In the trend of deglobalization, multiple countries are implementing trade protection policies to encourage the development of their domestic photovoltaic (PV) manufacturing industry. To promote energy transition and ensure energy security, many countries are enacting policies to support local PV manufacturing. For example, the United States, India, and Turkey have all raised tariffs to increase the cost of importing solar cells and modules, while also providing subsidies to support domestic manufacturers. Europe has set a goal of achieving 30GW of PV manufacturing capacity by 2030, with 40% of clean energy technologies to be produced domestically.

The U.S. solar cell supply bottleneck will last at least 2-3 more years.

The production capacity in four Southeast Asian countries is affected by tariffs, but capacities in Indonesia, Laos, and the Middle East are expected to benefit. The four Southeast Asian countries (Vietnam, Cambodia, Malaysia, and Thailand) are subject to high tariffs when exporting solar cells to the U.S. However, overseas regions outside of these four countries (Indonesia, Laos, the Middle East) and domestic U.S. manufacturers are not subject to these anti-dumping tariffs, giving them a significant advantage in supplying solar cells to the U.S.

As of the end of 2023, the combined module capacity in Indonesia and Laos reached 3.5GW. Among overseas manufacturers, SEG Solar, Apollo, and New East Solar all have expansion plans. SEG Solar plans to invest in a 5GW integrated capacity for wafers, cells, and modules in Indonesia, with the first phase of 5GW cells and 3GW modules expected to be completed by Q2 2025. New East Solar plans to build an 8GW cell and module production capacity in Indonesia, with the first phase of 2.5GW expected to be operational by the end of Q3 2023 and the second phase of 5.5GW set to start production in 2024. Among domestic manufacturers, Trina Solar’s 1GW cell and module plant in Indonesia and Hengdian DMC’s 2GW cell plant in Indonesia are both expected to start production in 2024. Zhongrun Solar is building a 4GW cell and 3GW module production capacity in Laos, which will gradually come online starting in 2024.

In the Middle East, Jinko Solar plans to establish a joint venture in Saudi Arabia to invest in a 10GW high-efficiency cell and module project. Junda shares plans to invest in a 5GW high-efficiency cell production base in Oman, expected to be completed and operational by 2025. Trina Solar is also planning to invest in a three-phase project in the UAE to produce 50,000 tons of high-purity silicon, 30GW of crystalline silicon wafers, and 5GW of cells and modules. Additionally, Qineng Optoelectronics and Oman’s renewable energy company Bakarat Investment announced plans to build an 8GW PV module and 2GW PV cell production base in Oman’s Sohar Free Zone, covering TOPCon and HJT technology.

Currently, solar cell production capacity in regions such as India, Turkey, and Europe remains relatively low, with significant uncertainty about future new capacity. Even if new solar cell capacity comes online, it is expected to primarily support local module production. Therefore, U.S. solar cell supply will likely come first from domestic U.S. manufacturers, as well as from Indonesia, Laos, and the Middle East. We assume:

1、According to Bloomberg NEF's forecast, U.S. PV installations will be 44.0GW dc in 2024, 48.5GW dc in 2025, and 52.0GW dc in 2026;

2、Cell demand will be 1.05:1 of module direct current installation;

3、Cell production capacity in the U.S., India, Laos, Indonesia, and the Middle East will all come online as planned. Considering the ramp-up period of new production capacity, the current cell output is calculated as (beginning capacity + end capacity)/2 × 80% capacity utilization rate.

Based on these conservative assumptions, we estimate that the U.S. solar cell supply gap will be 35.9GW in 2024, 18.9GW in 2025, and 2.4GW in 2026. If we further consider factors such as uncertainties caused by the U.S. presidential election affecting IRA subsidies, the possibility of delays in cell production expansion due to the shift from P-type to N-type technology, and the lack of N-type cell technology accumulation in the U.S., the progress of U.S. solar cell manufacturers is likely to be slower than expected. As a result, the U.S. solar cell supply shortage will likely last at least 2-3 years. The shortfall will be covered by either the four Southeast Asian countries (subject to anti-dumping tariffs) or by procuring cells from more expensive sources in India, Turkey, or Europe. In either case, the cost of imported solar cells will increase.

U.S. imported solar cell premium of 8-10 cents/W, with manufacturers enjoying high premiums from overseas capacity. According to U.S. import data, the average price of imported modules in Q1 2024 was $0.29/W, down $0.02/W from the previous quarter; the average price of imported cells was $0.15/W, up $0.01/W from the previous quarter. In Q1 2024, the domestic PERC cell price was 0.38 yuan/W, and the TOPCon cell price was 0.47 yuan/W. The average price of U.S. imported cells was 8-10 cents/W higher than the domestic price. According to Bloomberg NEF estimates, before subsidies, the cost of U.S. modules produced using Southeast Asian cells is about 23.2 cents/W, while the cost of modules produced using domestic cells rises to nearly 30 cents/W. This shows that the cost of domestic solar cell production in the U.S. is 6-7 cents/W higher than in Southeast Asia. Solar cell manufacturers with overseas production in the U.S., Indonesia, Laos, and the Middle East can enjoy high premiums in the U.S. market.

High production costs in India and Turkey will support solar cell premiums

Although India’s Basic Customs Duty (BCD) and Turkey’s minimum price are not aimed at any particular region, solar cells from China and the four Southeast Asian countries can still enter these markets. Therefore, for India and Turkey, there is no need to relocate solar cell production capacity overseas; simply exporting products will allow them to enjoy premiums in these two markets.

The cost of the Indian module market is 3 cents/W higher than imports, and this cost difference also exists in the solar cell sector. The price of India-made modules is also much higher than the global average. According to JMK Research and other industry data, in Q1 2024, the average price of monocrystalline PERC modules produced in India was 19.77 Indian Rupees/W (about 23.8 cents/W, including freight and taxes), significantly higher than the global average price of 11.5 cents/W. PV Magazine reports that the cost of modules produced in India using imported cells is about 3 cents/W higher than the cost of imported modules (including tariffs, freight, etc.). The technology gap between India and domestic manufacturers in the solar cell sector is greater than in the module sector, so the production cost of solar cells is also expected to be higher than that of domestic manufacturers.

Turkey’s domestic module prices are high, and the solar cell minimum price premium exceeds 3 cents/W. The price of modules in Turkey is also much higher than in China and Europe. At the beginning of 2023, the average price of PERC modules in Turkey was about 40-43 cents/W, while module prices in China and Europe were only 22-25 cents/W. According to financial data from Turkish module manufacturers and EPC firm CW Enerji, the average sales price of modules in Q1 2024 was still as high as 21 cents/W (excluding taxes). The minimum price for imported solar cells in Turkey is $60/kg, equivalent to about 7.2 cents/W based on a thickness of 130um, which is more than 3 cents/W higher than the domestic price.

Source：Southwest Securities