By Lewis Jackson, Phuong Nguyen, Colleen Howe, and Nichola Groom

(Reuters) – Some of the largest Chinese-owned solar factories in Vietnam are reducing production and laying off workers due to U.S. trade tariffs aimed at them and three other Southeast Asian nations.

In contrast, numerous new Chinese-owned solar plants are emerging in Indonesia and Laos, circumventing U.S. trade protections. Their anticipated capacity could supply approximately half of the solar panels installed in the U.S. last year, as reported by Reuters.

Chinese solar companies have consistently decreased output in existing locations while establishing new facilities abroad, enabling them to evade tariffs and maintain dominance in the U.S. and global markets despite ongoing tariffs over the past decade intended to limit their growth.

Although Chinese firms have been relocating their solar manufacturing for years, the recent significant shift to Indonesia and Laos has not been previously disclosed. This article is based on interviews with over a dozen individuals across five countries, including employees at Chinese factories, officials at non-Chinese solar companies, and legal experts.

"It's a huge cat and mouse game," stated William A. Reinsch, a former trade official from the Clinton administration and current senior adviser at the Center for Strategic and International Studies.

"It's not that hard to move. You set up and you play the game again. The design of the rules is such that the U.S. is usually one step behind."

China currently represents about 80% of global solar shipments, while other Asian export hubs account for most of the remainder, according to SPV Market Research. This marks a stark contrast to two decades ago when the U.S. led the industry worldwide.

Meanwhile, America's solar supply imports have tripled since the initiation of tariffs in 2012, reaching a record $15 billion last year, as per federal data. While nearly none came directly from China in 2023, around 80% originated from Vietnam, Thailand, Malaysia, and Cambodia—countries hosting factories owned by Chinese firms.

Last year, Washington imposed tariffs on solar exports from these four Southeast Asian nations and expanded them in October following complaints from U.S. manufacturers.

Over the past 18 months, at least four Chinese or China-affiliated projects have commenced operations in Indonesia and Laos, with an additional two announced. Collectively, these projects hold a capacity of 22.9 gigawatts (GW) in solar cell or panel production.

Much of this production is expected to be sold within the United States, the world's second-largest solar market and one of the most profitable. U.S. prices, on average, have been 40% higher than in China over the last four years, according to PVinsights data.

U.S. solar manufacturers have consistently asserted in trade complaints to the government that they cannot compete with the inexpensive Chinese products, which they claim are unfairly subsidized by the Chinese government and the Asian countries from which they export.

In response, Chinese solar firms argue that their technological expertise allows them to offer more competitive prices.

Trade tariffs have become a significant issue in the U.S. electoral landscape, with Republican former President Donald Trump proposing tariffs on all U.S. imports to bolster domestic manufacturing, including a 60% rate on goods from China. Conversely, Democratic Vice President Kamala Harris warned that Trump's plan could elevate costs for U.S. consumers.

Despite differing views, lawmakers across the political spectrum have expressed support for stricter tariffs on China's solar imports to foster a domestic supply chain.

"Moving forward, the American public should demand much stricter enforcement of tariffs, especially concerning (China's) use of third countries to breach U.S. trade law," remarked Republican Congressman John Moolenaar, who chairs the House Select Committee on China, in an interview with Reuters.

The U.S. Department of Commerce, the White House, and China's commerce ministry did not respond to Reuters' inquiries for comments.

PAIN IN VIETNAM

The immediate impact of the latest U.S. tariffs, which have raised total duties to over 300% for certain producers, has been heavily felt in Vietnam's solar sector.

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

In Bac Giang province, hundreds of employees at a large factory complex owned by Longi Green Energy Technology's Vinasolar unit reportedly lost their jobs this year, according to two employees familiar with the situation.

The company was operating only one of nine production lines in the industrial park, one of the employees stated.

Similarly, in Thai Nguyen, Trina Solar has reportedly halted production at one of its two factories that produce solar cells and panels, as revealed by two employees there.

Both companies' employees preferred to remain anonymous due to the sensitivity of the situation. Longi did not respond to requests for comments, although it confirmed in June that it had suspended operations at a Vietnamese solar cell plant but did not provide further details. Trina declined to comment but previously mentioned in June that some facilities in Vietnam and Thailand would be temporarily closed for maintenance without elaborating.

While U.S. solar import data indicates shipments from Vietnam surged nearly 74% through August, industry analysts attribute this increase to frontloading exports to beat current U.S. tariffs.

The Vietnamese government has not responded to requests for comments concerning this matter.

NEW EXPORT BASES, US PLANTS

Chinese solar companies are increasingly establishing operations in Indonesia due to the tariffs imposed on Vietnam, as noted by Indonesian industry ministry official Beny Adi Purwanto, who cited Thornova Solar as an example. Thornova's website states that its Indonesian plant has an annual capacity to produce 2.5 GW of solar modules and 2.5 GW of solar cells for the North American market.

Additionally, a new 1 GW Trina module and cell plant is slated to be fully operational by the end of 2024, which will expand manufacturing capacity, according to Beny. He also highlighted China Lesso Group's solar module plant, which has a production capacity of 2.4 GW.

Last year, China-linked New East Solar announced a 3.5 GW panel and cell facility in Indonesia. The Chinese companies have not replied to Reuters' requests for comment.

The transition to production in Indonesia has been described as rapid and substantial by a manager at a U.S. solar firm, who relayed that their Chinese supplier in Indonesia was overwhelmed with large orders from significant Chinese companies preparing for U.S. export.

"The scale is totally different," the manager stated, opting to remain unnamed.

Solar exports from Indonesia to the U.S. almost doubled to $246 million through August of 2024, according to federal data.

Companies seeking opportunities in Laos include Imperial Star Solar, which has Chinese origins but most of its production in Cambodia. The firm inaugurated a Laos wafer plant in March, which is expected to eventually hold 4 GW of production capacity.

At the time, the firm indicated that this move was designed to help it avoid U.S. tariffs. SolarSpace also launched a 5 GW solar cell facility in Laos in September 2023, asserting that the intention to shift production capacity to Laos was not linked to U.S. tariffs, without providing further details.

Solar exports from Laos to the U.S. were negligible in the first eight months of the previous year but reached approximately $48 million through August of 2024.

Others are exploring even more distant options. JinkoSolar has reported a nearly $1 billion agreement with partners in Saudi Arabia to construct a new 10 GW solar cell and module plant in the kingdom.

Moreover, the establishment of solar manufacturing facilities in the U.S. by Chinese companies is significantly accelerating as they seek to capitalize on U.S. incentives.

According to a Reuters analysis, Chinese companies are anticipated to possess at least 20 GW worth of annual solar panel production capacity within the U.S. by the next year, enough to meet around half of the U.S. market demand.