ITC study analyses services in solar panel manufacturing
A new ITC study shows that services are critical to the competitiveness of manufacturing and product exports. ‘Services in Global Value Chains: Solar Panel Manufacturing in China.’, is part of a series of analysis to better understand the contribution of services in manufacturing, especially as part of global value chains.
The study analyses the services inputs, such as transportation, installation and maintenance, design and packaging, research and development, and etc. in two segments of the photovoltaic (PV) value chain for a Chinese company: the manufacture of solar cells and the assembly of solar modules, commonly known as solar panels.
The study finds that services account for between 20% and 25% of the total cost of production. When material inputs are excluded from the calculations, however, services account for about 70% of the cost of production, with the remaining 30% is spent on interests on bank loans and wages for manufacturing workers on the production line.
The paper highlights the variety of services used in this value chain, how services enter the market, and what they contribute. In fact, forty services are required for the solar panel value chain, and three-quarters of those are partially or fully outsourced to third parties.
The study further highlights the implication of the related policies: the intertwined relationship between government and businesses may encroach on independent decision-making of companies and lead to over-investment. Industrial policies, meanwhile, may discourage investment in the downstream activities, whereas the construction of solar power plants might result in the heavy export dependence of the sector.
The study forms part of a wider project, initiated by Hong-Kong based Fung Global Institute (FGI), which seeks to analyse more deeply the role of services in production and consumption along GVCs. It is based on a series of case studies intended to build insights for more systematic analysis of services in production. It will also be presented to the APEC Public Private Dialogue on Services, to be held on 17 May 2015, in Manila, the Philippines.
Download Services in Global Value Chains: Solar Panel Manufacturing in China