Three Southeast Asian nations have become China’s “Mini Me” when it comes to the solar supply chain.
It has long been known that China’s biggest solar companies were setting up shop in Vietnam, Thailand and Malaysia due to anti-dumping duties against some companies there, and the Section 201 solar tariffs which targeted mainland China companies. But now, more of the solar supply chain is moving south. It’s all destined for Western markets.
Customs statistics show that polysilicon exports from China to Vietnam went from 639 metric tons in 2022 to 4,970 metric tons in 2023. “That raises doubts about the claims of a separate supply chain and should sound alarm bells at the Custtoms,” said a Nov. 2023 report by Bernreuter Research, a market research firm specializing in the polysilicon market.
Some U.S. producers that have been reliant on the mainland China market for sales have seen a shift to Southeast Asia buyers in order to avoid tariffs, and avoid any confusion over the Uyghur Forced Labor law that bans polysilicon from Xinjiang province.
Hemlock Semiconductor (USA), Wacker (Germany/USA) and OCI Malaysia together increased their polysilicon exports to Vietnam from 18,672 metric tons in 2022 to 33,265 metric tons in 2023. This growth all compensated for the 13,918 metric tons that those three companies supposedly lost in business volume in China in 2023, according to Bernreuter.
China’s solar shops in Southeast Asia now run the gamut from mere solar panel assembly operations, to solar wafer and solar cell fabrication. In other words, more of the solar supply chain is leaving mainland China. Although this is a headwind for China labor, it is not a problem for the Chinese multinationals who have managed to grow even bigger despite AD/CVDs against them, the weakened Section 201 tariffs, and the Inflation Reduction Act (IRA) which bestowed benefits to solar producers manufacturing in the U.S.
The appetite for polysilicon, an early starting material needed in making traditional solar cells, is mostly coming from Chinese companies in Southeast Asia. These companies are using that polysilicon to make the materials that ultimately go into the solar cells that get assembled into solar panels. This increased demand from Chinese companies means the supply goes there instead of here, and China’s solar companies then use it to make even more product, almost always bound for the U.S. China is the price setter.
The European solar industry is in dire straits because of this. China is taking them out, what is left of them, as reported by the FT earlier this week.
The U.S. was in better shape thanks to the IRA, but now Chinese players are producing so much, a glut threatens the market and threatens the projected returns on investment made by solar companies here.
Southeast Asia Now A Trio Of Mini-Chinas Producing Solar for US Market
Three Southeast Asian nations have become China’s “Mini Me” when it comes to the solar supply chain.
It has long been known that China’s biggest solar companies were setting up shop in Vietnam, Thailand and Malaysia due to anti-dumping duties against some companies there, and the Section 201 solar tariffs which targeted mainland China companies. But now, more of the solar supply chain is moving south. It’s all destined for Western markets.
Customs statistics show that polysilicon exports from China to Vietnam went from 639 metric tons in 2022 to 4,970 metric tons in 2023. “That raises doubts about the claims of a separate supply chain and should sound alarm bells at the Custtoms,” said a Nov. 2023 report by Bernreuter Research, a market research firm specializing in the polysilicon market.
Some U.S. producers that have been reliant on the mainland China market for sales have seen a shift to Southeast Asia buyers in order to avoid tariffs, and avoid any confusion over the Uyghur Forced Labor law that bans polysilicon from Xinjiang province.
Hemlock Semiconductor (USA), Wacker (Germany/USA) and OCI Malaysia together increased their polysilicon exports to Vietnam from 18,672 metric tons in 2022 to 33,265 metric tons in 2023. This growth all compensated for the 13,918 metric tons that those three companies supposedly lost in business volume in China in 2023, according to Bernreuter.
China’s solar shops in Southeast Asia now run the gamut from mere solar panel assembly operations, to solar wafer and solar cell fabrication. In other words, more of the solar supply chain is leaving mainland China. Although this is a headwind for China labor, it is not a problem for the Chinese multinationals who have managed to grow even bigger despite AD/CVDs against them, the weakened Section 201 tariffs, and the Inflation Reduction Act (IRA) which bestowed benefits to solar producers manufacturing in the U.S.
The appetite for polysilicon, an early starting material needed in making traditional solar cells, is mostly coming from Chinese companies in Southeast Asia. These companies are using that polysilicon to make the materials that ultimately go into the solar cells that get assembled into solar panels. This increased demand from Chinese companies means the supply goes there instead of here, and China’s solar companies then use it to make even more product, almost always bound for the U.S. China is the price setter.
The European solar industry is in dire straits because of this. China is taking them out, what is left of them, as reported by the FT earlier this week.
The U.S. was in better shape thanks to the IRA, but now Chinese players are producing so much, a glut threatens the market and threatens the projected returns on investment made by solar companies here.
Despite the Inflation Reduction Act’s incentives, the cutbacks and bankruptcies of U.S. solar companies have begun. After reporting a $36 million loss on just $29 million of quarterly revenue, California solar installer Sunworks filed for bankruptcy and is now being liquidated. Sunworks is just an installation company. But SunPower, one of the early developers of solar cells, announced a loss of $247 million in 2023, raised an emergency $175 million loan from its French parent TotalEnergy, and brought back its previous chairman Tom Werner to help save them. A smaller producer, Cubic PV, announced this winter that it was abandoning plans to manufacture solar wafers in the U.S. and instead would concentrate on solar panels made from imported cells. Trailblazing innovator Cubic was America’s best hope to break the Chinese stranglehold on solar wafers, but catastrophic price declines throughout the solar supply chain led Cubic’s investors to cancel the project. The likely outcome of oversupply caused by China’s leading solar companies means those companies will continue to be the sole Green OPEC, barring a policy change from Washington.
CPA’s chief economist Jeff Ferry warned in a report on Wednesday that the IRA was failing in its intent to reshore the solar supply chain, and support American industry. The single country benefiting from solar, and building the most new factories here, is China.
CPA analysis of planned solar module manufacturing facilities found that Chinese-owned companies are planning to build more U.S. facilities, in terms of gigawatts of capacity, than U.S.-based companies, including First Solar, the only native U.S. solar producer in the top 10. First Solar does not use traditional solar cells to make its panels.
Regarding announced investments, Chinese-owned companies will account for 31 GW or 35.9% of the total planned U.S. production capacity of 86 GW, as compared to 29 GW or 33.8% for U.S. companies. Chinese solar module leaders like Longi and Trina are building larger, multi-gigawatt facilities, while U.S.-owned companies like Mission Solar are building facilities with capacity of 1 GW or less.
In most cases, construction of the new or expanded facilities has already begun. If the price paid for solar modules continues to fall this year and next, U.S. companies will either cancel their plans or try to exit the business by selling their completed money-losing facilities. “In many cases, the buyer is likely to be a Chinese producer, further increasing China’s dominance of the U.S. solar manufacturing industry,” Ferry said.
Everyone agrees solar deployment will continue. China companies are set to remain number one in solar, crowding out domestic companies that were hoping domestic demand and new legislation would help them grow in the market. That might not be the case thanks to the perennial overcapacity issues stemming from China, and China companies setting up shop in the U.S. to soak up a lot of the solar cells and otter materials it makes in Southeast Asia to produce solar panels made here.
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