SEMI urges cooperation through global trade agreement

May 21, 2012
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Last week, the US Department of Commerce imposed tariffs of between 31 and 250% on solar imports from China. Semiconductor Equipment and Materials International (SEMI) has issued a statement calling for all parties to work together on measures to eliminate trade and investment barriers to solar energy.

SEMI is maintaining a neutral position in this trade dispute; however the organization believes that the tariffs would result in higher prices on US products, causing a knock-on effect for large-scale solar projects. It warns of the risk of trade friction, retaliatory action and therefore reduced adoption of solar power.

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Several experts at EuPD Research expect a backlash from the Chinese government. However, the research group insists representatives of Chinese companies are aiming for a joint solution. At SNEC 2012 in Shanghai last week, Daniela Schreiber, executive vice president of Hoehner Research and Consulting warned of the consequences of the tariffs, “The solar industry and the Asian manufacturers in particular were able to continuously decrease prices for solar modules due to, amongst others, economies of scale in the previous years. These countervailing duties will now increase the prices for solar modules and lead to reduced demand in an already tough market environment, e.g. in Europe.”

On the contrary, Jerry Stokes, president Suntech Europe said, “We do not see any negative effect for our European customers. We will also continue to supply our US customer hundreds of megawatts that will not be subject to tariffs. Because of the many years of experience with generally more developed PV markets, European policy-makers are aware of the globalized nature of the PV value chain.”

There is also speculation of Chinese solar manufacturers moving its operations to neighbouring countries. GTM Research Solar Analyst, Shyam Mehta said, “Chinese firms are hardly likely to stand still. Broadly speaking, they have two strategies: set up cell manufacturing outside China, or use the tolling services of Taiwan-based suppliers to turn wafers into cells there and then assemble the modules in China. Both strategies would allow the Chinese to bypass import tariffs. We estimate that tolling cells to Taiwanese firms would increase Chinese costs by 6-12%, which is meaningful but manageable.

“Given this, we do expect that the decision will result in at least incremental investment in domestic manufacturing by Chinese firms. However, there are other, lower-cost manufacturing locations that these firms could set up manufacturing in, such as Mexico and Taiwan, for example that would still allow them to price their modules below that of US-based suppliers.” Mehta continued, “Therefore, we see the impact of this decision on US manufacturing as positive, but spurring limited investment in the future and likely only temporary relief for existing US-based suppliers.”

Michael Splinter, chairman of the board of directors, president and CEO at Applied Materials said in a conference call last week, “For those global companies, I think they will be able to adjust their supply chain, move around, get access to cells from other regions. It will also give opportunity to Taiwanese manufacturers and of course it will give some benefit to US manufacturers as these tariffs get levied. My biggest worry [is] that these tariffs would affect demand, slowdown demand and that would be a negative for every part of the solar industry, so hopefully they [the government] don’t do that. But I think there’s a pretty big risk of that.”

The statement from SEMI read, “Now is the time to take an active position urging for the establishment of a global free trade agreement for renewable energy products. This will not be an easy achievement nor will it be accomplished anytime soon.”

In order to achieve this, SEMI urges the industry to adopt a model akin to the Information Technology Agreement (ITA) currently celebrating its 15th anniversary. Adopted by 70 participating countries, representing 97% of world trade, the ITA was created to eliminate all tariffs on information technology products and manufacturing agreement.

This suggestion has been echoed by Robert Hansen, president and CEO, Dow Corning and Andrew Tometich, president, Hemlock Semiconductor, “We believe that the consequences of this decision will prove to be devastating to the growth and adoption of solar technology in the US, job growth, as well as to our competitive leadership of this industry worldwide. Indeed, while Bonn, Germany-based Solar World and its co-litigants may initially benefit from this decision, the industry overall in the US will suffer.

“In our view, both the US and China will benefit by removing barriers to trade and promoting collaboration and open trade policies rather than introducing measures or litigation that impose trade barriers. Resolving trade concerns through an adversarial confrontation serves only to impede technological advancement and job creation, as well as the path towards energy independence and clean energy,” concluded Hansen and Tometich.

Furthermore, Suntech’s Andrew Beebe, CCO, said, “Despite these harmful trade barriers, we hope that the US, China and all countries will engage in constructive dialogue to avert a deepening solar trade war. Suntech opposes trade barriers at any point in the global solar supply chain. All leading companies in the global solar industry want to see a trade war averted. We need more competition and innovation, not litigation.”

The statement from SEMI concluded, “The current trade dispute is just one instance of growing trade barriers that are proliferating and encumbering the deployment of renewable energy. Other trade and market barriers have arisen in areas related to investment, government procurement, local content requirements and conflicting standards and certification requirements. PV solar and other renewable energy industries must begin the long and difficult process of developing a comprehensive and holistic world trade agreement that promotes free and open trade and accelerates adoption of renewable energy.”
 

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