On strategy: “Contrary to what people might think, Chinese firms are not going to stand still, accept the tariff, and continue business as usual. The companies are likely going to reconfigure their supply chains to bypass the import tariffs. Since the tariff only applies to cells made in China and modules made with cells in China, Chinese firms are likely going to adopt one of two strategies: set up cell manufacturing outside China, or use tolling agreements with Taiwan-based suppliers to turn wafers into cells there and then assemble the modules in China. While reconfiguring their supply chain is certainly a hardship and will take some time, it is a manageable task and expense. We estimate that tolling cells to Taiwanese firms would increase costs by 6% to 12%, and at current profit margins, Chinese manufacturers would certainly have to raise U.S. prices to turn a profit. But the cost increase may only translate to a 5% to 10% increase on module prices because the companies will accept slightly lower profit margins. That price increase is not as alarming when you consider that the price of Chinese modules is, on average, about 30% lower than U.S.-made modules.”
On system prices: “Even with the tariff in place, PV will still continue to get cheaper and cheaper. We look at all the factors when assessing the long-term impact. More efficient modules will be making their way onto the market. This means we will be able to pack more power onto a roof using fewer modules. Fewer modules will cut down on the labor time and cost of installation. There is a trend toward lower permitting fees, and the cost of other system components is likely to decline as well, helping temper any slight increase in module prices.”
On U.S. manufacturing: “Even with the slightly increased prices, the Chinese firms should be able to price modules meaningfully below the levels sold by Western and Japanese competition. We don’t think the tariff is going to signal a change in U.S. manufacturing in the long term. Just because the prices of Chinese modules may increase, that doesn’t mean everyone is going to run out and buy U.S. modules. The modules industry is global and very competitive, and U.S. manufacturers still need to compete with manufacturers in other countries.”
On U.S. solar employment: “You won’t see a lot of new manufacturing jobs returning to the United States. The tariff might prompt some China-based companies to open a U.S. manufacturing plant, but those will be isolated cases. Most of the jobs created by Chinese companies in the United States are in sales and marketing. I don’t think the tariff issue is going to have an effect on those jobs. Separate from that, there is downsizing going on in the industry at large due to the global oversupply environment we are in. With regard to existing jobs, I know that some installers are worried about potential price increases and lowered demand, which would impact their businesses. As a result, some have placed expansion plans and new hiring on hold. My view is that they are overestimating the impact these tariffs will have.”
