By Nichola Groom

July 19 (Reuters) - The collapse last week of legislation that includes subsidies for domestic solar panel output is a blow to nascent efforts to wean the solar industry off major reliance on China, the chief executive of the largest U.S. solar panel producer said on Monday.

In an interview, First Solar Inc CEO Mark Widmar said that without the Democratic-backed climate change bill there was no incentive for manufacturers to build solar equipment factories in the United States.

"Where we sit now there is no policy, there's no direction, there's no indication for anyone to invest here in the U.S. for solar manufacturing."

The lack of a domestic supply chain for solar panels, a fast-growing industry that is key to achieving President Joe Biden's climate change goals, is a growing problem for the industry. In the last two years, big solar projects have faced delays due to pandemic-related supply chain disruptions, import tariff threats and increased border scrutiny stemming from concerns about ties to forced labor.

Widmar's company, which makes panels in Ohio and in Asia, benefits from having a technology that is different from the silicon-based products that dominate the market. As a result, solar developers have increasingly sought out First Solar panels, which are not subject to tariffs.

First Solar won't build its next plant in the United States, Widmar said, calling the Biden administration's efforts to boost solar manufacturing insufficient.

"If the actions being taken by the administration were creating momentum you would see that in the marketplace, you'd see announcements being made for new factories," he said.

"Instead you see the opposite," Widmar added, pointing to the closure this year of LG's solar factory in Alabama.

The Biden administration has said that it wants clean energy technologies to be produced domestically, and last week announced $56 million in new funding aimed at spurring domestic manufacturing. In June, Biden also invoked the Defense Production Act to spur solar manufacturing at home.

Widmar said those efforts were "not going to move the needle."

Some 90% of U.S. solar panels are made overseas. The bulk of the industry's raw material, polysilicon, is produced in China.

There is growing recognition from project developers that the reliance on China is a major vulnerability for the industry's long-term ambitious, Widmar said, pointing to the surging demand his company has seen this year.

"We're going to almost be sold out through 2026 by the end of this year," he said.