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Chinese Solar Firms Reroute from Southeast Asia to Middle East Due to U.S. Tariff Hikes

published: 2024-06-05 17:41

Facing the U.S. government's "precision strikes," Chinese photovoltaic companies have been compelled to reassess their overseas market strategies. Some Chinese PV companies have begun shutting down their factories in Southeast Asia and relocating to the U.S., while others are focusing on the Middle East. Leading companies such as LONGi Green Energy and GCL Technology have already started accelerating these initiatives.

On June 3, GCL Technology announced that it would explore potential cooperation opportunities with Mubadala Investment Company PJSC (Mubadala) to establish a globally and regionally significant integrated silicon ecosystem in the United Arab Emirates (UAE).

According to the announcement, in May, GCL Technology (Jiangsu) Co., Ltd. (GCL Jiangsu), a wholly-owned subsidiary of GCL Technology, signed a cooperation agreement with MDC Power Holding Company LIC (MDC Power). MDC Power and GCL Jiangsu will collaborate on developing the first polysilicon production facility in the UAE.

GCL Technology's 2023 annual report reveals that its Middle Eastern polysilicon project focuses on granular silicon technology and is expected to commence construction in 2024.

GCL's intention to build a factory in the Middle East was evident as early as last year. In a September 2023 interview, GCL's Co-CEO Lan Tianshi stated that the company was seeking to construct a 120,000-ton silicon material plant in a Middle Eastern country, aiming for production to begin by 2025. At that time, signs suggested a preference for Saudi Arabia, with reports indicating that GCL had initiated registration procedures there. However, according to GCL sources, the agreement with the UAE signifies the abandonment of their plans in Saudi Arabia.

The establishment of GCL's granular silicon factory in the UAE will enhance the local industrial chain. At the third Belt and Road Forum for International Cooperation last year, Chinese PV companies like TCL Zhonghuan, Trina Solar, and Jinko Solar signed cooperation agreements with Middle Eastern countries. For instance, Trina Solar signed a Memorandum of Understanding with AD Ports Company PJSC and Jiangsu Overseas Cooperation Investment Co., Ltd. to develop a vertically integrated large base project in the UAE, planning three phases of construction: 50,000 tons of high-purity silicon material, 30 GW of silicon wafers, and 5 GW of cell modules.

Southeast Asia "Springboard" Fails, PV Companies Accelerate "Exodus"

In recent years, Chinese PV companies have faced numerous challenges in international trade. Due to geopolitical factors, some Western countries have targeted Chinese PV products, making 2024 potentially the most challenging year for these companies.

In May, the Biden administration announced an increase in tariffs on Chinese PV products from 25% to 50% under Section 301. Additionally, the tariff exemption for PV products imported from four Southeast Asian countries will expire on June 6. This development has rendered the strategy of bypassing U.S. tariffs via Southeast Asia ineffective, prompting PV companies to start "fleeing" Southeast Asia.

Industry sources indicate that LONGi Green Energy has begun gradually shutting down its module factory in Malaysia, which only started operations in October last year. Furthermore, all five production lines at LONGi's cell factory in Vietnam have ceased operations. Two of these lines were planned for sale to Yingfa Group, but no formal contract has been signed, and the transaction has stalled.

In addition to LONGi, reports suggest that a major factory in Thailand has ordered a halt to production, offering employees the choice to either relocate to the U.S. or leave the company. There are also indications that another leading company with factories in Vietnam and Thailand plans to close its Southeast Asian operations by mid-June.


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published: 2024-05-24 17:24  |  tags: ,