Solar power is becoming more and more popular as people become environmentally aware and look for ways to cut their monthly costs. This is not only true of individuals; it is also true of many industries that would like to save money. Although it certainly is possible to purchase solar panels from companies that manufacture them in the United States, you will find that the costs are much lower when they are purchased from Chinese companies. How is China able to keep their manufacturing costs low for solar equipment? The answer may surprise you.

When most people think about industry in China, they think about low labor costs. They may also think about government support of business, which tends to be strong in China. Although these factors may play a role in the lower cost of solar equipment in China, it is not actually the main reason why the prices are lower. One reason why this is the case, is because many of the factories that manufacture solar equipment are highly automated. Although the cost to pay for labor is less expensive in China, this is not a large factor in solar equipment manufacturing because there is not a large workforce involved.

One of the main reasons why Chinese companies are able to manufacture solar equipment for less is because of stringent cost analysis. Cost analysis is performed in the United States, but it is done on a more superficial scale. Chinese companies are narrowing down the amount that they spend on everything from equipment, labor and materials that are necessary for the manufacturing process. In doing so, and in looking at each step individually, they get a better overall picture of what they are spending. This helps to cut down factory costs while at the same time, staying profitable.

Yet another reason why China is able to cut costs substantially for manufacturing solar equipment is their manufacturing capacity. Over the past few years, China has expanded their manufacturing capacity quickly. In comparison, Germany, which is also a large player in the solar equipment field, decreased its subsidies during the same time. The difference can really make an impact on costs and profit.

One other factor to consider, and one that really makes a difference in the amount that is spent on manufacturing solar equipment, is the size of the factory. In China, the factories that manufacture photovoltaic (PV) arrays are up to four times larger than similar factories located in the US. This allows Chinese businesses to cut costs by negotiating with suppliers and leads to higher efficiency in the use of manufacturing equipment.

At this time, China is responsible for 63% of solar equipment production worldwide, while at the same time, paying 23% less for manufacturing compared to the United States. Although this describes the current situation, it is not something that needs to be permanent. By adopting manufacturing methods that are currently used for PV in China, many other countries also have an opportunity to catch up and surpass these numbers.