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Because some of the newer companies don't have long-term silicon contracts, they are stuck paying spot prices, which analysts have estimated at up to four or even five times the prices of long-term contracts. Even the ones that do have longer contracts - such as Suntech Power, which has large deals with suppliers such as Hoku Scientific, LDK and MEMC - have had to pay higher prices to get them, compared with older companies with pre-existing deals.

But if the supply shortage eases, Chinese companies' costs could drop lower than their competitors'.

Getting Aggressive

Suntech (NYSE: STP) surely thinks so. "What the Chinese companies will do in terms of generalization is bring the industry to grid parity faster than it otherwise would have," said Steven Chan, chief strategy officer for Chinese solar-panel titan Suntech Power.

Chan is talking about the point when solar electricity is equal to or cheaper than conventional electricity. Among those leading the charge will likely be Suntech, a maker of low-cost solar cells.

Suntech has been growing more than 100 percent per year since starting production in 2002. According to second-quarter figures posted in August, net revenues grew 147.7 percent year-over-year to $317.4 million.

And Chan talks big about the power Suntech can wield. "We think we can bring the whole industry to grid parity within five years," he said. When that time comes, Chan said Western companies probably will be okay. But there will be an element of struggle.

Contrary to Hoffmann's suggestion, Chan said lower labor costs will play a heavier role in the global solar market, especially once the industry recovers from the silicon shortage (see Silicon Steals the Spotlight, Again).

Suntech's cost structure is skewed, with 75 percent of costs going to silicon, he said. But with the hefty silicon bill out of the equation, Suntech will be spending about 70 cents per watt to make its products while competitors spend more than $1 per watt, Chan said.

That's when the pressure will really hit for companies in places like Europe, he said. "We can compete them down if we wanted to. To drive the weaker competition out of the market."

But Chan indicates competitors don't need to worry. "I don't think we'll do that," he said. "We don't look to compete [with] a solar competitor to the point where they are insolvent."

That might not be as placating as he intended. It also begs the question: Will everyone play as nice?

- Greentech Media Editor Jennifer Kho contributed to this report.