The mainland has created the world's biggest solar panel and parts manufacturing industry as well as the world's biggest solar panel market from scratch in less than a decade, thanks to government support. We will invest in new facilities in Malaysia and not on the mainland JOHN ZHANG YI, COMTEC SOLAR SYSTEMS But to Comtec Solar Systems Group's chief executive John Zhang Yi, remaining small and nimble and staying clear of the crowded mainland market served by low-end products are key to the parts maker's long-term survival. Amid worsening overseas trade protectionism, it has even chosen a strategy to gradually move its production away from eastern China to Malaysia, making it the only mainland solar parts manufacturer in the Southeast Asian nation. "In order to secure the long-term stability of our business, we will invest in new facilities in Malaysia and not on the mainland," Zhang told the South China Morning Post . "We also want to move our mainland facilities to Malaysia as much as possible. "The United States is highly likely to impose further trade barriers aimed at Chinese producers this year, we can't just sit here and hope that it won't happen." He said Comtec had been exporting to its American panel-producer customer SunPower's Malaysian plant for some time. "We have been considering producing in Malaysia for over a year because we have a major customer there, but now our main consideration for moving there is to avoid trade barriers in our main markets," he added. After a plant construction binge that saw Chinese panel and parts producers flood the global market and drove some US firms out of business, Washington imposed steep anti-dumping duties on mainland products in 2012. Similar duties are likely to be slapped this year on Taiwan-made products to close a loophole that allows mainland producers to avoid duties by shifting downstream product processing to Taiwan, Zhang said. After intense negotiations, the European Union last year reached a deal with mainland producers whereby Beijing will restrict export volumes and sell at a higher minimum price, to protect European producers. India and Australia have also launched investigations into alleged dumping and unfair government subsidies that have helped mainland exports. Shanghai-based and Hong Kong-listed Comtec has production facilities in Shanghai and Jiangsu province that can annually make around 550 megawatts (MW) of mono-crystalline silicon solar-wafers. It is small relative to fellow Hong Kong-listed and Jiangsu-based GCL-Poly Energy, the world's largest wafer maker with 12,000 MW of annual output capacity. Comtec plans to start commissioning 300 MW of capacity in Kuching, east Malaysia, late next month, and reach full capacity by the end of the year. Of this, 100 MW is equipped with gear moved there from the mainland and the rest newly acquired. GCL makes multi-crystalline wafers that are cheaper, but which have lower solar-energy-to-electricity conversion efficiency compared to the mono-crystalline ones that Comtec makes. Wafers are processed into cells, which are then assembled to become panels. "On the mainland, whether projects get financed or not is largely driven by politics," Zhang said. "If the government is determined to support domestic consumption, projects will get financed even if they have not reached the commercial requirements that would have been required in Western markets." This explains why mainland developers tend to buy panels primarily on price and less on long-term quality considerations, he added. Premier Li Keqiang in March declared "war" on air pollution in major cities, and solar farm development is one of a few clean-energy sources whose consumption has been supported by state subsidies. State policy bank China Development Bank has been providing the bulk of the financing. Commercial banks have been more cautious on lending, particularly after some were burned by soured loans to upstream solar panels and parts makers that sank into losses and defaulted on bonds and loan obligations. Although moving production lines to Malaysia is costly, he said this will be offset by lower power prices in hydropower-rich eastern Malaysia, where electricity costs less than half that of coal-fired power in Jiangsu. Electricity accounts for just under 20 per cent of Comtec's total operating costs. The Malaysian government also granted profit tax holidays to the firm, as well as financial assistance for it to train local workers. Zhang said Comtec has obtained government approval for three phases of development of its production base in Kuching, with total annual capacity of just under 1,000 MW. Comtec's wafer shipments grew 17.3 per cent last year to 397 MW. It posted a net profit of 7.1 million yuan (HK$8.92 million) in this year's first quarter. It racked up net losses of 133 million yuan for the whole of last year.