Chinese solar companies, ever agile, are reaching further where US tariffs cannot

Some of China’s largest solar factories in Vietnam are cutting production and laying off workers, amid rising U.S. trade tariffs on the country and three other Southeast Asian countries.

Meanwhile, a slew of new Chinese solar plants are springing up in nearby Indonesia and Laos, beyond the reach of Washington’s trade protections. According to a Reuters report, their planned capacity will be enough to power about half of the panels installed in the US last year.

Chinese solar companies have repeatedly cut production at existing centers while building new factories in other countries, allowing them to bypass tariffs and dominate the U.S. and global markets despite successive waves of U.S. tariffs intended to rein them in.

While Chinese companies have been shifting their solar production for years, the extent of the shift to Indonesia and Laos in this latest phase has not been previously reported. More than a dozen people from five countries were interviewed for this article, including Chinese factory workers, officials from outside Chinese solar companies and lawyers.

“It’s a big game of cat and mouse,” said William A. Reinsch, a former trade official in the Clinton administration and senior adviser at the Center for Strategic and International Studies.

“Transferring is not that difficult. You take the game apart and play it again. The rules are that the United States is usually one step behind.”

According to SPV Market Research, China accounts for about 80 percent of the world’s solar energy supply, with the rest made up by export hubs elsewhere in Asia. This is a stark contrast to the situation twenty years ago, when the United States was the world leader in the industry.

Meanwhile, U.S. solar imports have tripled since Washington began imposing tariffs in 2012, reaching a record $15 billion last year, according to federal data. While almost none came directly from China in 2023, about 80 percent came from Vietnam, Thailand, Malaysia and Cambodia – where factories owned by Chinese companies are located.

Last year, Washington imposed tariffs on solar exports from these four Southeast Asian countries and extended them in October following complaints from U.S. producers.

Over the past 18 months, at least four Chinese or China-linked projects have started operations in Indonesia and Laos, and two more have been announced. Together, the projects are expected to have a total solar cell or panel capacity of 22.9 gigawatts (GW).

Much of that production will be sold in the United States, the second-largest solar market after China and one of the most profitable. Prices in the U.S. have been on average 40 percent higher than in China over the past four years, according to PVinsights.

U.S. solar producers have repeatedly said in trade complaints filed with the U.S. government that they cannot compete with cheap Chinese products, which they say are unfairly supported by subsidies from the Chinese government and the Asian countries from which they export.

Chinese solar companies have responded that their mastery of the technology makes them more price competitive.

Tariffs are a key issue in the U.S. election, and former Republican President Donald Trump proposed tariffs on all U.S. imports to boost American manufacturing, including a 60 percent tariff on all goods from China. His rival, Democrat Vice President Kamala Harris, said Trump’s plan would raise costs for American consumers.

Lawmakers on both sides of the aisle, however, have shown support for tighter tariffs on solar supplies from China to strengthen the domestic supply chain.

“The American public should demand much more stringent tariff enforcement in the future, especially as (China) uses third countries to violate U.S. trade law,” Republican Congressman John Moolenaar, chairman of the House Select Committee on China, told Reuters.

The U.S. Commerce Department, the White House and China’s Commerce Ministry did not respond to Reuters requests for comment.

PAIN IN VIETNAM

The most immediate visible impact of the latest U.S. tariffs, which have raised total tariffs to more than 300 percent for some producers, has been in Vietnam’s solar energy sector.

In August, Reuters visited industrial parks in northern Vietnam owned by Chinese companies, including Longi and Trina Solar, and spoke to workers.

In Bac Giang province, hundreds of workers at a large factory complex owned by Longi Green Energy Technology’s Vinasolar unit have lost their jobs this year, said two workers with knowledge of the matter.

As one of them stated, the company used only one of the nine production lines in the industrial park.

Elsewhere in Thai Nguyen province, Trina Solar has suspended one of its two factories producing solar cells and panels, two employees said.

Employees of both companies declined to provide data due to the sensitivity of the issue.

Longi did not respond to Reuters requests for comment. In June, it said it had suspended production at a Vietnamese solar cell factory, but did not provide details. Trina declined to comment. In June, it said some facilities in Vietnam and Thailand would be closed for maintenance, without providing details.

While U.S. solar import data shows shipments from Vietnam jumped nearly 74 percent in August, industry analysts attribute the increase to a concentration of exports early to get ahead of this year’s U.S. tariffs.

The Vietnamese government did not respond to requests for comment.

NEW EXPORT BASES, PLANTS IN THE USA

According to Indonesian Ministry of Industry official Beny Adi Purwanto, who cited Thornova Solar as an example, Chinese solar companies are coming to Indonesia motivated by tariffs imposed on Vietnam. Thornova says on its website that its Indonesian factory has an annual production capacity of 2.5 GW of solar modules and 2.5 GW of solar cells for the North American market.

According to Beny, the new Trina module and 1 GW cell plant will be fully operational by the end of 2024 and will increase efficiency. He highlighted China Lesso Group’s solar module factory with a production capacity of 2.4 GW.

China-linked New East Solar also announced the construction of a 3.5 GW panel and cell plant in Indonesia last year.

The Chinese companies did not respond to Reuters requests for comment.

According to one manager at a U.S. solar company, the shift to Indonesian production has been sharp and rapid, and a Chinese supplier in Indonesia told him it was being inundated with large orders from major Chinese companies looking to export to the United States.

“The scale is completely different,” said a manager who did not want to remain anonymous.

Indonesian solar exports to the United States nearly doubled to $246 million by August 2024, federal data show.

Solar companies seeking greener pastures in Laos include Imperial Star Solar. The company, which has Chinese roots but most of its production is in Cambodia, opened a wafer factory in Laos in March that will eventually have a capacity of 4 GW.

The move, it said in a statement at the time, helped it avoid U.S. tariffs.

In September 2023, SolarSpace also opened a 5 GW solar cell plant in Laos. The main purpose of moving production capacity to Laos was not related to U.S. tariffs, the company said in a statement to Reuters, but gave no details.

Solar exports from Laos to the U.S. were non-existent for the first eight months of last year, but by August 2024 they were worth about $48 million.

Others go further.

JinkoSolar said in July that it had signed an agreement worth almost $1 billion with partners in Saudi Arabia to build a new 10 GW solar cell and module factory in the kingdom.

Construction of U.S. solar plants by Chinese companies is also increasing as they, too, seek to benefit from U.S. incentives.

A Reuters analysis shows that Chinese companies will have at least 20 GW of annual solar panel production capacity in the U.S. next year, enough to serve about half of the U.S. market.