba disk drive), while Korea contributed less than $1.

Apparently China ends up just being the place where electronics are assembled, n0t where much of the value is added. (There are other stats that look at the huge dollar value of electronic components they import in order to achieve their exports of a value that is not too much higher.) What was the other fact I heard? That all of the wafer fabs in China that are so scary to Taiwan actually only handle 3% of China's demand? (This demand including chips needed to export products, not just local demand.)

But still, China was first out of the box with cheap solar panels. Let's see how the horse race shapes up. And let's hope Nanosolar has some good IP attorneys and has seriously vetted their work force.

Solar panel raw materials are from foreign sources.

Side Note: India is a major producer of commercial windmills, another green technology that is supposed to provide the new manufacturing opportunities for rich countries. Probably more like design and engineering jobs, with some forklift positions and installers.