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After dodging strong protective action for a long time, the solar inverter market could be set for significant upheavals in the next few years worldwide outside China. In 2024, 9 of the top 10 solar inverter firms were from China, with Huawei and Sungrow together accounting for almost 55% of the market according to reports. Non-Chinese brands like SMA, SolarEdge, Enphase, Fimer, Fronius etc have all seen market shares tumble in sync with China's rise in the solar market. Chinese firms have also benefited from the obvious advantage of the Chinese market itself accounting for over 60% of the global solar market at times in the past 5 years.
EU Acknowledges Risks
Now, the European Union's (EU) Economic Security Doctrine has identified solar inverters as a high-risk dependency, a move welcomed by the European Solar Manufacturing Council (ESMC) which has been pitching for the kind of protection accorded to the module manufacturing supply chain.
The doctrine includes solar inverters and their supply chains among its assessment of risks to the EU’s critical infrastructure with a strong focus on cybersecurity.
It must be noted here that EU plans to protect the European solar manufacturing sector for modules has broadly failed, with the plan failing to arrest the closure and exit of many firms, and the long term future of such manufacturing as it exists still in doubt once subsidies end.
Hence the talk of developing supply chains in other 'trusted' third countries beyond China.
The ESMC has been highlighting the dominance of two Chinese brands that account for over 80% of the EU market's solar systems.
Recent Incidents Add To Security Worries
Solar Inverter security is just one of the many issues that have been raised in the light of Chinese dominance. While some unlisted hardware on devices in the US raised a security flag earlier this year, more recently, it is the dependence on China built Electric buses that has raised concerns, as these have depended on firmware updates from China to run efficiently. Discovered first in Norway, the worry here was linked to the ability to shut down these buses remotely. Chinese moves to use the export of rare earth magnets where it has a 90% global share did not help matters at all.
The hands off approach to solar inverters has its basis in practicality, as Chinese dominance in the entire components chain that goes into solar inverters is very strong, and establishing the same is a lot more complex than the module supply chain, for instance. But looking at current trends and the push for more semiconductor manufacturing around the world, it is safe to say that solar inverters will come under the scanner sooner than later in other markets including India as well. Indian currently has a 20% duty on imported solar inverters. Most so called domestic inverter manufacturers source over 80% or more of their components from China, so even a drop in market share of China based inverter firms does not give a true picture of the situation here. Effective market share of China 'origin' inverters is thus probably closer to 95%.