Three-quarters of China's solar-grade polysilicon producers face closure as Beijing looks to overhaul inefficient industry.
About 40 companies employing 30,000 people in total are involved in manufacturing polysilicon for solar panels. In recent years, China has poured in over 100 billion yuan (£10.6bn) in subsidies into the industry, which is said not to be able to compete with global market leaders from Germany and South Korea.
The current move was said to be a direct consequence of the on-going global economic crisis, which forced the governments worldwide to reassess their renewable energy programmes.
The polysilicon industry insiders say the move will halve China's production capacity to 100,000 tonnes a year, leaving around 10 relatively strong firms with better technology and cost efficiency.
"Most producers will be eliminated rather than acquired. This may sound cruel, but it is the reality as they are technologically uncompetitive," Lu Jinbiao, a senior official at China's top polysilicon producer GCL-Poly Energy, told Reuters.
To help save the struggling polysilicon sector, China has recently embarked on an ambitious plan to quadruple the country’s solar-power-generating capacity to 35 gigawatts by 2015. This will help to enable the manufacturers to find customers for their products.
The challenges mirror those faced by much of China's manufacturing sector, from cement and steel to shipbuilding – local governments chasing jobs and economic growth over-invested in often high-cost, low-tech capacity in the mid-2000s when demand for solar panels was booming.