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Southeast Asia's solar development affected by US-China tariffs. (Photo: iStock)
The solar supply chain in Southeast Asia appears to be facing turbulent times as the U.S. accuses companies in the region of unfair competition and plans to raise tariffs. As a result, some manufacturers are delaying production or withdrawing operations. Meanwhile, the effectiveness of the trade barriers imposed by the Biden administration is also under intense scrutiny.
Southeast Asia’s solar panel capacity ranks second globally
According to Bloomberg New Energy Finance (BNEF), Vietnam, Thailand, Malaysia, and Cambodia are the second-largest producers of solar panels globally, following China. U.S. solar industry giants have accused these four Southeast Asian countries of dumping low-priced solar panels, prompting the U.S. government to launch an investigation. The exemption is expected to be canceled, and import tariffs are likely be between 30% and 50%。
Three-quarters of solar products in the U.S. come from these four countries. With the clear stance on reinstating tariffs, a wave of solar panel purchasing has erupted in the U.S. to mitigate the pressure from rising future costs. S&P Global Market Intelligence found that in the second quarter of 2024, the scale of solar panel imports into the U.S. reached 17.4 GW (gigawatts), a 36% increase compared to the same period in 2023, marking a historical high. Among the fastest-growing sources were Vietnam and Thailand.
At the same time, many Chinese companies are adjusting their strategies by reducing production capacity in Southeast Asia. For example, LONGi Green Energy has halted production lines at its Vietnamese battery plant, Trina Solar has closed factories in Thailand and Vietnam, citing annual maintenance, and Jinko Solar has shut down a factory in Malaysia.
Chinese firms accused using Southeast Asia to avoid tariffs
Yana Hryshko, Head of Global Solar Supply Chain Research at Wood Mackenzie, suggests that suppliers might consider relocating their production lines to countries like Indonesia, Laos, or the Middle East, especially for battery production. She notes that some Chinese manufacturers are observing the extent of the U.S. tariff increases before deciding whether to relocate their production lines.
After the U.S. imposed tariffs in 2012, Chinese solar manufacturers gradually shifted their base. Unexpectedly, by using Southeast Asian countries as a production base, they may still face high tariffs. However, some analysts believe that not every Chinese company will be unable to withstand this pressure.
Dennis Ip, an analyst at Daiwa Capital Markets, points out that not all Chinese factories in Southeast Asia will shut down, as products from there can be shipped to India, Europe and elsewhere.
While Chinese firms may have other markets to explore, U.S. companies face a significant challenge in terms of cost competitiveness. Wood Mackenzie notes that the cost of Chinese solar components is about 9-11 cents per watt, compared to 27-33 cents per watt in the U.S. This disparity means many American companies are selling at a loss. The Biden administration's tariff measures may block foreign competition but fail to address the cost issue, which could result in higher costs for developers and potentially hinder the advancement of renewable energy.
Source: Bloomberg, Reuters, New York Times
