Chinese solar panel makers are shunning their overcrowded home market in favor of lucrative exports, a switch that has helped to arrest a two-year slump in margins and push shares to 12-month peaks.
Manufacturers such as JA Solar Holdings Co Ltd (JASO.O) and ReneSola Ltd (SOL.N), reliant on low-margin Chinese sales after trade wars with the United States and Europe, are pushing into Japan and emerging economies where solar panel demand is rising.
"Opportunities in China are less attractive than in many other emerging markets," said Daniel Heck, spokesman for Canadian Solar Inc (CSIQ.O), an Ontario-based company that has most of its operations in China.
China plans to add 10 gigawatts (GW) of installed solar power capacity this year. While this would make it the world's biggest solar market, excess panel manufacturing capacity has led to a sharp decline in prices.
Data from business information provider IHS show that Chinese-manufactured modules were selling in the domestic market at 57 cents per watt in April, the lowest price worldwide. The same panels were selling in Japan at 72 cents per watt.
Companies such as China Sunergy Co Ltd CSUN.O are sacrificing high volumes at home for a slice of the premium Japanese market.
"I expect companies to chase as many high-margin sales as they can, and to use their remaining capacity in the Chinese high-volume market if they are able to," said Edward Guinness, co-portfolio manager at Guinness Atkinson Asset Management.
The results are evident. JA Solar's latest quarterly results revealed that gross margins were positive for the first time in three quarters.
In the three months ended March, the company generated 38 percent of its total panel sales from Japan, a market in which it previously had very little presence. China's share fell to 14 percent from 50 percent in the preceding quarter.
Since the company reported first-quarter results on Monday, its stock has risen more than 40 percent and hit 12-month highs. Competitor ReneSola's shares have jumped 30 percent since it reported on May 16, also touching a year-high.
This reversal in fortune is a welcome change for Chinese solar companies that have grown accustomed to posting quarterly losses over the last two years, a period during which global panel prices have fallen by more than two-thirds.
LAND OF THE RISING SUN
The European Union is considering whether to impose punitive import duties on solar panels from China, after the United States levied its own duties last year - a move fiercely opposed by Beijing.
This drove many Chinese panel makers back to their home market, but tough domestic competition has encouraged them to look to new markets - and better payment terms - abroad.
Canadian Solar's Heck said investors were also reluctant to build solar power plants in China as the government had been slow to implement payment of feed-in tariffs, the incentives offered to consumers to use more solar power.
Japan, as well as other markets in Asia, the Middle East and Africa, are helping to fill the gap.
Seeking to cut its reliance on nuclear power since the Fukushima disaster, Japan is encouraging the installation of solar panels by allowing users to sell power generated from the roofs of homes, factories and solar farms to the national grid.
"Japan will be about 5.3 GW and the second-largest solar market this year, and it has sparked a rather positive global demand outlook," said IHS analyst Stefan de Haan.
ReneSola aims to generate a third of its sales from the Asia-Pacific region this year, company spokesman Tony Hung said, with Japan and Australia becoming key contributors to revenue.
JA Solar, similarly, expects Asia-Pacific to account for 30 percent to 40 percent of shipments in 2013.
But walking away entirely from the Chinese market, which this year is expected to overtake the European Union as the largest solar power consumer, is not an option for most players.
To survive in the current low-price environment, some Chinese companies, including Trina Solar Ltd (TSL.N), also plan to develop integrated solar power projects, a more lucrative business than simply selling solar cells or panels.
"Trina's strategy is to move downstream and develop our own projects, which will allow us to capture more profitability," said company spokesman Kevin Zhang.
(Editing by Robin Paxton, Don Sebastian)