KUALA LUMPUR: A slowdown in solar panel manufacturing by Chinese companies in Malaysia triggered by the United States' investigations into crystalline silicon photovoltaic cells and the end of the anti-dumping exemptions for selected solar products, is likely to significantly disrupt the domestic solar supply chain, industry players say.
In May, the US opened anti-dumping and anti-subsidy investigations into crystalline silicon photovoltaic cells from Cambodia, Malaysia, Thailand and Vietnam.
Last week, a two-year 200 per cent tariff exemption granted by the US for certain solar imports out of Malaysia also ended.
These developments are expected to make Chinese solar product manufacturers rethink their operations in Malaysia.
Malaysian Photovoltaic Industry Association (MPIA) president Davis Chong said this was because the US is a major export destination for Chinese solar product manufacturers in Malaysia.
International Renewable Energy Agency (IRENA) report titled Renewable Energy and Jobs: Annual Review said most US module imports came from Chinese-owned factories in Malaysia, Vietnam and Thailand, comprising about 81 per cent of 11.6 gigawatt (GW) shipped in the first half of 2021.
The news has impacted Chinese manufacturers' operations in other markets.
Longi Green Energy Technology Co Ltd on Friday announced plans to halt production at its Vietnam plant, while Trinasolar said facilities in Thailand and Vietnam would enter maintenance shutdowns.
Seven of the 11 largest solar PV companies have operations in Malaysia, they include First Solar, Longi, SunPower, Hanwha Q Cells, Jinko, and Risen.
According to the Centre on Global Energy Policy (CGEP) at Columbia University's School of International and Public Affair, companies in the target countries may face a tariff level ranging from 50 percent to 250 percent on the import value.
Malaysia is the third largest global manufacturer of photovoltaic (PV) modules and products, and is the world's largest thin film manufacturing site.
Malaysia's solar PV exports stood at RM41.6 billion in 2022, a 22 per cent year on year (YoY) surge from 2021.
Chong said while the situation is concerning for the domestic solar panel manufacturers, domestic solar projects remain untouched as the engineering, procurement, construction and commissioning (EPCC) contractors tend to import materials from China.
"The changes in Malaysia supply chain will not affect solar projects in Malaysia, because domestic solar EPCC and developers import solar panel import from China due to their competitive price," Chong, who is also Solarvest executive director and group chief executive officer, told Business Times.
On outlook for the industry, he said it is expected that the affected companies will gradually divert their orderbook to other markets not impacted by the anti-dumping tax.
"The impact of this move will be long-term and extends to the US alliance such as Europe and Australia. Unfortunately, domesticmanufacturers may struggle to redirect their supply to these markets," he added.
Samaiden group managing director Chow Pui Hee said while these measures may affect the manufacturers, it may not impact the developers and EPCC companies.
She said as a player mainly in the EPCC segment, an oversupply situation could be beneficial for the company, as it will help keep solar panel prices low.
"Due to higher production costs, panels made in Malaysia cannot be priced as competitively as those from China. Consequently, manufacturers shall reposition their pricing strategy to sustain the domestic plant operations," she said.
According to International Renewable Energy Agency (Irena) report titled Renewable Energy and Jobs: Annual Review, Malaysia is the third leading solar PV cell and module manufacturer and exporter in Southeast Asia after Vietnam and Thailand in 2022.
As a key module manufacturing hub, the agency estimated that the solar PV industry employed nearly 45,000 employees, whereas domestic installations have remained limited.
Malaysia has a complete solar energy industry value chain, starting from manufacturing of materials and PV modules right up to system integration.