The future of South-east Asia's quickly growing solar industry is facing serious challenges due to rising tensions between the United States and China. This region now ranks second globally for solar panel production capacity, trailing only China, but trade tensions could change everything.
Recently, US authorities have accused Chinese firms of evading tariffs by moving operations to South-east Asia. Some prominent companies, like Longi Green Energy and Trina Solar, have already begun to scale down their operations across Thailand, Vietnam, and Malaysia, which have been targeted by Washington.
These four countries—the so-called 'ASEAN Solar Hub'—account for over 40% of global solar module production outside China. With tariffs looming, many of these companies are scrambling to find alternative markets to replace the United States.
Yana Hryshko, who leads global solar supply chain research at Wood Mackenzie, noted, "The mood of the suppliers is to pack the lines, especially the cell lines, and move them to either Indonesia, Laos, or the Middle East." For some manufacturers, the decision to leave hinges on the potential tariff levels set by the US.
This uncertainty reflects larger issues within the clean energy supply chains as the US and Europe work to reclaim market shares from China, which currently dominates the solar equipment and electric vehicle battery industry. Meanwhile, Chinese solar firms are grappling with increased domestic competition and overproduction, with several smaller players already falling victim to the market's challenges.
A US investigation last August revealed some Chinese manufacturers were skirting existing tariffs by shifting their production to South-east Asian countries after the US had imposed tariffs on directly imported panels from China in 2012. This led to the US imposing additional import taxes on various companies operating out of these regions.
Some US companies now seek tariffs as high as 272% on solar products from these four countries, according to reports. By comparison, tariffs on China currently stand at about 25%, with plans to double those rates, intensifying the urgency of the situation.
Washington is edging closer to implementing those tariffs, with the US International Trade Commission indicating it believes domestic manufacturers are being harmed by low-cost imports from Southeast Asia. Following this development, reports emerged indicating Longi has halted multiple production lines and is winding down operations, with Trina also planning to reduce its capacity.
Despite the challenges, not all Chinese factories in South-east Asia are closing down just yet, as some can still ship products to markets like India and Europe. Analyst Dennis Ip suggested, "Some older facilities might shut down, but newer plants should survive if they discover alternative markets to serve."
The current political climate adds more pressure, with both US political parties adopting stiffer stances against China as the November elections approach. The upcoming tariffs not only threaten South-east Asia’s burgeoning solar industry, but they could also endanger US efforts to decarbonize its energy supply, considering the region supplied over three-quarters of US solar product imports last year.
The potential tariff imposition is anticipated to occur early next year, but as Deborah Elms from the Hinrich Foundation noted, there might be less scrutiny surrounding US solar manufacturing, as industry ramp-ups aren't happening as quickly as expected.
Elms added, "Efforts to clamp down on suspected circumvention of US restrictions on Chinese imports will likely continue, especially if Donald Trump returns to office." For the focus will remain acute on countries the US has trade deficits with, including several South-east Asian nations.
With such uncertainty hovering over the industry, many are left wondering just where the Southeast Asian solar sector is headed—and whether it can thrive amid the brewing trade storm.
