With increased tensions in the trade war between the United States and China, Indonesia is positioning itself to become the next hot spot for manufacturing solar panels and other equipment. US tariffs, which limit Chinese and Southeast Asian exports of solar panels, have lured huge foreign investments to create a global leader in clean energy production.

Indonesia has been aggressively wooing these manufacturers-both from China and the U.S.-with slack local regulations and abundant incentives for foreign firms. The move could accelerate Indonesia's renewable energy development by leveraging a strategic advantage of being among the handful of countries in Southeast Asia that do not fall under the US anti-dumping tariff regime.

In recent times, the US has imposed tariffs on China, Cambodia, Malaysia, Thailand, and Vietnam for selling solar products to the American market at below-market prices. Indonesia has not attracted such sanctions so far; this is extremely attractive to a manufacturer looking for a way of bypassing barriers.

Indonesia's government, to attract more foreign investment in the country, reduced the local content for solar power plants from 40% to 20% in 2024. This move is liable to increase investment by multinational companies that can set up operations in Indonesia without dependence on a large local supply chain. Further, Indonesia is targeting multilateral foreign lenders to finance clean energy projects and is going to secure at least half of its funding for renewable energy projects from international partners.

The strategy seems to be yielding fruits because several big companies have already invested in the region. In December 2024, a Singaporean solar manufacturer by the name EliTe Solar opened a new production facility for solar cells in Indonesia. The firm sounded very optimistic about Indonesia's prospects of driving the adoption of clean energy in Southeast Asia while aligning with the general plan of the country for economic and social development.

Meanwhile, U.S.-based SEG Solar is developing a giant photovoltaic industrial park in Batang, Central Java. This facility will have an annual production capacity of 5 gigawatts of silicon ingots, wafers, cells, and modules, making it the largest vertically integrated solar manufacturing hub in Indonesia. The plant will supply not only solar panels for Indonesia's renewable energy projects but also feed the U.S. market, which remains a key consumer of photovoltaic products.

China is also moving focus to Indonesia in response to the tariffs after having traditionally dominated global solar manufacturing. Many of the Chinese solar firms have had to scale down operations in other parts of Southeast Asia slapped with US duties, while setting up new manufacturing plants in Indonesia and Laos, both still free from American tariffs.

While Indonesia is enjoying a boom in the manufacturing of solar energy, experts believe that to make the growth of the industry sustainable, Indonesia has to try harder to generate demand for the energy source in the country. Putra Adhiguna, the managing director of the Energy Shift Institute in Indonesia, believes that while Indonesia benefits from export-oriented production, increased local adoption of solar energy is required for long-term stability within the industry.

Countries like Indonesia need to develop a strong domestic market for renewable energy independently of the growth in the manufacturing sectors dictated by US trade policies," Putra said.

As Indonesia goes ahead with its plan, the future of the solar industry in the Southeast Asian nation would be well-watched, as it plays out the fine line of global trade dynamics, balancing export-driven growth while nurturing local demand for green energy solutions.