Tokyo  - Eager not to loose its long-held position at the leading edge of solar-cell technology to foreign competitors, Japan is promoting the further development of the technology, which is regarded as one of the strategically important industries of the future.

"We can already feel the effects. Sales are increasing," said Tetsuhiro Maeda, vice-president and general manager of the solar division of Sanyo Electric Co.

The company, which is soon to merge with electronics giant Panasonic Corp, hopes to recover market share lost in recent years, and is to a large extent pinning its expectations on the German market.

"Both the government and we, the companies, are working hard so that Japan gains ground in the solar energy field again," Maeda said.

After the oil crisis in the 1970s, Japan was among the first countries to promote the use of solar energy for producing hot water and electricity, turning the Land of the Rising Sun into the world's largest producer of solar cells in the process.

However, in recent years, Japan's government has given into the demands of electricity providers opposed to being required to buy solar-generated electricity at higher-than-market prices. When subsidies were scrapped in 2005, the market tanked.

Suddenly, Japan lost ground to the competition abroad, with the German Q-Cells group replacing Japan's Sharp Corp as global market leader for solar cells.

Sanyo suffered the same fate. While holding seventh position in 2007 in terms of solar cell production with a market share of 4.4 per cent, Sanyo's market share fell to 3 per cent and the company's global ranking dropped several notches to 12th one year later.

Adding to the solar-cell industry's misery is the global economic downturn, which has hit the country's entire electronics sector hard. In the business year 2008-09, which ended March 31, Sanyo, the world's largest producer of rechargeable batteries, was in the red.

Net losses for the business year were 93.22 billion yen (968 million dollars) following a net profit of 28.7 billion yen the year before.

In the current business year, Sanyo aims to be back in profit again. By focusing on rechargeable batteries and solar energy, the company hopes to make a profit of 7 billion yen.

For the business year 2010-11 Sanyo wants to increase its market share in solar cells to 8 per cent, and raise it to 10 to 15 per cent in the subsequent years.

"For us, Germany is the market with the biggest potential," Maeda said. The German market is attractive for Japanese companies, as high quality and reliability are appreciated there, he explained.

Sanyo still sees "much space" to expand capacity at its European production site in Hungary, and while it does not plan any further plants in Europe, a factory is being expanded in Mexico.

Both sites are expected to churn out solar cells at full capacity by 2010 or 2011, Maeda said. And by 2014 or 2015, according to the ambitions plans, production is planned to reach more than 1 gigawatt of solar-cell production.

But to reach that goal, further production sites are needed, Maeda said, but stressed that Sanyo was still focused on its core markets in Europe, Japan and North America. China, for the time being, is not central to the company's strategic considerations.

Even if the Chinese market were to grow this year, it would be unlikely to exceed 100 or 200 megawatts. Moreover, the market is already covered by large Chinese producers. "We doubt that we can gain a foothold there," Maeda said, because the Chinese government is subsidizing the domestic market.

Meanwhile, Sanyo is busy cutting costs, increasing further the efficiency of its products and expanding domestic production capacity, by enlarging its biggest Japanese plant, located in Shiga prefecture.

Early next year, the plant will run at its full 100-megawatt production capacity, Maeda said. (dpa)