China's Photovoltaic Industry's 'close To The US' Strategy, Not Afraid Of 'Trump 2.0'?

Source: Alpha Factory Green

Introduction: Whether it is the Biden administration or "Trump 2.0", if Chinese photovoltaic companies want to squeeze into the US market, building factories in the United States may be the only way out.

China's photovoltaic industry chain has made new progress in its "near-US" layout.

On October 28, Anhui Shijing Solar Technology Co., Ltd. (Shijing Solar), a wholly-owned subsidiary of Shijing Technology, announced on its official microblog that the company will build a photovoltaic cell project in Puebla, Mexico to produce high-efficiency N-type TOPCon cell products, covering the mainstream sizes of the industry, and is expected to reach full production in 2025.

Shijing Solar said that the project has received strong support from local government departments, including policy preferences in resource allocation and infrastructure.

The location of Shijing Solar's new overseas factory is quite meaningful.

Puebla is located in central Mexico, with convenient transportation and only 150 kilometers away from the capital, Mexico City. There are many industrial parks around the project, and the industrial infrastructure is complete.

More importantly, Mexico borders the United States, and most of the factories of Chinese photovoltaic companies in the United States are closer to Mexico.

For example, JA Solar invested US$60 million in Phoenix, Arizona to build a 2GW photovoltaic module production capacity;

Trina Solarand Canadian Solareach built a 5GW module factory in Texas;

TCL Zhonghuan (002129.SZ) also has a planned production capacity of 3GW in New Mexico.

The above three U.S. states are adjacent to Mexico.

Photovoltaic giants have always had their own "disciples". In the battery segment, Longi found Yingfa and Junda to do OEM; Mingpai Jewelry tied up with Trina Solar, etc.

JinkoSolar and Shijing Technology also have a very close relationship.

On March 8, 2024, the joint venture Sichuan Shijing New Energy Technology Co., Ltd. jointly established by the two parties invested in the Sichuan Shijing High-efficiency Solar Cell Manufacturing Base Project.

On the same day, Shijing Technology announced that Shijing Solar and JinkoSolar and its subsidiaries had signed a "Battery Cell Procurement Contract". During the validity period of the contract, Shijing Solar will sell about 2.5 billion solar monocrystalline cells/A-grade cells including but not limited to 182mm size to JinkoSolar and its subsidiaries.

In August 2024, JinkoSolar announced that its module factory in Florida received tax credits under the U.S. Inflation Reduction Act (IRA). The factory has an annual production capacity of 400MW, and the newly commissioned 2GW capacity in the United States is also actively seeking relevant subsidies.

In this way, JinkoSolar's module factory in the United States may be able to collaborate with Shijing Solar's cell factory in Mexico to optimize the supply chain - that is, Shijing Solar's upstream cells are produced in Mexico and then shipped to Jinko's United States for processing into modules.

For JinkoSolar, under the condition of overcapacity, the significance of finding professional OEM production has become increasingly prominent.

Due to the increasing losses in the silicon wafer and cell links, the vertically integrated production model has greatly reduced the profit margin, resulting in very tight cash flow for large factories.

If it can cooperate with Shijing Solar and outsource cells, JinkoSolar can not only ensure the security of the supply chain, but also effectively reduce the overall cost of its business in the United States, and reduce the risk of the entire industry chain being controlled in the United States in the future.

The move by Shijing Technology is also quite meaningful - relying on the accumulated experience in the research and development of environmental pollution control equipment, it enters the battery cell segment to do professional OEM, which is usually the first step for cross-border photovoltaic companies.

By building a factory in Mexico, Shijing Technology can not only meet the needs of JinkoSolar, but also supply other large factories closer to it in the future, or extend itself to the upstream and downstream of the industrial chain.

Previously, in order to bypass sanctions, Chinese photovoltaic factories mostly chose to break through Southeast Asia.

However, with the United States canceling the tariff exemption for photovoltaic modules in four Southeast Asian countries and launching anti-dumping and anti-subsidy investigations, the route through Southeast Asia has been blocked.

Now, in addition to setting up factories in the United States, Chinese photovoltaic companies build battery factories in Mexico, use the tariff agreement between Mexico and the United States to bypass restrictions, and then send products to the United States to be processed into modules - this "curve to the United States" strategy may become a new path to enter the US market.

It is worth noting that the factory construction plan announced by Shijing Solar was formulated before the results of the current US election were released, which is in line with the existing sanctions policy.

On November 4, 2024, at a campaign rally in Raleigh, North Carolina, Trump expressed a tough trade stance.

He threatened that if the Mexican government did not take measures to control illegal immigration across the border, once he was elected, he would impose a 25% tariff on all Mexican imports and may increase the tariff rate to 100%.

Previously, after the national security tariff measures based on the "Section 232" took effect on July 10, 2024, the United States had imposed 25% and 10% tariffs on Mexican steel and aluminum products, aiming to prevent China and other countries from transshipping goods through Mexico to circumvent US tariffs.

Considering that the specific implementation of the "global tariff" has not yet been clarified, and there are nearly two months before Trump enters the White House, the photovoltaic industry chain is still in a relatively mild period of "Trump's deal".

However, judging from the Trump "policy platform" that has been circulated recently, combined with his previous political stance, for a long time in the future, Trump's domestic goal will still be "manufacturing repatriation" and promoting employment; foreign policy will continue to continue "America first".

The economic benefits contributed by Chinese photovoltaic companies to the United States when they set up factories in the United States are not obvious. Because the degree of automation in photovoltaic manufacturing is very high, it is difficult to bring too many jobs.

In addition, most Chinese photovoltaic companies that have built factories in the United States have benefited from the preferential policies stipulated in the IRA signed by Biden on August 16, 2022.

The IRA is one of the largest investment bills in the history of the United States to address climate change. The preferential policies include two parts:

First, it provides $30 billion in production tax credits to accelerate the manufacturing of solar panels, batteries and key minerals in the United States;

Second, it provides $10 billion in investment tax credits for the construction of clean technology production facilities, such as solar panel manufacturing plants and other clean technology factories.

According to the above policy, the current subsidies for photovoltaics from silicon wafers to inverters are all above 50%.

If the new Trump administration insists on requiring Chinese photovoltaic companies to build factories in the United States, then for companies that have a subsidy-generating link and can apply for subsidies, building factories is feasible.

If subsidies cannot be applied for, based on the current production costs, it is not economical at all, and Chinese photovoltaic companies will not be able to build a complete industrial chain in the United States.

On July 17, 2024, when Bloomberg Businessweek conducted an exclusive interview with him at Mar-a-Lago, Trump was critical of the IRA and intended to repeal the bill.

He believes that the bill actually increased inflation rather than reduced it. He also pointed out that there are problems with the allocation of funds in the bill and believes that these funds should not have been used.

If Trump still insists on the above claims after taking office, or if the overcapacity of photovoltaic production continues to impact domestic manufacturing companies in the United States, the "hammer" of sanctions may be awakened again.

Whether it is the Biden administration or "Trump 2.0", if Chinese photovoltaic companies want to squeeze into the US market, building factories in the United States is the only way out.

But from an industrial perspective, if the Chinese photovoltaic industry chain in Mexico develops into a cluster of the size of Southeast Asia in the future, it is not ruled out that the United States will fill the Mexico nearshore "loophole" and impose global tariffs.

In addition to the long-standing contradictions and differences between the United States and Mexico, the uncertainties faced by Shijing Technology's factories that plan to produce solar cells in Mexico also depend on whether other Chinese counterparts move too quickly.

Note: The copyright of the articles reprinted on this site belongs to the original author and the original source. The views in the articles are for sharing and communication only. If there are any copyright issues, please let me know and I will deal with them in a timely manner.