Investing.com -- The ongoing oversupply in China’s solar market, combined with global policy uncertainty, could create new advantages for U.S. solar companies, according to a recent Bank of America report.

BofA analysts highlighted insights from an expert call with Frank Haugwitz, Director of AECEA, noting that "China commands ~80% of key solar manufacturing steps and nearly all wafer production." 

Despite efforts in regions like the U.S., India, and Türkiye to localize manufacturing, BofA said these face "steep hurdles: expertise gaps outside China, slower equipment innovation, and significantly higher capex costs."

Oversupply issues are said to be intensifying. BofA pointed out that "2024 YTD price declines are stark: polysilicon (-39%), wafers (-50%), cells (-30%), N/P-type modules (-29%), HJT modules (-57%)," with module prices in China hovering at "~$0.08/W and could drop to ~$0.07/W by mid-year." 

Meanwhile, "industry-wide negative net profits could persist through at least 2027," forcing many Chinese firms to continue burning cash.

At the same time, policy-driven uncertainties are reportedly hampering efforts to diversify the solar supply chain. 

"Escalating AD/CVD risks and potential IRA modifications are driving caution in new investments," BofA warned, adding that "FEOC restrictions and broader tariff threats compound early-stage challenges for non-Chinese manufacturing."

Despite these challenges, global solar demand continues to grow. BofA stated that "global solar installations reached 600GW in 2023 growing ~30% yoy," although growth outside Europe was more pronounced, led by India, the U.S., Brazil, and Pakistan.

Looking ahead, BofA believes First Solar (NASDAQ:FSLR) could be a key beneficiary. "Persistent Chinese oversupply, mounting trade headwinds, and formidable barriers to non-Chinese manufacturing reinforce our conviction that FSLR’s market positioning is more durable than broadly appreciated," the firm wrote.

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