From 2004 to Q3 2008, the price of PV modules remained approximately flat at $3.50-$4.00/W,
despite manufacturers making continuous improvements in technology and scale to reduce their
costs. Much of this can be attributed to the fact that the German, and then Spanish, tariff
incentives allowed project developers to buy the technology at this price, coupled with a shortage
of polysilicon that constrained production and prevented effective pricing competition. The 18
largest quoted solar companies followed by Bloomberg made average operating margins of
14.6%-16.3% from 2005 to 20083.

Consequently, both polysilicon companies and downstream manufacturers expanded rapidly.
When the Spanish incentive regime ended abruptly at the end of September 2008, global demand
stayed roughly flat at 7.7 GW in 2009, from 6.7 GW in 2008, while polysilicon availability
increased at least 32%; enough to make 8.5 GW of modules, with an additional 1.6GW of thin
film production. As a consequence of this sudden need to compete on price, wafer and module
makers gave up some of their margins, and the price fell rapidly from $4.00/W in 2008 to
$2.00/W in 2009. The ability of manufacturers to drop their prices by 50%, and still make a
positive operating margin, was due to the reductions in costs achieved over the previous four
years, driven by scale and advances in wafer, cell and module manufacturing processes, as well as
to improved performance resulting from better cell efficiencies and lower electrical conversion
losses (Wesoff, 2012).

(bold mine)

This can either be seen as an argument for a "free-market" approach, or alternatively the state gives the initial boost to help establish industrial critical mass and then market forces can operate. A bit like the "Internet" model where the (US) state reasearched and built the infrastructure and then, with critical mass, the market could then enter.

If it is technologically underdeveloped and capital intensive, the initial boost might be critical.