Two years ago this month, New York Times columnist Thomas Friedman wrote about a visit he made to Applied Materials, which manufactures machines that make computer chips and photovoltaic panels. Based in Santa Clara, California, Applied Materials had established photovoltaic equipment-making factories in seven countries – Germany (which has five plants), China (four), and Spain, India, Italy, Taiwan, and Abu Dhabi (one each) – to serve customers in those locations.

No new Applied Materials factories, Friedman noted at the time, were scheduled for construction in the U.S. His column cast harsh light on the contrast between U.S. government financial and regulatory support for renewable-energy industries, which has been inconsistent, and support in the countries mentioned above, where government regulations and incentives (including subsidies) to encourage production and deployment of photovoltaic systems have been extensive enough to create solid markets for solar products, particularly in Germany and China. Market realities since the column appeared seem to bear out Friedman’s concerns that the U.S. will not lead the way in photovoltaic manufacturing or domestic sales.

Reversal of fortune

On August 31, a Silicon Valley-based maker of photovoltaic devices, Solyndra, laid off 1,100 workers and filed for Chapter 11 bankruptcy protection, citing, among other things, falling demand in the U.S. and, over the past year, rapidly increasing competitive pressure from Chinese manufacturers.

This despite the fact that Solyndra received $527 million in loans from the federal government and about $1 billion in private investment. The company’s downfall was blamed in part on the fact that it bet on copper indium gallium diselenide thin-film technology rather than on polysilicon, which in 2009, when the company got its loan guarantee, was expensive. Solyndra’s solar panels featured cylindrical modules designed to absorb light from any angle. When Solyndra broke ground, in Fremont, California, then-Gov. Arnold Schwarzenegger and Energy Secretary Steven Chu were on hand to help celebrate, and President Obama visited the factory.

As noted in a recent Times story on Solyndra’s failure, the Department of Energy, which approved the company’s funding, said the price per watt of capacity has dropped 42% since December 2010, and China’s subsidies to its solar industry are indeed threatening the ability of American manufacturers to compete.

“Solyndra was born in an era of undersupply, expensive polysilicon, and still-shaky reputations for major Chinese manufacturers,” Nathaniel Bullard, a solar analyst with Bloomberg New Energy Finance, wrote in an email to Forbes writer Todd Woody. “It grew, however, in a market that was the opposite of all of those factors. That means it had to be much more efficient, lower cost, high volume, and well regarded than even its most optimistic backers probably expected.”