Competition between the West and China is often couched in terms of a zero-sum game—China "takes" the manufacturing business in products like toys or clothes that the West can no longer do economically. But in other areas, China, the United States and Europe are competing in newer industries where the field is wide open. This poses new challenges for all sides. Green technologies like solar panels and wind turbines offer a glimpse into how this competition is shaping up.
At first glance, the market for solar technologies might look like a replay of China's traditional strategy. Chinese companies, led by Suntech, Yingli, and JA Solar, have latched onto an older form of solar panel, using silicon wafers, and ramped up production. China now produces one-third of the world's silicon wafers.
Overinvestment in capacity, combined with lower silicon prices, has led Chinese manufacturers to push down prices by roughly 50% over the last year and a half. This is squeezing early leaders in the West, like Europe's Q-Cell, which can't keep up with those prices...