Chinese solar panel maker Suntech has filed for bankruptcy, just days after the company said it defaulted on a US$541 million bond payment.
One of the world's largest makers of solar panels, Suntech Power Holdings, had been hit by global oversupply of solar cells and panels, China Daily reported Wednesday.
Its fortunes were also hurt by trade disputes the Chinese solar industry had with the United States and Europe over alleged Chinese dumping and government subsidies, it added. European companies had complained that Chinese solar firms were selling panels below cost in Europe in an effort to gain market share, also known as "dumping".
A court in Wuxi, China, where Suntech is based, ruled that the company undergo bankruptcy reorganization, according to the report. By end February this year, nine major Chinese commercial banks had lent Suntech a total US$1.14 billion.
The board of Suntech ousted its founder and chairman Shi Zheng Rong earlier this month.
According to 21st Century Business Herald, Shi founded Suntech in 2002, and took the company public three years later, becoming a solar billionaire. He obtained credit from China Development Bank which helped him gain control of the solar industry from German and Japanese competitors, the report said.
The Wuxi government poured a large amount of subsidies into Suntech. To qualify for the government subsidies, the company sold its products to overseas subsidiaries to boost sales figures. However, a sharp drop in solar panel prices in recent years has swept away the profits of solar panel manufacturers worldwide.
Data from the China PV Industry Alliance said orders for Chinese PV (photovoltaic) equipment slumped 80 percent year-on-year in 2012. Up to 90 percent of Chinese polysilicon makers had halted production, and 80 percent of solar panel producers had either shut down or drastically reduced output.
Gao Hongling, deputy secretary-general of the China Photovoltaic Industry Alliance, said Suntech's fall will serve as a warning to other emerging strategic industries in China. which also face similar problems of haphazard investment and excessive production capacity.