Abstract
The cost advantages have not only established Chinese vendors' leadership in the worldwide solar PV (Photovoltaic) industry, but also caused European, US, and Japanese vendors' withdrawal from the market or bankruptcy in the business. Although the Taiwanese crystalline silicon photovoltaic industry is able to compare with its Chinese counterpart in quality and price, a considerable gap exists between these two countries in terms of the cost. The total cost difference between them ranges up to US$0.43 - 0.63/W. This report examines the industrial environment and vendors' strategies and outlines how the "Shanzhai" business model - a business model based on counterfeiting others' design concepts - operates in the industry.
Cost Reduction Underpins the Chinese PV Industry's "Shanzhai" Business Model
With China becoming the world's factory, the impact of Chinese vendors' business strategies on global vendors is becoming inevitable. Besides the leadership in the entire industry chain that covers from silicon materials to silicon wafers, solar cells, and modules, Chinese vendors have caused many European and US vendors to reorganize or file bankruptcy due to excess supply in the global market. Therefore, players in the photovoltaic industry which has low technological barriers to entry and centers on cost competitiveness must seriously confront the impact of Chinese vendors' "Shanzhai" business model as the impact will determine whether their business will survive or not.
Due to the industrial characteristics, Chinese photovoltaic vendors' "Shanzhai" business model has mainly focused on cost reduction when seeking value creation and making development strategies. The idea of lowering costs has spread throughout their businesses, from R&D to purchasing, production, logistics, marketing, and financing.
Cooperating in "Shanzhai" Ecosystem to Be Key for Survival
In the mobile phone industry, MTK provided a development platform for Chinese "Shanzhai" phone vendors and shared the value they created. In the solar PV industry, non-Chinese vendors including Taiwanese vendors have to come up with solutions to seek the best value out of Chinese vendors' "Shanzhai" business model.
The photovoltaic industry is challenged due to low technological barriers, a high level of product homogeneity, reduced subsidies, and excess supply. Besides putting forward value-creation strategies from the viewpoint of pursuing diversified product portfolios and targeting a good command of key customers, non-Chinese vendors have to develop their cost competitiveness to achieve the highest value.
For their own sake, non-Chinese vendors are advised to learn from the innovations hidden in China's "Shanzhai" business model and, if necessary, embrace the said model that delivers consumer benefits with careful risk management.
Appendix
Glossary of Terms
List of Companies