Japan is often seen as the motherland of the photovoltaic industry. Back in 1993, the government started its New Sunshine Project, a massive subsid program that helped to equip 300,000 Japanese houses with solar panels over the following decade. During that time Japan became the undisputed world market leader for the production of photovoltaic systems. Still in 2006, three of the world's largest five firms were Japanese ones: Sharp, Kyocera and Sanyo. Their combined production capacity of solar cells amounted to 922 megawatts, clearly outweighing No. 2 Germany with 508 MW.

However, this dominance is changing, and it is changing very rapidly. Other countries are catching up fast, and in particular, Germany threatens to overtake Japan. Back in 2003, the volume of newly installed solar panels in Japan was 223 MW, much higher than Germany with 157 MW. However, in 2006 this figure had increased to 750 MW for Germany while Japan only installed 300 MW of new capacity. For 2007, observers even expect Germany to add one gigawatt, or 1,000 MW. The total volume of all installed panels for Germany meanwhile amounts to 2,500 MW, or 10 times more than just four years ago. Germany now exceeds the former "land of the rising sun" with only 1,700 MW installed from Hokkaido to Okinawa by the end of 2006.

Hence it comes as no surprise that Japanese firms are losing global market share. In 2006, the share of market leader Sharp dropped from 24 percent to 17 percent while Kyocera and Sanyo also lost a part of the global pie. The winner by contrast was the German company Q-Cells. Last year, Q-Cells increased its production by 50 percent and its global market share climbed to 10 percent; with these gains, the company took the global No. 2 position behind Sharp. And other competitors are eating into the global market such as SolarWorld from Germany and Suntech from China, which was the world's fourth-largest solar firm in 2006. In its July 19 economic analysis, the Nikkei Shimbun even wondered whether Japan will lose its technological edge in a key industry as it did before with semiconductors and mobile phones. Germany by contrast is attracting many investments in the solar-energy industry due to its strong home market.