While China remains the world’s dominant manufacturer of solar panels, wind turbines, and batteries, global companies are aggressively pursuing a “China Plus One” strategy to diversify their supply chains. Southeast Asia, with its competitive labor costs, growing technical skill base, and favorable trade policies, is winning the lion’s share of this new investment. Vietnam and Thailand are at the forefront, establishing themselves as specialized hubs for solar and electric vehicle (EV) batteries, respectively.
Key Details and Developments:
1. Vietnam: The Solar Powerhouse
Vietnam has rapidly become a world leader in solar panel manufacturing and is now expanding into other areas.
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Recent Investment: Major Chinese companies are bypassing tariffs by setting up massive factories in Vietnam. For instance, GCL Technology announced in late 2023 a $1.4 billion investment to build a plant in Vietnam for producing polysilicon (a key material for solar panels). This is one of the largest investments in the region’s renewable sector.
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Why Vietnam?
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Skilled Labor: A strong, tech-savvy workforce willing to work for lower wages than in China.
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Trade Access: Strategic free trade agreements, including with the EU, make exports attractive.
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Existing Ecosystem: It already hosts manufacturing facilities for giants like LONGi Solar and Aiko Solar.
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Challenges: Its energy grid is still reliant on coal, creating a paradox where green equipment is made with fossil fuels.
2. Thailand: The EV Battery and Assembly Hub
Thailand, long known as the “Detroit of Asia” for internal combustion engines, is successfully pivoting to electric vehicles and their components.
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Recent Investment: Chinese EV giant BYD is leading the charge. In 2024, BYD announced it will build its first Southeast Asian EV factory in Thailand, with an annual capacity of 150,000 vehicles. This follows a wave of investments from other Chinese battery makers like SVOLT and Gotion High-Tech.
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Government Support: The Thai government’s aggressive incentive package, “30@30”, aims to have 30% of all vehicles produced domestically be zero-emission by 2030. This includes tax cuts and subsidies for manufacturers and consumers.
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Why Thailand?
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Established Auto Supply Chain: It has decades of experience and a deep network of auto parts suppliers that can be retooled for EVs.
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Strategic Location: Centrally located in Southeast Asia, it’s a perfect export base to the entire ASEAN market.
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3. The United States: Reshoring with Government Backing
Driven by the Inflation Reduction Act (IRA), the U.S. is experiencing a manufacturing renaissance in clean energy, though its focus is largely domestic.
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Recent News: Billions of dollars in IRA tax credits are fueling a boom in battery “gigafactory” construction across the “Battery Belt” in the South and Midwest. Companies like Panasonic (supplying Tesla), SK On, and CATL (via a licensing deal with Ford) are building massive facilities.
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Key Differentiator: The U.S. is not competing on low costs. Instead, it’s leveraging massive subsidies, a desire for energy security, and access to a wealthy consumer market to become a self-sufficient hub, particularly for EVs and grid storage.
4. India: The Ambitious Challenger
India is making a strong push with its Production-Linked Incentive (PLI) schemes for solar modules and advanced chemistry cell batteries.
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Recent News: Reliance Industries is building a massive integrated solar manufacturing facility as part of its $10 billion green energy push. Similarly, companies like Waaree are expanding their solar panel production capacity significantly.
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Challenge: While ambition is high, it still lacks the seamless, large-scale supply chain ecosystem of Southeast Asia, making production costs potentially higher.
Analysis: Who Wins?
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The “Next Hub” is Plural: There will not be a single “next China.” The global supply chain is diversifying into multiple hubs.
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Southeast Asia for Global Export: Vietnam and Thailand are the leading candidates for export-oriented manufacturing due to their cost structure, strategic location, and willingness to attract foreign investment. They are best positioned to supply equipment to Europe, the rest of Asia, and emerging markets.
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U.S. for Domestic & High-End: The U.S. is becoming a dominant hub for its own domestic market and for higher-end, technologically complex equipment where proximity to R&D centers is key.
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Europe’s Focus: The EU is also pushing for its own green manufacturing through its Green Deal Industrial Plan, but it is focused more on retaining its existing industrial base rather than becoming a low-cost export hub.
Conclusion:
The next major global export hub for energy equipment, particularly solar and EV batteries, is taking shape in Southeast Asia, with Vietnam and Thailand as the core engines of growth. This shift is a direct result of geopolitical strategy, corporate supply chain diversification, and proactive government policies in the region.
