But the same price decline that has hurt panel manufacturers has helped sustain demand in the face of disappearing subsidies. That means a number of businesses, such as those that install household solar equipment, continue to thrive.
Panel assemblers have been hit particularly hard, because what they do is more easily replicated than, say, firms that make the polysilicon material used in photovoltaic cells, or the devices, called inverters, used to hook panels to the grid.
China's top panel maker, Suntech, put its main manufacturing unit, Wuxi Suntech, into insolvency in March; Germany's Q-Cells filed for insolvency last year and was then bought by South Korea's Hanwha.
Even wealthy conglomerates such as Bosch and Siemens of Germany have exited solar, pointing to the longtime crisis in the industry.
SolarWorld, once Germany's largest panel maker and immune to the global woes, is also trying to reach a restructuring deal with creditors. Sources say such an agreement could give ownership to hedge funds and Qatar.
More Damage Ahead
The proposed tariffs on Chinese solar imports could backfire on Europe. The world's No. 2 solar market last year, China is expected to overtake Germany this year, according to the European Photovoltaic Industry Association, and Asia could overtake Europe.
Western solar panel makers have long been at odds with their Chinese counterparts, accusing them of receiving credit lines to offer modules cheaply in Europe while protecting their own market where outside companies have made little headway.
(Read More: Don't Worry, We'll Quiet Skeptics: First Solar CEO)
China has threatened punitive tariffs on EU exports of solar-grade polysilicon, a move that would hit companies such as Germany's Wacker Chemie, the world's No. 2 maker of the material.
"This situation is weighing on the market," Wacker CEP Rudolf Staudigl said this week.
Despite the bloodbath among manufacturers, solar capacity is being sold and installed at record rates, and there are still good reasons to invest in panels themselves, if not in the companies that make them.
Europe aims to get 20 percent of its energy from renewables by 2020, from about 13 percent in 2011.
This year, the volume of installed panels worldwide is expected to rise at least 12.5 percent to more than 35 gigawatts, according to data from electronics consultancy IMS Research. That is still equivalent to only about 0.2 percent of global electricity production.
"The conflicting trend of growing [photovoltaic] installation volumes accompanied on the other hand by falling revenues will challenge solar companies to continue to reduce their cost structures," said Ash Sharma, director of solar research at IMS parent firm IHS.
According to GTM Research, a green-tech analysis firm, per-watt production costs for solar panels are expected to fall to $0.42 by 2015 from $1.29 in 2009.
Solar companies have launched cost-reduction programs, ranging from job cuts and factory closures to less investment in research and development. Cost cuts are putting solar power further along the road to "grid parity"—the ultimate goal of making it cheaper to install solar than to buy conventional electricity.
The remaining production costs include polysilicon, the main raw material for the industry whose producers include Wacker Chemie and Hemlock Semiconductor—a joint venture of Dow Corning, Shin-Etsu Handotai and Mitsubishi Materials.
The panel glut and consolidation is reminiscent of the computer chip industry, which saw massive price drops as Asian manufacturers took on U.S. and European incumbents.
The problems of solar equipment manufacturers have been exacerbated by subsidies, only to see them removed as the market takes off.
With costs still higher than those for coal or natural gas, solar power demand has been spurred by rules that subsidize those who generate power and feed it into the grid—so-called feed-in tariffs. But those subsidies have been withdrawn faster than expected. In Germany, subsidies have been more than halved in the past four years.
While solar-panel makers have been losing out, the price of equipment has fallen fast enough to keep demand strong, despite the lower subsidies. Those who installed solar equipment in Germany a few years ago are still earning returns on investment of about 15 percent.
More than a fifth of new European solar capacity last year was in private households—good news for the hundreds of small and midsize companies that install it.
"That part of the market has done well in the past and continues to do so," said Thorsten Preugschas, CEO of German firm Soventix, which helps homeowners choose solar systems.