US Tariff Impact on Solar Encapsulation Industry

The global solar encapsulation market is estimated to grow from USD 4.9 billion in 2023 to USD 7.2 billion by 2028, and is expected to record a CAGR of 8.0% during the forecast period. Growth is majorly driven by favorable government incentives and schemes supporting solar installations. However, tariffs on imported raw materials and equipment used in the production of solar encapsulants may reshape market dynamics. Below is an analysis of their impacts and strategic responses:

Request US Tariff Threat Assessment Analysis Now

Economic Impact: Navigating Challenges and Adjustments

1. Increased Production Costs:

   • Tariffs on imported raw materials such as ethylene vinyl acetate (EVA), polyvinyl butyral (PVB), and polydimethylsiloxane (PDMS) raise production costs for encapsulant manufacturers.

   • Equipment used in the manufacturing process can also see increased costs.

2. Higher Module Prices:

   • Increased production costs could translate into higher prices for solar modules, potentially slowing down adoption rates.

3. Reduced Profit Margins:

   • Encapsulant manufacturers may face reduced profit margins as they try to absorb tariff-related cost increases while remaining competitive.

4. Impact on Investments:

   • Tariffs could deter foreign investments in the solar encapsulation market, potentially affecting innovation and capacity expansion.

Geographical Impact: Shifting Production and Demand

1. Asia-Pacific:

   • Expected to dominate the market, driven by increasing PV module demand in countries such as China, Japan, India, and South Korea.

   • Tariffs may restrict access to the U.S. market, prompting companies to explore alternative markets and boost domestic demand.

2. North America:

   • Driven by government incentives and a growing emphasis on renewable energy.

   • Tariffs could incentivize domestic manufacturing of solar encapsulants but may cause short-term supply chain disruptions.

3. Europe:

   • Stringent environmental regulations and support for renewable energy projects are key drivers.

   • Tariffs on exports to the U.S. may challenge European manufacturers but are offset by robust intra-regional demand.

Business Impact: Innovation and Strategic Adaptation

1. Supply Chain Resilience:

   • Companies diversify suppliers or relocate production facilities to mitigate risks associated with tariffs.

2. Shift Towards Cost-Effective Encapsulation:

   • Recycling complexity of solar encapsulations creates restraints in the market.

   • The need for more cost-effective encapsulation techniques compared to present ones is a current market opportunity.

3. Focus on Performance and Durability:

   • Opportunity to make advanced encapsulants that perform better while saving on costs.

4. Strategic Collaborations:

   • Economic encapsulation techniques that are of the highest quality.

Key Strategies for B2B Stakeholders: Proactive Measures

1. Localized Manufacturing Investments:

   • Setting up production facilities within tariff-free regions or countries with favorable trade agreements.

2. Supply Chain Diversification:

   • Businesses should identify alternative suppliers in regions unaffected by tariffs to mitigate cost increases.

3. Leveraging Trade Agreements:

   • Exploring opportunities under bilateral trade deals to access cost-competitive inputs for production.

4. Innovation Focus:

   • Invest in R&D for advanced materials and encapsulation techniques to enhance performance and reduce costs.

Adapting to Tariff-Induced Market Shifts

Tariffs present both challenges and opportunities for stakeholders across the solar encapsulation market. The solar encapsulation market is dominated by a few major players that have a wide regional presence. Domestic manufacturers benefit from reduced competition but must strategically invest in local manufacturing capabilities, supply chain diversification, and technological innovation for sustained growth. Asia Pacific is expected to have the largest market share in the Solar encapsulation market during the forecast period, followed by Europe. Emphasizing sustainability and creating novel encapsulation methods will be critical in promoting the use of solar energy amid tariff-related concerns.

Get your Solar Encapsulation US Tariff Readiness Assessment

Related Report:

Solar Encapsulation Market by Material (EVA, PVB, PDMS, Ionomer, TPU, Polyolefin), Technology (Crystalline Silicon, Thin-film Solar), Application (Ground-mounted, Building-integrated Photovoltaic, Floating Photovoltaic) & Region - Global Forecast to 2028