Analysis: China’s Solar Manufacturers Scour the Globe Amid Trade Tensions, Cutthroat Competition

Chinese solar manufacturers are expanding their international presence through diverse strategies. Leading companies like Longi Green Energy Technology Co. Ltd. (601012.SH) are increasing production capabilities in the U.S. to benefit from subsidies, while others turn to the Middle East and new Southeast Asian markets to avoid trade barriers. The move comes amid escalating trade tensions, a domestic industry glut, and intense price wars that have impacted profitability.[para. 1][para. 2]

In recent first-half financial reports, major Chinese PV manufacturers, usually profitable, reported significant losses. For instance, Longi saw a net loss of 5.2 billion yuan ($733 million), contrasting with a 9.2 billion-yuan profit the previous year. TCL Zhonghuan Renewable Energy Technology Co. Ltd. (002129.SZ) posted a net loss of over 3 billion yuan, a sharp reversal from a 4.5 billion-yuan profit a year earlier.[para. 3]

The U.S. market is critical for overseas ventures of Chinese solar manufacturers, as module prices there are about $0.25 per watt—more than twice that of Europe. This profitability is enhanced by subsidies under the Inflation Reduction Act (IRA) promoting local clean energy manufacturing. However, high costs of building U.S. factories, nearly four times higher than in China, make subsidies less accessible for smaller manufacturers.[para. 4][para. 5][para. 6]

Many Chinese manufacturers build local plants or shift supply chains to countries that can bypass U.S. tariffs. Longi's $600 million, 5-gigawatt solar panel assembly factory in Ohio and Trina Solar Co. Ltd.'s (688599.SH) $200 million, 5-gigawatt manufacturing facility in Wilmer, Texas, exemplify this strategy. Despite the lucrative subsidies, uncertainties loom due to proposed restrictions by U.S. senators on Chinese firms receiving IRA subsidies.[para. 7][para. 10]

Efforts to evade tariffs also led Chinese manufacturers to Southeast Asia. Yet, Washington’s investigations on imports from Malaysia, Cambodia, Thailand, and Vietnam could result in new tariffs by 2025. This has prompted some manufacturers to look to other Southeast Asian countries like Indonesia and Laos. However, this might not be a foolproof strategy as the U.S. could expand tariff investigations.[para. 11][para. 12][para. 14]

Amid shifting ASEAN tariff policies, the Middle East is gaining popularity for Chinese manufacturers seeking to dodge trade barriers and access the U.S. market. Major investments are underway, like those by TCL Zhonghuan and Jinko Solar in Saudi Arabia, totaling billions. However, economically, the low unit price of solar power in the region makes high-return investments challenging. Some companies adopt an asset-light model, assembling components on-site to curb costs.[para. 16][para. 17][para. 19]

The solar industry also faces competitive pressures across all markets. In the first half of 2024, exports fell by 35.2% year-on-year to $18.7 billion. Exports to Europe, a significant market for China, plummeted by half, driven by excess inventory and rising geopolitical tensions. This competitive, dynamic environment constrains profitability despite diverse international expansion efforts. [para. 24]

The varied strategies among Chinese solar manufacturers underscore the complex global landscape, regulatory challenges, and competitive pressures they navigate. These efforts highlight the importance of strategic geographical diversification to mitigate risks and capture new market opportunities.[para. 1][para. 16][para. 24]