Summary of Key Points
The U.S. policy regarding photovoltaic products is not merely a simple 15% tariff; it constitutes a comprehensive set of measures: establishing minimum import prices for polysilicon, silicon wafers, cells, and modules (with subsidies if the imported prices are lower than these thresholds), along with a 15% ad valorem tax, and offering tariff incentives in exchange for building manufacturing facilities in the United States. The ultimate goal is to create a "price protection barrier" for domestic photovoltaic manufacturers, forcing them to either sell at higher prices or set up upstream production capacity (such as for polysilicon and silicon wafers) within the U.S. The aim is to rebuild the nearly collapsed American photovoltaic supply chain while also supporting the semiconductor material industry.
Detailed Analysis
1. Minimum Import Prices: A More Stringent "Price Barrier" than Tariffs
Traditional tariffs are added as a percentage of the import value (e.g., 15%), but the minimum import prices (MIPs) set this time directly define a lower limit for the products:
- Polysilicon: $21 per kilogram (while global spot prices are only $4.78, and non-Chinese-produced polysilicon costs around $18.5).
- Modules: $0.38 per watt (while modules imported from Southeast Asia cost only $0.27 per watt).
If importers sell below these minimum prices, they must pay the difference in taxes (for example, if they sell modules for $0.27/W, they would have to pay an additional $0.11/W in taxes) and may face permanent import bans. This essentially turns the U.S. market into a "high-price zone," allowing domestic companies to earn profits without competing with cheaper global products.
What's more, the U.S. Department of Commerce can adjust these minimum prices at any time, effectively controlling market prices directly, which has a more significant impact than tariffs.
2. Polysilicon: A Critical Common Material for Both Photovoltaics and Semiconductors
Why is polysilicon the focus of this policy? It's because it serves as a fundamental material for both industries:
- The photovoltaic industry uses 97.6% of all polysilicon (with demand expected to reach 1.37 million tons by 2025), while the semiconductor industry uses only 2.4% (33,500 tons).
- Semiconductor-grade polysilicon requires higher purity (above 11N) and is 30 times more expensive than photovoltaic-grade polysilicon, but its demand is much smaller, making it difficult to justify large-scale production facilities based solely on semiconductor demand.
The U.S. strategy is to leverage the high demand from the photovoltaic industry to share the production costs of semiconductor-grade polysilicon. By protecting the photovoltaic upstream supply chain, it indirectly supports the semiconductor material sector, achieving a dual benefit.
3. The Current State of the American Photovoltaic Industry
In recent years, U.S. photovoltaic assembly capacity has grown rapidly (with an additional 42 GW of capacity added after the IRA act), but the upstream production has lagged significantly:
- U.S. polysilicon production has plummeted from 50% of global capacity in 2005 to less than 2% in 2024.
- The country relies almost entirely on imports for silicon ingots, wafers, and cells, with only two polysilicon manufacturers (Hemlock and Wacker) remaining.
In contrast, China accounts for 90% of global polysilicon/silicon wafer production and 80% of module production. The U.S. aims to address its upstream weaknesses, as assembly is relatively easy (it involves purchasing components and assembling them), but materials and wafers require long-term investment in manufacturing facilities and process development—these are the real bottlenecks.
4. Chinese Photovoltaic Industry: Low Prices Due to Both Subsidies and Excess Capacity
Chinese photovoltaic products are inexpensive for several reasons:
- Economies of scale: Well-developed industrial clusters with integrated upstream and downstream production, and lower energy costs (e.g., cheaper electricity).
- Excess capacity: China has excess polysilicon production, with prices currently below the cost of production ($31.5 per kilogram, approximately $4.13 per dollar). As a result, the top ten global photovoltaic companies are expected to incur a total loss of $4.5 billion in 2024.
By setting minimum import prices, the U.S. aims to prevent domestic companies from engaging in unprofitable competition and give them room to generate profits before gradually building up production capacity. However, whether these "protected prices" can translate into actual competitiveness depends on factors such as capacity utilization and yield.
5. A New Global Photovoltaic Landscape?
This policy could lead to the formation of two separate markets:
- High-price zone: The U.S. and its allies (formed through equivalent minimum prices or investment exemptions), where prices are protected by government policies.
- Low-price zone: Other countries, where prices are determined by global supply and demand.
The impact on Chinese companies includes:
- Difficulties in direct exports to the U.S. due to existing anti-dumping measures and the UFLPA (U.S. Foreign Labor Protection Act).
- The need to assess whether overseas production capacity (in Southeast Asia and the Middle East) can meet U.S. requirements for product traceability.
- Excess Chinese production capacity may flow to Europe and the Middle East, potentially driving down prices in those regions.
6. Policy Success Depends on Key Metrics
Policy effectiveness will be determined by several indicators:
1. Whether U.S. upstream projects (for polysilicon and silicon wafers) actually start construction and begin operations.
2. Whether capacity utilization and yield can improve to competitive levels (e.g., reaching Chinese standards).
3. Whether the gap between U.S. and global module prices persists over time.
4. Whether China's excess production capacity can be reduced or redirected to other markets.
While the minimum price thresholds can be specified in official announcements, manufacturing capabilities cannot be created by mere documents. Whether the U.S. can successfully rebuild its upstream supply chain will only become clear over time through actual results.