Can ASEAN’s solar photovoltaic (PV) industry remain resilient when its export-led growth could be eroded by geopolitical uncertainties? With overwhelming reliance on China for key inputs and on the United States (US) as its primary destination market, ASEAN is at risk of losing its largest market, the US Policymakers must take actions to diversify export markets and explore alternative import sources of key production inputs to safeguard the solar PV industry in the region.

As one of the most widely adopted renewable energy sources, solar PV plays a crucial role in achieving climate commitments for ASEAN. Economically, ASEAN also envisions capturing greater value from the solar PV industry to unlock more manufacturing and export potential from the green economy.

Promising as these ambitions are, how far in reality has ASEAN progressed in developing the export capacities of relevant solar PV products? What are the strengths and weaknesses of individual ASEAN Member States (AMS)? ACI researchers answered these important questions by conducting a comprehensive solar PV supply chain mapping.

Within the supply chain, the most essential components are solar PV cells or modules that convert sunlight into electricity. Producing these products requires intermediates (wafers, polysilicon, silica sands and quartz sands), machines for cells, machines for modules, parts of semiconductor devices and parts of machines. Using 6-digit HS codes (2017 version) as indicators for each of these components, ACI researchers drew on bilateral trade value data from the UN Comtrade database to compute ASEAN’s and AMS’s market shares and identify their major trade partners.

Among all key components in the solar PV supply chain, ASEAN’s export strength primarily lies in the final product stage. From 2013 to 2023, the region’s share in global exports of these products rose from 12.7% to 26.6%, ranking second behind China (50.0%). Within ASEAN, Malaysia and Singapore remained leading players throughout the decade, while Vietnam, Thailand and Cambodia recorded remarkable growth in recent years. ASEAN also maintained its position as the world’s largest exporter of parts of semiconductor devices. Most AMS had a limited presence in the exports of intermediates and fixed capital products, except for Malaysia and Singapore.

In terms of export partners, ASEAN’s exports of solar PV cells or modules to the US skyrocketed by a staggering 993% between 2013 and 2023, pushing the US’s share among all destinations up from 22.5 to 62.1%.In fact, major ASEAN exporters of solar PV cells or modules, namely Vietnam, Malaysia, Thailand, and Cambodia, all exhibited highly US-centred export profiles, which implies that the region’s solar PV industry is vulnerable to swings in a single country’s trade policies.

On the import side, the study also reveals the equally significant risks associated with ASEAN’s solar PV trade. The region is the world’s largest importer of wafers, and China’s share among all ASEAN’s import sources surged from 8.24% in 2013 to 65.2% in 2023. In particular, China accounted for 49.4% of Malaysia’s wafer imports, 96.3% of Thailand’s, and 99.9% of Vietnam’s, which were ASEAN’s major wafer importers.

The dominance of China-originated components in the final products exported to the US played a role in the recent US anti-dumping duty/countervailing duty (AD/CVD) actions, which claimed that major ASEAN exporters benefited from subsidies from the Chinese government, which effectively helped China circumvent US tariffs. Such escalating protectionist measures threaten to push up the price of ASEAN’s exports and disrupt the growth trajectory of these countries’ solar PV industry.

To sustain growth and mitigate geoeconomic risk, ASEAN must explore new external export markets and enhance intra-regional supply chain linkages.

ACI’s research identifies alternative export destinations with rising domestic solar PV installation capacity and high import demand across Europe (such as Germany, the Netherlands, and Poland), Asia (such as India and Turkey), and Latin America (such as Mexico and Brazil). These markets remained largely untapped for ASEAN exporters. Even India, the second-largest export destination for solar PV cells or modules in 2023, accounted for only 8.43% of the total export value, falling far behind the US (62.1%).

Besides exploring new markets for final product exports, fostering regional cooperation in the solar PV supply chain could help mitigate exposure to shocks from the external source of key inputs. Currently, intra-ASEAN trade remains overshadowed by extra-regional exports. Yet, there are a few exceptions. For example, Vietnam, the second-largest wafer exporter in ASEAN in 2023, exported 85.2% of its wafers to Malaysia, significantly boosting the growth of intra-ASEAN wafer trade since 2013. This highlights both the potential and feasibility of this import diversification strategy.

In conclusion, this study assesses the decade-long progress of ASEAN in the global solar PV supply chain from a trade perspective, underscoring the mounting risks posed by China’s grip on key inputs as well as the US’s protectionist measures against major ASEAN exporters of solar PV cells or modules. To reinforce ASEAN’s position in the global PV supply chain and uphold its sustainability ambitions amidst external headwinds, ASEAN must adopt a dual diversification strategy to explore new export markets as well as alternative import sources.

By YAN, Bowen

Researchers: HUANG, Yijia, YAN, Bowen, TAN, Kway Guan, WONG Ka Ying, Christy