Letters | In Cambodia’s solar panel industry, a little spark can go a long way

Readers discuss how Cambodia can navigate the reimposition of US tariffs on solar imports, and why countries are better off cooperating with China

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Cambodia saw a sharp increase in solar panel manufacturing following a US tarriff exemption in 2022, but the re-introduction of tariffs is posing challenges. Put: Shutterstock Images

Published: 11:30am, 23 Sep 2024

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The US-China trade tensions have created dynamic economic implications for regional economies. One example is Cambodia.

For decades, Cambodia’s economic growth was fuelled by garment exports and tourism. However, a sharp increase in electrical and electronics manufacturing, particularly solar panels, has emerged. In 2022, Cambodia’s solar panel exports nearly tripled to US$1 billion, far outpacing imports, indicating a spike in solar panel assembly for export – a trend continuing into 2023.

The surge was triggered by the US government’s decision in June 2022 to diversify its supply chain from China and to temporarily exempt tariffs on solar imports from Cambodia, Malaysia, Thailand and Vietnam. As a result, solar cell and module exports to the US from these four Association of Southeast Asian Nations members increased sharply, accounting for almost 80 per cent of the US solar imports in 2023. Cambodia’s share alone reached 15 per cent – a remarkable achievement given the size of its economy.

Interestingly, more than 90 per cent of Cambodia’s solar panel imports came from China in both 2022 and 2023. This high share suggests a possible re-routing of Chinese exports through Cambodia or reflects China’s heavy investment in Cambodia’s solar panel manufacturing industry, which gained growth momentum shortly after the US tariff exemption announcement.

However, the industry is facing challenges as solar panel exports to the United States will be charged anti-dumping and countervailing duties ranging from 50 per cent to 250 per cent following the US tariff exemptions expiry in June this year. Some factories halted production even before June while some others are considering closure, highlighting the sector’s vulnerability. Cambodia’s exports dropped significantly in early 2024, mirroring declines in Malaysia, Thailand and Vietnam.

Domestically, the industry struggles with unstable electricity supply and high transportation costs. Cambodia’s solar panels are priced higher than those from the other three countries, indicating the need to address infrastructure bottlenecks to reduce costs and stay competitive.