KUALA LUMPUR – Several Chinese-owned solar panel makers have shut down or scaled back their operations in Malaysia, industry sources say, as US tariff hikes in 2024 squeezed margins and further hikes are expected.
These include the world’s largest solar panel manufacturers Jinko Solar Co, Risen Energy Co and JA Solar Technology Co, which collectively account for nearly 40 per cent of Malaysia’s total solar production capacity.
Risen Energy Co is believed to have scaled down its production in the last six months, according to industry sources. The company first entered the Malaysian market in 2021, and had planned to invest over RM42 billion (S$12.7 billion) over 15 years in its production facility in Kulim, Kedah state.
Meanwhile, Chinese solar panel giant Longi Green Energy Technology Co, which accounts for more than 37 per cent of capacity in Malaysia, has halted its expansion plans after building three manufacturing facilities in central Selangor state and Sarawak in East Malaysia. It first ventured into Malaysia in 2016, and its total investments amounted to RM5.4 billion in 2023.
ST has reached out to the companies for comment.
China’s solar panel makers dominate the local sector, making up nearly 80 per cent, or 18.6 gigawatts (GW) of Malaysia’s 23.6 gigawatts (GW) total solar production capacity in 2024, according to consultancy firm Wood Mackenzie. The remaining production capacity is taken up by the US’ largest solar manufacturer First Solar and South Korea’s biggest solar producer Hanwha Qcells.
Most of these solar panels are manufactured for export to the US, with Malaysia’s installed solar capacity at only 4.2GW. From January to September 2024, Malaysia, which is a major hub for solar panel manufacturing in South-east Asia, exported nearly US$1.8 billion worth of solar panels.
Mr Chin Soo Mau, adviser to the Malaysian Photovoltaic Industry Association, told The Straits Times that more Chinese solar firms are expected to shut down operations in Malaysia as US tariffs continue to erode their profit margins.
“Many of these firms initially invested in Malaysia to target the US market. With higher scrutiny over the ownership of companies importing solar panels to the US, and potential higher tariffs by Mr Trump, their products will no longer be competitive in the US market,” he added, referring to US President-elect Donald Trump.
Over the past decade, Malaysia, along with other South-east Asian countries like Vietnam and Thailand, has been a key destination for Chinese solar panel firms relocating their operations to bypass US tariffs on direct imports from China.
The US market is crucial, as their profit margins on sales there can reach as high as 40 per cent, compared to just 10 to 20 per cent in other markets, said Ms Yana Hryshko, head of global solar supply chain research at Wood Mackenzie.
These companies also benefited from a two-year tariff exemption granted by the US, which expired in June last year, on solar panel imports.
But the US announced a new round of tariffs in 2024 on solar panel imports from Malaysia, Thailand, Cambodia and Vietnam, in a bid to close loopholes exploited by China-owned firms. The US views the influx of cheaper Chinese solar panel imports as a threat to its domestic solar energy industry.
Most solar panels installed in the US are made overseas, and around 80 per cent of imports come from these four South-east Asian nations. According to a preliminary decision posted on the US Commerce Department’s website in November, the agency calculated dumping duties of between 21.31 per cent and 271.2 per cent, depending on the company, on solar cells from Cambodia, Malaysia, Thailand and Vietnam. The department is expected to make its final determinations in April 2025.
The closure and scaling down of operations at these big players in Malaysia have had a knock-on effect on smaller, Chinese-owned firms in the supply chain, a local banker said.
“Many of our clients are these smaller, Chinese-owned firms from the supply chain of the solar panel industry who are closing down because they are unable to supply their products to the major solar panel manufacturers that have shut operations,” said the banker, who declined to be named.
Ms Yana said more Chinese solar panel makers will exit the Malaysian market in 2025, which could potentially mean more than 5,000 workers losing their jobs, resulting in lower tax revenue from the sector.
A senior official who also declined to be named told ST that Malaysia’s government agencies are in talks with some of these companies about using their spare capacity to spur the country’s transition to renewable energy.
“The manufacturing facilities are already built, so we are exploring whether they can be used to supply solar panels to local power producers,” said the official.
The ongoing US-China rivalry, particularly if escalated under the Trump administration, could result in Chinese investments in Malaysia declining further.
China, which was Malaysia’s largest foreign direct investor in 2022, saw its investments plummet from RM55.4 billion to RM14.5 billion in 2023, dropping to the fifth-largest investor, according to data from the Malaysian Investment Development Authority (Mida).
Mida’s statistics also show approved investments from China in Malaysia’s manufacturing sector have declined by 5.2 per cent year on year to RM5.2 billion in the first half of 2024.
This decline reflects the caution of Chinese investors in investing abroad, driven by the slowdown in China’s economy.
Malaysian think-tank Socio Economic Research Centre executive director Lee Heng Guie said this year will continue to be challenging.
“We expect the intensified trade spat between the US and China and the rest of US’ trading partners under Mr Trump will continue to challenge China’s economic growth and its investment inflows into Malaysia in 2025,” said Mr Lee.
US tariffs have also refocused the Malaysian government’s efforts to draw foreign investment. In December 2024, Deputy Minister for Investment, Trade and Industry Liew Chin Tong advised Chinese companies to refrain from investing in the country if it merely wants to dodge US tariffs.
Meanwhile, economists say China is likely to diversify to supply other rapidly growing markets – such as the South-east Asian region and Africa – in the long run, in a shift away from the US.
“US will not be a major market for China any longer. Malaysia as a manufacturing base provides access to the Asean region for Chinese products that it can supply in various industries,” said Professor Jeffrey Sachs, who is the director of the Centre for Sustainable Development at Columbia University.
For now, however, Chinese companies will continue to relocate their operations to other countries to bypass tariffs.
“They are eyeing to relocate their production facilities to the US as well as Indonesia and Laos as these countries are not currently subjected to US tariffs,” said Ms Yana.
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