In early August, U.S. President Donald Trump signed an executive order under Section 232 of the Trade Expansion Act of 1962, announcing that a 15% tariff would be imposed on imported polysilicon derivatives. Additionally, a minimum import price mechanism was established for imported polysilicon and its derivatives, with the aim of supporting the domestic supply chains for polysilicon, semiconductors, and solar energy in the United States. Although the new regulations have not yet taken effect, Reuters reported that this trade measure, intended to counter Chinese dominance, has instead dealt a major blow to U.S. factories.
On September 4th, local time, Reuters reported that a polysilicon factory in Charleston, Tennessee, is facing closure due to Trump's new tariff measures, which have driven away its only two remaining customers. This factory was once a crucial part of Washington's efforts to secure a domestic semiconductor supply chain.
According to reports, this factory is owned by the German company WACK Chemie. It mainly produces polycrystalline silicon for use in chips and solar panels. The factory employs approximately 600 people locally. The person mentioned above said that the company will decide whether to shut down the factory within the next few weeks.
Wacker's headquarters are located in Munich. Its three polysilicon factories in the United States and Germany have long been under competitive pressure from Chinese counterparts. Last year, the company implemented layoffs at its Charleston plant, which cost $2.5 billion. A few days before the new regulations were announced, CEO Christian Hartel warned investors that if trade protection did not yield tangible benefits, the company might "build an additional factory."
After the news came out on Friday, Wacker's stock closed down 2.6% that day. Although the company clarified that there were no plans to close its Charleston plant, it admitted that the current tariff provisions "cannot effectively support the production of polysilicon in the United States." The company also stated that it is actively discussing with the Trump administration how to achieve the goal of protecting domestic producers through this policy.
Analyst Sebastian Brey of Berenberg pointed out that Wacker is likely to shut down one of the three factories, but it may not be the factory in Tennessee. He expects the company to disclose more information at the London investor meeting on September 17th, and emphasized that “negotiations with the U.S. government may take longer.”
Regarding this, the U.S. Department of Commerce did not respond to requests for comment. A Trump administration official stated that the government is 'continue to engage with industry stakeholders' to inform them of its strategy to reshape the polysilicon manufacturing industry.
Reuters pointed out that this is another example of Trump's trade policies leading to "repercussions." The steel and aluminum tariffs have already increased the costs for American automakers. Additionally, this raises doubts about whether the White House can truly curb China's advantages in supply chains. For a long time, Chinese companies have held a dominant position in the field of solar-grade polysilicon and have expanded into higher-end areas such as semiconductors.
Wood Mackenzie research analyst Elisa Pierce said bluntly, 'We expect that, under the current structure, Section 232 tariffs will not boost demand for polysilicon in the United States.'
The lobbying organization 'Prosper America Alliance' (CPA), which supports tariffs and industrial policies, believes that the rules implementing the trade measures, which will take effect in December, should provide incentives for the purchase of polysilicon manufactured in the United States.
"The organization's spokesperson, Nick Yakovlev, stated: “Without clear signals indicating that domestically-produced monocrystalline silicon will become the foundation for the solar and semiconductor supply chains, we could potentially hand it over to foreign competitors and countries like China. This is a direct threat to national security."
CPA pointed out that currently, only two companies in the US produce this material. Reports say, due to the parent company Corning directly purchasing their solar-grade monocrystalline silicon for domestic wafer fabrication, the semiconductor company Hemellock, another American producer, is expected to be relatively unaffected by this policy.
According to the US announcement, the minimum import prices that will be in effect on December 4th this year are as follows: 21 dollars per kilogram for polycrystalline silicon; 100 dollars per kilogram for polycrystalline silicon ingots and wafers; 0.22 dollars per watt for solar cells; and 0.38 dollars per watt for solar panels.
The announcement also grants the Department of Commerce the authority to establish an incentive program for “reflow to the United States”. Enterprises that promise to build, renovate, or expand production facilities for polysilicon, silicon wafers, or solar cells in the United States and start construction by January 20, 2029, can apply for exemption from tariffs under Section 232 for certain imported equipment and related products. However, the announcement states that these incentive measures must be negotiated based on each company’s specific circumstances.
In terms of its impact on China, the Shanghai Securities News cited Lü Jinbao, an expert consulted by the Chinese Photovoltaic Industry Association, who stated that this policy has limited impact on Chinese companies' direct exports. This is because the US downstream silicon wafer production capacity is small, and there is a low dependence on imports of polysilicon. The policy primarily aims to increase the cost of photovoltaic power generation in order to support the domestic industry.
Currently, the domestic photovoltaic industry is still trapped in a downward cycle of overcapacity. Many industry insiders believe that compared to the uncertainties of going overseas, how to activate the domestic market is the most concerning issue for domestic photovoltaic companies at present.
