The $21 billion Chinese solar-panel industry, the world's largest, is set for consolidation as the global economic downturn crimps spending on solar projects and overcapacity drives prices down. The bigger, U.S.-listed Chinese manufacturers, like the domestic leader, Suntech Power Holdings, and JA Solar and Trina Solar, are expected to be among the survivors, as smaller players are pushed out of business. Shares in China's once-hot solar makers, which made a series of initial public offerings in recent years, trade about 90 percent below their peaks as margins shrink, buyers have a hard time financing orders and manufacturers scale back production. "Times are tough, and there are simply far too many companies competing," said Charles Yonts, a solar analyst for CLSA. China accounts for 60 percent of the world's solar-panel supply. Of that, Suntech and other U.S.-listed Chinese makers account for more than two-thirds, a market share that is expected to grow as they squeeze out rivals. Suntech joined Chinese and global solar-panel makers, like the industry leader, Q.-Cells of Germany, in posting weak fourth-quarter results. After managing a profit a year earlier, Suntech lost $65.9 million in the quarter, blaming falling prices and orders. Trina Solar warned that its margins would suffer because of write-downs on the value of its solar inventory, while Canadian Solar, which despite its name is Chinese, said it would ship fewer cells in 2009 than it had forecast. "Competition will be tough for the smaller companies, which do not have the strong portfolio of clients that Suntech has," said Christine Wang, an HSBC analyst. But the smaller listed players, like Trina and Canadian Solar, are expected to benefit from not having expanded aggressively. "Not that they will have an easy time, but these firms are quick to shift focus from growth to balance-sheet preservation and cash flow," said Yonts of CLSA. "They're doing the right thing." He said he liked JA Solar because it had a strong balance sheet, while more recent market entrants would be the first to disappear. Making solar panels requires relatively little start-up capital but plenty of labor, which made it attractive to manufacturers and investors in China. A Chinese-made solar laminator, for example, costs less than $12,000. "Many companies jumped into solar -panel manufacturing with reckless disregard for supply/demand trends," said Kit Temple, chief executive of ENF, a photovoltaic research company. ENF identified 393 panel makers in China, of which only 51 were certified to sell to major overseas markets. Some smaller companies had completely shut down, while others began scaling down production in November as orders fell, Temple said. The main obstacle to growth is limited access to credit among customers, said Terry Wang, the Trina Solar chief financial officer. Clients, including solar system integrators and equipment distributors, have less cash these days and are seeking longer payment terms, as much as 60 days, he said. "Demand from end users is there, but our clients are having difficulty getting financing from banks," Terry Wang said. "We are trying to extend a longer payment term for them, and the challenge is having enough cash to help our clients." Falling module prices this year will further squeeze margins and slow production for panel makers, though government stimulus packages in China and elsewhere may bring a new wave of demand. In 2008, the average price of a panel sold in the United States was $4.80 per watt, compared with $6.90 in Europe. Christine Wang, the HSBC analyst, expects the price to fall 20 percent to 30 percent in 2009. Chinese solar companies, which ship mostly to Europe to benefit from state subsidies, are looking to sell more panels at home to augment sales, though it may be years before the domestic business has made a meaningful contribution to revenue. "Now is a good time for China to promote solar power, since prices of silicon and panels are down," said Zhengrong Shi, chairman of the Jiangsu-based Suntech, the world's third-biggest module maker. China accounts for just 3 percent of Suntech sales, a share that Shi expects to grow to 10 percent in three years as falling panel prices make solar power more economical. "The reason the Chinese government didn't support the industry is because they didn't see any future in it," he said. "Now, clearly they can see-that."