China holds more than 80% of the capacity that turns silicon into solar panels

Nearly every stage of making a panel happens in one country

A solar panel starts as raw silicon, then becomes polysilicon, the purified material a factory melts and forms into cylinders called ingots. Machines slice each ingot into thin discs called wafers, then process the wafers into cells, and cells are wired together into the finished panel, called a module. China holds more than 80% of the capacity to do all of that, from 2023 through 2026, according to Wood Mackenzie, a market research firm. Within China, the region of Xinjiang alone holds 40% of the total capacity worldwide to make polysilicon, and 1 out of every 7 solar panels made anywhere comes from a single factory.

Despite considerable module expansion plans, overseas markets still cannot eliminate their dependence on China for wafers and cells in the next three years.

Huaiyan Sun, senior consultant at Wood Mackenzie. Source 2.

The United States gave up the material it once controlled

The United States held 50% of the world capacity to produce polysilicon in 2005. By 2024 that share had fallen to less than 2%, according to a proclamation the White House signed in August 2026. The same proclamation states the country is now almost entirely dependent on imports for solar ingots, wafers and cells, the middle stages of making a panel. United States capacity to fabricate semiconductor wafers, the thin silicon discs used to make computer chips, shows the same decline over a longer period.

A new tariff taxes the material at every stage

To respond, the government used a law called Section 232 of the Trade Expansion Act of 1962 to set a new tariff on imported polysilicon and the products made from it. Signed August 6, 2026, the tariff takes effect December 4, 2026, 120 days later. It sets a 15% tax on polysilicon derivative products generally, cut to 10% for imports from the United Kingdom, and set at 15% combined for imports from Japan, South Korea, Taiwan, the European Union, Switzerland and Liechtenstein. The government also set minimum prices for these products, enforced with additional tariffs when a shipment comes in priced below them, 21 dollars a kilogram for polysilicon, 100 dollars a kilogram for ingots and wafers, 0.22 dollars a watt for solar cells, and 0.38 dollars a watt for solar modules.

This is not the first tariff aimed at the same problem

This is not the first time the government has tried to tax its way to a domestic supply. A separate case, decided the year before, targeted panels from Cambodia, Malaysia, Thailand and Vietnam. Producers in those countries responded by moving production elsewhere, so regulators opened a new case, called Solar 4, against Indonesia, Laos and India. Preliminary rates in that case, which cover exports priced too low or backed by unfair government support, and are not yet final, run to 139% for Indonesia, 103% for Laos and 234% for India.

Commerce's preliminary determinations in the Solar 4 case reinforce what we have consistently seen, foreign producers adapt quickly to trade enforcement actions, and partial measures are not enough.

Jon Toomey, President of the Coalition for a Prosperous America. Source 4.

Investors bet on the tariff months before it arrived

A basket of major solar company stocks tracked by UBS rose 40% in 2026 through May 28, including a 33% gain in May alone, breaking a 5 year losing streak. First Solar, the standout mover in that basket, was trading around 268 dollars a share. The rally was driven partly by falling bond yields and partly by investors expecting the Section 232 decision in mid to late June 2026. The actual decision did not arrive until August 6, 2026, more than 2 months later than the market had priced in.