(Reuters) – Some of the largest Chinese-owned solar plants in Vietnam are cutting production and laying off jobs, prompted by an expansion of trade tariffs targeted by the U.S. and three other Southeast Asian countries.
Meanwhile, in Indonesia and nearby Laos, many new Chinese-owned solar plants are springing up, out of reach of Washington’s trade protections. The planned capacity is enough to supply around half of the panels installed in the US last year, a Reuters report showed.
Chinese solar companies have repeatedly slashed output at existing hubs while building new plants in other countries, allowing them to avoid tariffs and dominate the US and global markets despite a wave of US tariffs that have been in place for more than a decade designed to control them.
While Chinese companies have been moving solar manufacturing for years, the scope of the move to Indonesia and Laos in this latest phase has not been previously reported. More than a dozen people in five countries, including employees at Chinese factories, officials at non-Chinese solar companies and lawyers were interviewed for this article.
“It’s a huge cat and mouse game,” said William A. Reinsch, a former trade official in the Clinton administration and a senior adviser at the Center for Strategic and International Studies.
“It’s not that hard to move. You set it up and replay the game. The rule design is usually US one step.”
China accounts for about 80% of the world’s solar shipments, while export centers elsewhere in Asia make up much of the rest, according to SPV Market Research. That’s a stark contrast to two decades ago when the US was the global leader in the industry.
Meanwhile, American imports of solar supplies have tripled since Washington began imposing tariffs in 2012, to a record $15 billion last year, according to federal data. While almost none of it will come directly from China in 2023, around 80% will come from Vietnam, Thailand, Malaysia and Cambodia – home to factories owned by Chinese companies.
Washington slapped tariffs on diesel exports from four Southeast Asian countries last year and expanded them in October after complaints from manufacturers in the United States.
Over the last 18 months, at least four Chinese or China-related projects have begun operations in Indonesia and Laos, and two more have been announced. Together, the projects total 22.9 gigawatts (GW) in solar cell or panel capacity.
Most of that production will be sold in the United States, the world’s second largest solar market after China and one of the most profitable. US prices have averaged 40% higher than in China over the past four years, according to data from PVinsights.
US solar producers have repeatedly stated in trade complaints filed with the US government that they cannot compete with cheap Chinese products that they say are unfairly supported by subsidies from the Chinese government and Asian countries that are exported from.
Chinese solar companies argue that their mastery of the technology makes their prices more competitive.
Tariffs are a major theme in the US election, with former Republican President Donald Trump proposing levies on all US imports to stimulate US manufacturing, including a 60% tariff on any goods from China. His rival, Democratic Vice President Kamala Harris, said Trump’s plan would increase costs for US consumers.
Lawmakers on both sides of the aisle, however, have shown support for tougher tariffs on Chinese solar shipments to nurture domestic supply chains.
“Going forward, the American public must demand stricter enforcement of tariffs, especially on the use of third countries (China) to violate US trade laws,” Republican Congressman John Moolenaar, Chairman of the House Select Committee on China, told Reuters.
The US Commerce Department, the White House and China’s commerce ministry did not respond to Reuters’ requests for comment.
PAIN IN VIETNAM
The most immediate impact of the latest US tariffs, which brought total duties of more than 300% for some producers, has been on Vietnam’s solar sector.
In August, Reuters visited an industrial park in northern Vietnam owned by Chinese companies including Longi and Trina Solar, and talked to workers.
In Bac Giang province, hundreds of workers at a large factory complex owned by Vinasolar unit Longi Green Energy Technology lost their jobs this year, two employees with knowledge of the matter said.
The company only uses one of the nine production lines in the industrial park, one of them said.
In Thai Nguyen, another province, Trina Solar has idled one of two factories making solar cells and panels, two employees said.
Employees at both companies were not identified due to the sensitivity of the issue.
Longi did not respond to a Reuters request for comment. It said in June it had suspended production at its Vietnam solar cell factory but gave no details. Trina declined to comment. In June it said some facilities in Vietnam and Thailand would be closed for maintenance without elaborating.
While US solar import data showed shipments from Vietnam were up nearly 74% through August, industry analysts have attributed the jump to frontloading exports to earlier requests for US tariffs this year.
The Vietnamese government did not respond to a request for comment.
NEW EXPORT BASIS, US PLANTS
Chinese solar companies are coming to Indonesia motivated by tariffs in Vietnam, according to Indonesian industry ministry official Beny Adi Purwanto who cited Thornova Solar as an example. Thornova said on its website that its factory in Indonesia has an annual capacity to build 2.5 GW of solar modules and 2.5 GW of solar cells for the North American market.
The new 1 GW Trina module and cell factory will be fully operational by the end of 2024 and will increase capacity, according to Beny. He noted China’s Lesso Group solar module factory has a production capacity of 2.4 GW.
China-linked New East Solar also announced a 3.5 GW panel and cell factory in Indonesia last year.
The Chinese company did not respond to a Reuters request for comment.
The shift to Indonesian production has been clear and rapid, according to one manager at a US solar company who was told by a Chinese supplier in Indonesia that he was inundated with large orders from Chinese companies looking to export to the United States.
“The scale is very different,” said the unidentified manager.
Solar exports from Indonesia to the US will nearly double to $246 million by August 2024, according to federal data.
Solar companies looking for greener pastures in Laos include Imperial Star Solar. The company, which is based in China but produces most of its production in Cambodia, opened a Laos wafer factory in March that is slated to have a capacity of 4 GW.
The move, he said in a statement at the time, helped offset U.S. tariffs.
SolarSpace is also opening a 5 GW solar cell factory in Laos in September 2023. The main purpose of moving production capacity to Laos is unrelated to US tariffs, the company said in a statement to Reuters but did not elaborate.
Solar exports from Laos to the US were flat in the first eight months of last year but were worth about $48 million through August 2024.
Others want to go further.
JinkoSolar said in July it had signed a nearly $1 billion deal with partners in Saudi Arabia to build 10 GW of new solar cell and module plants in the kingdom.
Construction of U.S. solar plants by Chinese companies is also on the rise as they also seek to take advantage of U.S. incentives.
Chinese companies will have at least 20 GW of annual solar panel production capacity on US soil next year, enough to serve about half of the US market, according to a Reuters analysis.
(Reporting by Lewis Jackson in Sydney, Phuong Nguyen in Hanoi, Colleen Howe in Beijing and Nichola Groom in Los Angeles; Additional reporting by Stefanno Sulaiman in Jakarta, Francesco Guarascio and Khanh Vu in Hanoi, David Kirton in Shenzhen and Alexandra Alper in Washington; Editing by Richard Valdmanis and Edwina Gibbs)
