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Leaving Southeast Asia, where should Chinese photovoltaic enterprises go overseas?

published: 2024-07-04 17:58

Going overseas is not a new topic in the photovoltaic industry. However, the recent US trade policy has caused a wave of turbulence, and the overseas expansion path of Chinese photovoltaic companies is being reshaped.

"The preferred relocation routes for Chinese photovoltaic companies in Southeast Asia are now Indonesia and Laos, which have not yet been included in the tariff list by the United States." Li Nan, a senior executive of the marketing department of an A-share listed photovoltaic company, said: "Some photovoltaic companies are not leading enterprises and have small production capacity. They may choose to quickly relocate to these two neighboring countries to seize the window period before the United States establishes a new bill."

In mid-May this year, the U.S. Department of Commerce officially announced anti-dumping and anti-subsidy investigations on crystalline silicon photovoltaic cells (whether assembled into modules or not) imported from Cambodia, Malaysia, Thailand and Vietnam, and imposed additional tariffs on solar cells imported from China (whether assembled into modules or not).

On June 7, local time, the United States International Trade Commission (USITC) passed a preliminary ruling on damages in the anti-dumping and anti-subsidy investigation of photovoltaic products from four Southeast Asian countries. Due to the possibility of traceability, before the final ruling is released, Chinese companies will be cautious about selling battery components to the United States through production lines in Southeast Asia. But it is clear that it is an inevitable trend for Chinese photovoltaic companies to turn their "course" overseas.

Back in 2011, the United States began to impose high anti-dumping and anti-subsidy tariffs on my country. Since then, major battery manufacturers in my country have begun to choose to build production lines in Southeast Asia.

Chinese photovoltaic enterprises have successively "gone to Southeast Asia", and the leading enterprises have integrated production capacity from silicon wafers to modules. Southeast Asia has become an important region for Chinese photovoltaic enterprises to export to the US market. According to statistics, as of 2023, the main supply of photovoltaic cell modules in the United States will still come from Southeast Asia, accounting for about 60% of the total demand in the US market.

According to statistics from the U.S. Department of Commerce, the total volume of modules imported by the United States from the four Southeast Asian countries from 2021 to 2023 will be 16.6GW, 18.7GW, and 36.4GW, respectively, with corresponding import amounts of US$4.33 billion, US$5.69 billion, and US$11.91 billion in the three years. However, with the resurgence of U.S. trade protection measures, Southeast Asia is no longer a "safe haven" for Chinese photovoltaic companies.

"Several factories in Thailand may still be wondering whether a 'miracle' will happen. The leading large factories are more practical. They have long given up their fantasies and have basically turned to setting up factories in Mexico and the United States." A senior person in the photovoltaic industry said that some companies that have invested in recent years but have not yet recovered their investment are now basically moving to Laos, Myanmar or Indonesia.

In response to recent rumors of a shutdown at its Thai factory, Trina Solar (688599.SH) said that the company's production capacity in Thailand and Vietnam is mainly for the United States. The demand in the US market will fluctuate in the short term, so the company will adjust its production plan based on industry and market conditions. "The company has already laid out component production capacity in the United States and battery component production capacity in Indonesia, both of which are under construction. The Indonesian factory is expected to be put into production in the third quarter of 2024. The joint venture partner of the project is the Indonesian National Electricity Company."

Talking about the way out for Southeast Asian photovoltaic power generation, Li Zhenguo, president of Longi Green Energy (601012.SH), recently responded to the media that whether the photovoltaic production capacity in Southeast Asia must be shut down needs further evaluation. First, it is necessary to evaluate the market competition situation, and second, it is necessary to consider whether to keep the Southeast Asian production capacity as a "backup". Trina Solar said that the company's production capacity in Thailand and Vietnam will soon enter a shutdown and maintenance state, which will be carried out in the middle of each year.

The situation in Southeast Asia is changing, and the Middle East is becoming a potential destination for Chinese photovoltaic companies to expand overseas.

In October last year, Trina Solar (688599.SH) signed the "Memorandum of Understanding on Cooperation in Trina Solar's UAE Project", intending to invest in the construction of a large vertically integrated base project in the local area, including about 50,000 tons of high-purity silicon materials, 30GW of crystalline silicon wafers and 5GW of battery modules, to be built in three phases; in May last year, TCL Zhonghuan (002129.SZ) announced that it planned to invest in the construction of a photovoltaic crystal wafer factory project in Saudi Arabia, with a designed production capacity of 20GW in the first phase.

On the evening of June 13, Drinda (002865.SZ) announced that the company had signed an "Investment Intention Agreement" with the Oman Investment Authority on the same day. The company plans to invest in the construction of an annual production capacity of 10GW of high-efficiency photovoltaic cells in Oman to strengthen the overseas market supply of photovoltaic cells. It is worth noting that the investment amount of the battery factory is about US$700 million. The company also promised to invest in the most advanced production capacity in Oman to provide the most popular products on the market.

In addition, during the just-concluded Shanghai SNEC exhibition, Saudi International Electricity and Water Company ("ACWA Power") signed the "Solar Photovoltaic Module Framework Agreement" with three Chinese solar photovoltaic module suppliers, JinkoSolar (688223.SH), Longi Green Energy and Tongwei Co., Ltd. (600438.SH).

From a regional perspective, the new photovoltaic "GW-level market" (referring to the market with photovoltaic power generation installed capacity reaching or exceeding 1GW) in 2022 will be mainly in European countries such as Greece and the United Kingdom, while the new photovoltaic "GW-level market" in 2023 will be mainly in Middle Eastern countries such as the United Arab Emirates and Saudi Arabia.

However, some photovoltaic companies believe that there are still opportunities to invest and set up factories in Europe.

Chen Gang, chairman of Aiko Co., Ltd. (600732.SH), said that in terms of going overseas, we are one of the few companies that have not invested in production capacity in Southeast Asia. Aiko has always been quick to do things, but we have been refraining from setting up production capacity in Southeast Asia. "If the company had made a relatively large investment in the four Southeast Asian countries, the financial statements in the past few years might have looked better, but the losses now are relatively large. In addition to financial losses, we will also face a series of problems such as the handling of local labor relations. We did not get this dividend in the past, and we have not suffered this loss today." Chen Gang believes that setting up a factory in Indonesia or Laos is very risky, and setting up a factory in the Middle East is also risky. He said: "If there is an opportunity, the company's overseas destination will first choose the European market, especially we have noticed that Europe has recently introduced some production subsidy policies."

It is also understandable that the United States is an important option for Chinese photovoltaic companies to go overseas.

In terms of volume, the US photovoltaic market is the third largest market in the world, second only to mainland China and Europe. According to statistics from the US Energy Information Administration, the cumulative import value of photovoltaic modules in the United States in 2023 was US$18.608 billion, equivalent to RMB 135.3 billion at the latest exchange rate, a year-on-year increase of 95%; the cumulative import volume was 53.84GW, a year-on-year increase of 63%.

In recent years, more and more leading photovoltaic companies have started to layout photovoltaic module production capacity in the United States, and most of the production lines are expected to be put into production from 2024 to 2025.

For example, Longi Green Energy cooperated with the US clean energy developer Invenergy, and the 5GW photovoltaic module joint venture factory in Ohio, USA, was put into production in the first quarter of 2024. Trina Solar has 5GW module capacity under construction in the United States, which is expected to be put into production within 2024.

However, except for the photovoltaic component link, the return effect of other links in the photovoltaic industry chain (silicon materials, silicon wafers, and solar cells) is not obvious.

According to statistics from Solar Power World (SPW), a US photovoltaic industry platform, as of January 2024, the production capacity of domestic solar cells in the United States is 0, and the silicon wafer production capacity in the upstream of the photovoltaic industry chain has almost no production capacity. It is expected that the supply of photovoltaic cells will still be mainly imported from 2024 to 2025.

In addition to being close to the terminal market, subsidies are also an important factor in attracting Chinese companies to build factories in the United States.

It is clear that the "overflow" of China's photovoltaic capacity has become inevitable. According to data from the Ministry of Industry and Information Technology, in 2023, China's production of polysilicon, silicon wafers, batteries, and modules will be 1.43 million tons, 622GW, 545GW, and 499GW, respectively, with each link increasing by more than 60% year-on-year. It is expected that the global market share of each link will exceed 90%.

Under the trend of involution in the entire industry, Chinese companies are facing the dilemma of being out of the market if they do not go overseas.

"The deeper the involution, the more opportunities can be found in the crisis by going out." Zhu Gongshan, chairman of GCL Group, said during the just-concluded Shanghai SNEC Shanghai Photovoltaic Exhibition that the global industrial chain is deeply reconstructed, and China's photovoltaic industry has become inevitable to go overseas. Europe, the United States, India and other countries are paying more and more attention to the autonomy and controllability of their own industrial chains. The "tariff stick" that is constantly waving has forced China's photovoltaic industry to change from "going overseas in a roundabout way" through Southeast Asia to going overseas in an all-round way, and from going overseas with a single technology and product to going overseas with an industrial chain including equipment and raw materials.

Diversifying investments and not putting all eggs in one basket is also the consistent thinking of photovoltaic companies when actively responding to overseas trade barriers.

However, whether choosing to change course and "enter the Middle East", temporarily moving to other Southeast Asian countries such as Indonesia and Laos, or directly investing and setting up factories in Europe and the United States and other places close to the market, Chinese photovoltaic companies need to change from "going out" to "integrating in".


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