Challenges and Strategies for Malaysia’s Solar Industry Amid US Tariffs

Malaysia’s solar industry is navigating new tariff threats from the Trump administration, with experts recommending a focus on increasing local content. The industry has historically attracted foreign investment due to incentives, but ongoing US investigations and recent tariffs pose challenges. While Chinese investments continue, shifting market dynamics may necessitate a re-evaluation of operational strategies to ensure long-term viability.

In light of potential new solar tariffs under the Trump administration’s second term, Malaysian academic Tham Siew Yean suggests that the solar industry in Malaysia should build local content rather than perpetually shift production locations. Malaysia has been attractive to foreign direct investment (FDI) due to favorable fiscal and non-fiscal incentives, which have historically drawn significant players such as First Solar and Sunpower, alongside major Chinese firms seeking refuge from tariffs. The previous tariffs imposed during Trump’s first term, beginning at 30% in February 2018, aimed at curbing imports, and while some exemptions existed, many companies adapted their operations in response to regulatory changes.

The current environment is further complicated by ongoing investigations into circumvention practices by US Department of Commerce, targeting significant solar module suppliers in Malaysia and other Southeast Asian nations. The results of these investigations, while clearing some firms, led to further duties being placed, challenging local manufacturers. As the Biden administration’s moratorium allowed duty-free imports for a period, Malaysia saw an uptick in exports. Nonetheless, the future remains uncertain amid potential changes in tariffs and market dynamics.

Additionally, China continues to invest in Malaysia’s solar sector, with firms like LONGi Green Energy and Risen Energy committing substantial investments amid the ongoing tariff climate. However, experts foresee an expansion of the tariff scope, which might prompt firms to consider relocating operations to avoid penalties – a move that is fraught with uncertainty as new tariffs could target these shifting operations. To safeguard the industry, increasing local content appears to be a prudent strategy while minimizing reliance on the volatile US market.

The solar industry in Malaysia has experienced significant fluctuations due to tariffs imposed by the US government, particularly during the Trump administration. These tariffs were initially designed to protect American solar manufacturers but have had a complex impact on foreign investments and local operations. Malaysia has been a favored location for solar manufacturing due to its attractive investment conditions and historical influx of both Western and Chinese companies seeking to bypass high tariffs on Chinese solar products.

In conclusion, Malaysia’s solar industry must adapt strategically to the evolving tariff landscape characterized by ongoing sanctions and investigations. Focusing on increasing local content and diversifying export markets may mitigate dependency on the US while ensuring competitive advantages remain intact. However, this is complicated by the cost competitiveness of existing Chinese suppliers, necessitating a balanced approach to maintain both growth and sustainability within the solar sector.

Original Source: www.thinkchina.sg