China considers a new pressure point: solar equipment

American companies like Tesla want them. China has them, but soon they might be awfully hard to get their hands on. We’re talking about solar power components.

Reuters has reported that China, the largest manufacturer of solar energy parts, is considering restricting exports of solar panel manufacturing equipment to the United States. That won’t exactly end U.S. solar progress, but experts say it may slow it down.

Kyle Chan, a fellow of foreign policy at the Brookings Institution's John L. Thornton China Center, recently joined Marketplace’s Sabri Ben-Achour to discuss what exactly a restriction would mean for the U.S. The following is an edited transcript of their conversation.

Sabri Ben-Achour: China wants to restrict these exports of solar manufacturing equipment. It has restricted exports of rare earths. The U.S. has done the same thing for technologies it considers sensitive. Is this a tit for tat, or is this like a bigger strategic shift?

Kyle Chan: I think it is part of a broader trend of trying to control, and, maybe in some cases, leverage key parts of the supply chain and technology for these cutting-edge fields, like AI, semiconductors, and clean tech. And so in some cases, this might be about leverage, about trying to convince the other party — the other country — to change their behavior, maybe to lift their own export controls. But in some cases, this is about protecting a commercial advantage.

Ben-Achour: Why might China have picked solar panel manufacturing equipment to start restricting?

Chan: In general, China is the dominant player across the entire solar supply chain, from solar cells, polysilicon, and a lot of the equipment that's used to produce every step of the supply chain. And I think what's interesting is that it will be one thing for China to restrict the solar cells or the modules — the sort of downstream end products — but to go upstream to the more fundamental equipment and materials that might be used to produce these final products, that is a signal to me that this is more than just about the sales of these final products, but about controlling who can make the technology, who can produce these products in the first place.

Ben-Achour: As you mentioned, I mean, China already dominates the whole supply chain, fully integrated from silicon itself to the actual solar cells. What would it mean if the U.S. can't get this one piece of the supply chain?

Chan: So, I don't think it would mean a complete cut off of the United States ability to do solar manufacturing domestically. A lot of the technology is there in the U.S., and there could be alternative suppliers, either domestic or abroad. But I do think it could slow down the ability for the U.S. to really ramp up some of its solar production.

Ben-Achour: I mean, the U.S. does have some solar producers that use different technology than what China is very good at producing. So First Solar uses cadmium telluride to make thin film, voltaics. I wonder, would this create an opening for those alternatives?

Chan: It could actually. So, this is sort of the double-edged sword of trying to control technology. In the near term, you might be able to slow down your competitor or your sort of target country's efforts to produce their end products, but in the medium to long term, this might stimulate their ability to move up the value chain and try to develop that capacity on their own.