Another tediously typed up comment that was lost in the flood (What Gore Didn't Say About Solar Cells)
Lets have a look at actual data:
During the last decade there was only a very mediocre decline in manufacturing cost per watt. Scaling up solar cell production in the last few years actually brought prices up again due to silicon shortage.
However the price of solar cells is expected to decline sharper during the next years
1) Many new solar grade silicon fabs are coming up, hopefully driving down the cost of solar grade silicon
2) Thin film solar cells which can be produced at lower cost (but at the expense of efficiency and reliability) are gaining more and more market share and are improving.
As many other people pointed out, the scaling of solar cells is inherently different from that of microelectronics. In integrated circuits you are actually able to reduce the size and increase the density of your circuits.
For solar cells the material consumption per watt is pretty simple:
Vol [cmÂ/W] = thickness [cm] / efficiency [W/cmÂ]
Efficiencies for mass products are currently stuck somewhere between 15% and 20%. There are limited ways to work around this (concentrator cells, multijunction). This figure of merit is not expected to scale.
Reducing the material thickness is obviously the only option. Since the material thickness depends on physical properties (direct/indirect band gap) there are hard limits as well.
It boils down to the fact there there is no technical scaling model or road map to improve solar cell similar to integrated circuits. The main lever is simply in manufacturing intelligence and cost.
Personally I think the most interesting ramifications of this are that we will see (short lived) phase where companies can survive based on superior manufacturing technologies. Over time these differentiators will becomes less significant and cost is only defined by environmental factors such as cost of energy, raw material and labour.
This is why the solar cell industry will not be a pleasant place to work in in ten years, as interesting as it looks now. Outsourcing and consolidation will be swift and brutal. Even today companies are looking into places such as Malaysia, Mexico, Mongolia (!).