USA – China’s – Malaysia Solar Photovoltaic Triangle

Updated: Oct 26

This article is an attempt to explain on the solar photovoltaic value (PV) chain with regard to the current relationship between USA-China’s-Malaysia. It provides a broad perspective to anyone who wanted to learn more on the value chain and the technology on PV including policy-making government bodies such as Ministry of International Trade and Industry Malaysia (MITI), Malaysian Investment Development Authority (MIDA) and private sectors such as attorneys, human activists and PV R&D scientists and engineers.



Summary of USA – CHINA’s – MALAYSIA crystalline solar PV Triangle, relates to anti-dumping duties, for Malaysia, Vietnam and Thailand.
Summary of USA – CHINA’s – MALAYSIA crystalline solar PV Triangle:

When people talk about silicon modules or solar panels, most people would immediately conjure the image of hundreds of solar modules installed on bare land known as solar farm or arrays of solar modules that is set-up on commercial buildings rooftop or residential building rooftop. Some may perhaps connect it to the picture of solar modules integrated to a system such as solar powered system for internet of things (IoT) in agricultural, communication or security system. The application of the solar system is known as the back-end value chain of solar module – integration, system, its usage.


As important as the back-end value chain, the front-end is actually the main factor when it comes to huge investment in manufacturing the first 7 stages of solar value chain from the global manufacturing perspective. Let us go through the complete crystalline solar photovoltaic (CSPV) PV supply value chain as illustrated below:


solar pv value chain from poly-silicon, crystal growth, wafering, solar cell and solar module
8 stages of solar photovoltaic value chain

From the illustration, the first 7 stages illustrate all the stages needed to produce a complete solar module – back-end. Initially, majority solar module manufacturers are located in China involve in processing the first 7 stages of solar value chain. These China’s manufacturers entered the US market by exporting solar modules to the end users or suppliers.


It is known that China’s manufacturers entered the US market by selling their solar modules at a lower price as they enjoyed lower production cost in their country. Needless to say, the lower pricing structure is hurting the local businesses in the US domestic market. To protect the US local businesses, the US Government has responded by imposing anti-dumping duties to solar modules imported from China. In order to avoid high anti-dumping duties imposed in the US port entry, China diverts their solar manufacturing to other countries such as Malaysia, Thailand and Vietnam due to the fact that the US Government did not impose anti-dumping duties for the solar modules manufactured from Malaysia, Thailand or Vietnam. Hence, the diversion.


From Malaysia’s eyes this is a huge business opportunity to bring solar manufacturers to invest into Malaysia through Malaysia Investment Development Authority (MIDA). MIDA is a principal agency under Ministry of International Trade and Industry (MITI) Malaysia with main objective in promoting and facilitating foreign investors into Malaysia in manufacturing sector. The facilitation from MIDA inter alia, providing matching grant money for setting up R&D in Malaysia, sponsoring local Malaysian employees for oversea training and many more. With this initiative, Malaysia will be benefitted in the increased number of skilled, high technology and manufacturing labors.


Going back to the illustration, the solar PV manufacturers (mostly foreign investors) in Malaysia are practising different business strategies to manufacture solar module. For instance, company A may directly start from Stage #2 (silicon crystal growth) all the way to Stage #7 (solar module). Company B may start from Stage #5 (slicing) to Stage #7 (solar module). Company C may only perform Stage #6 (solar cell). Company D may start from Stage #5 to Stage #6 and then outsource Stage #7 to manufacturer outside of Malaysia. At any point of time, none of Stage #1 (poly-silicon) is being processed inside Malaysia instead it is being imported into Malaysia by the solar manufacturers. Hence, this explained why at this moment there is no fully integrated solar processes in Malaysia.


This bring us to the next subject of why China-owned made-in Malaysia solar modules (Stage #7) were detained at the US port entry wherein the issue is only related to Stage #1 (poly-silicon) pursuant to the United States Codes (U.S.C.) § 1307:


Under 19 United States Codes (U.S.C.) § 1307 Convict-made goods; importation prohibited, “All goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/and indentured labor under penal sanctions shall not be entitled to entry at any of the ports of the United States, and the importation thereof is hereby prohibited, and the Secretary of the Treasury is authorized and directed to prescribe such regulations as may be necessary for the enforcement of this provision.

"Forced labor", as herein used, shall mean all work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily. For purposes of this section, the term "forced labor or/and indentured labor" includes forced or indentured child labor”


Take note here that, under the said code all goods manufactured wholly or in part in any foreign country by forced labor shall not be entitled to enter at any point of the ports in the US. The US Department of Commerce’s Bureau of Industry and Security believe that the particular entity (manufacturer) of polysilicon (Stage #1) for solar module is in connection with forced human labor in Uyghurs and other Muslim minority in China. They have identified and added 5 companies to the Entity List in connection with the participation of accepting, or utilizing forced labors. One of the companies is Hoshine Silica Industry Co, the manufacturer of poly-silicon (Stage #1) which is also the poly-silicon supplier for several solar companies in Malaysia. Even if China-owned made-in Malaysia solar manufacturer only produced Stage #6 and Stage #7 in Malaysia, they are still subject to the said code; hence, the solar module is reported being hold by the US CBP at the US entry port. Unless, the China-owned made-in Malaysia solar manufacturers provide evidence to proof the supply of solar value chain is free from forced labor, the said detained solar modules will be released.

Now this is like a chess game, China makes their move, USA makes their move. Now, what will be China next move to overcome the new US restriction on Malaysia solar modules export? Will China maintain and expand their solar manufacturing sites here in Malaysia? They could import polysilicon (Stage #1) elsewhere or to invest more money in Malaysia to manufacture Stage #1 locally and become fully integrated solar manufacturer.


But keep in mind, Malaysia is not a cheap manufacturer site for high tech industries relatively speaking from the perspective of the cost for all supplies, the resources and the salary for engineers and technicians based on my own personal experience. This has led many to suspect that the main reason for China solar manufacturers investment in Malaysia is to circumvent the anti-dumping duties as the primary objective and not because of cheap labor or cheap resources.


To add on, under separate investigation from anti-dumping duties, US Department of Commerce has identified several Chinese entities are violating the aforesaid the US codes. Now that the US has put restriction on solar modules made-in Malaysia, what will be the compelling reason for China solar manufacturers to remain in Malaysia? It will not be a surprised if the current China solar manufacturer investors decided to exit Malaysia as they will not be the first to exit Malaysia at lost.


MIDA has a critical role to play in helping the business community in the solar manufacturing concern to justify their continued presence in Malaysia. Assistance from the Government of Malaysia of not just creating incentive in lowering their cost of production but also assistance to ease the market barrier at international borders should not be ruled out. Thus, the Government of Malaysia must fully understand the intricate details of all 7 Stages in the solar value chain adopted by each China-owned solar manufacturers in Malaysia because each of them has its own unique business strategy which would be unfair for them to be ‘punished’ just because they are ‘solar manufacturers’ from China.


Summary of USA - China's - Malaysia Solar PV Triangle

Summary of USA - China's - Malaysia Solar PV Triangle

References:

  1. uscode.house.gov

  2. www.commerce.gov

  3. Images of flags are from https://enwikipedia.org

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