US trade complaint could prompt relocation of some factory capacity

NEW YORK - Chinese solar companies are considering shifting manufacturing to other countries to avoid paying tariffs that may result from a trade complaint.

LDK Solar Co and JA Solar Holdings Co said they may move some production operations if the US imposes duties on solar products imported from China. Suntech Power Holdings Co, the world's biggest solar-panel maker, said the dispute would be "extremely damaging to the entire US solar industry".

The statements, made during conference calls with analysts on Tuesday, show that Chinese manufacturers are developing strategies to avoid potential duties, and that the complaint may not give US solar companies the relief they're seeking.

"In the short term, maybe we will work through partnerships," said Fang Peng, chief executive officer of Shanghai-based JA Solar. "In the longer term, we're also evaluating the possibilities to set up operations in the region close to the customers."

JA Solar hasn't decided how to respond to the trade case because it hasn't been resolved, Ming Yang, JA Solar's vice-president of business development and corporate communications, said. "To be prudent, I think we need to have a solution, a workaround solution," he said.

LDK may move some production to Africa, Europe or North American sites including California if necessary, the Jiangxi, China-based company said in a conference call with analysts.

Circumventing tariffs

"There are ways to circumvent" tariffs, said Jesse Pichel, an analyst at Jefferies Group Inc in New York.

Chinese mainland companies may avoid the tariffs by buying solar cells from Taiwan-based companies and assembling them into modules outside the mainland, Pichel said.

Suntech and Canadian Solar Inc, which makes panels in China, already have plants in North America, and JA Solar has an existing relationship outside China with a company to which it could outsource some manufacturing.

SolarWorld Industries America Inc, the Oregon-based unit of Germany's SolarWorld AG, and six unidentified US manufacturers filed the trade complaint last month with the US International Trade Commission and Commerce Department, asserting that duties on Chinese imports will compensate for unfair financial support China provides to its solar industry.

The US imported $2.4 billion of solar panels from China in 2010, according to the Solar Energy Industries Association.

A tariff will increase prices for developers, homeowners, utilities and others who purchase solar panels in the US, Pichel said.

"The net impact is that we raise the cost of solar to the US consumer." He said it's likely the trade complaint will pass and tariffs will be imposed.

Tariffs on Chinese panels may also cut into business for GT Advanced Technologies Inc, which sells equipment used in solar manufacturing, said CEO Tom Gutierrez.

Gutierrez, who opposes the tariffs, said he's concerned that Chinese manufacturers may retaliate against US companies, including his, by stopping purchases. "It's natural," he said. "If they've been punished by the US, why would they want to reward a US supplier?"

Bloomberg News