U.S. solar stocks surged 54%! How extreme is the industry gap between China and the U.S.?

A few days ago, Zorro asked me a question: Why have U.S. solar stocks surged so sharply recently—especially First Solar, whose share price jumped 54% in May? What’s the logic behind this? And why have A-share solar stocks plunged so severely? Great question. After President Biden signed the Inflation Reduction Act (IRA) in August 2022, the U.S. government granted substantial subsidies to domestic solar enterprises—including First Solar. According to its financial reports, First Solar’s total net profit in 2023 amounted to $830 million, of which $660 million—79.5%—came from government subsidies. Backed by U.S. support, First Solar has dramatically expanded its production capacity. In 2023, its photovoltaic (PV) module production capacity reached 16.5 GW, up 68% year-on-year. It currently holds over 80 GW in backlog orders, valued at more than $25 billion, with deliveries scheduled through 2030. Meanwhile, due to severe overcapacity in China’s domestic PV industry, intense intra-industry competition has triggered a vicious cycle of price-cutting. As a result, the gross margin for Chinese PV module manufacturers has fallen below 18%, whereas First Solar’s current PV module gross margin stands at over 40%. Does this mean First Solar’s PV products are superior? No. First Solar employs thin-film solar cell technology, whose photoelectric conversion efficiency is under 20%. By contrast, leading Chinese PV firms achieve efficiencies above 25%. Longi’s silicon-perovskite tandem solar cell even set a new world record with a photoelectric conversion efficiency of 33.9%. PS: Photoelectric conversion efficiency measures how effectively solar panels convert sunlight into electricity—the higher the efficiency, the greater the power generation. Analogous to return on investment, 20% efficiency means generating $20 of electricity per $100 of solar energy input. Although Chinese PV giants possess more advanced technologies, superior products, and lower costs, they face steep U.S. import tariffs—up to 50%—on solar cells, while First Solar benefits from generous production subsidies. This double whammy erodes Chinese firms’ competitiveness in the U.S. market, causing a large share of American solar orders to flow to First Solar. Even though First Solar lags behind Chinese firms in shipment volume, technological sophistication, and cost advantages, it remains highly profitable. In contrast, many leading Chinese PV companies posted losses in Q1 2024: Longi lost RMB 2.3 billion, Tongwei RMB 800 million, and JA Solar RMB 500 million—meaning the more they sell, the deeper they lose. Consequently, markets now anticipate that, fueled by massive U.S. subsidies, First Solar will outcompete numerous Chinese PV giants and become the world’s top PV company. Stock prices always reflect future expectations ahead of time. Hence, First Solar’s recent market capitalization has surpassed those of Longi and Sungrow Power Supply, reaching $29.1 billion (approximately RMB 210 billion)—making it the world’s most valuable PV stock.

The U.S. government provided $4.8 billion in subsidies—snatching away the global No. 1 spot from Chinese enterprises.

Recently, U.S. solar giant First Solar saw its stock price surge sharply, achieving a market capitalization of $27.6 billion (approximately RMB 19.98 billion), claiming the title of the world’s most valuable solar company. Previously, this ‘global No. 1’ title belonged to the Chinese firm Sungrow Power Supply. Sungrow’s current market cap stands at RMB 146.6 billion—RMB 50 billion less than First Solar’s. Looking at the timeline: In mid-2022, First Solar’s share price hovered around $100; in less than two years, it has nearly tripled. First Solar’s Stock Price Trend Did First Solar’s soaring stock price stem from surging revenue? No. Although First Solar’s 2023 revenue rose 27% year-on-year, it totaled only $3.32 billion (RMB 24 billion)—far below Sungrow’s RMB 7.22 billion. First Solar’s core product is PV modules; its 2023 shipment volume was 12 GW—ranking outside the global top ten, and less than one-sixth of Chinese firm JinkoSolar’s shipments. Top 10 Global PV Module Shipment Companies in 2023 — All Based in China. Source: Youquan Gongpin Was it due to a major technological breakthrough? No, again. Photoelectric conversion efficiency is widely regarded as the key metric—and barometer—for assessing PV module technology. First Solar’s PV modules achieve only 19.7% photoelectric conversion efficiency—well below the Chinese industry average of 24%. Longi Green Energy Technology’s self-developed silicon-perovskite tandem solar cell achieved a world-record-breaking 33.9% photoelectric conversion efficiency. Longi Green Energy Technology’s self-developed silicon-perovskite tandem solar cell sets a new world record for conversion efficiency. So, what exactly propelled First Solar to the top? The primary driver is massive government subsidies from the U.S. federal government. First Solar’s financial report shows that its 2023 net profit reached $830 million—a near 20-fold increase year-on-year. Notably, $660 million (RMB 4.8 billion) of that $830 million came directly from U.S. government subsidies. In other words, nearly 80% of First Solar’s net profit originated from U.S. government subsidies. This generous subsidy program reflects the U.S. government’s broad strategic support for its entire new-energy sector. On one hand, the U.S. government strongly backs domestic enterprises.

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