Analysis of the impact of changes in Vietnam's solar subsidy policy on solar inverter companies

Analysis of the impact of changes in Vietnam's solar subsidy policy on Solar Inverter companies

Before discussing the impact of changes in Vietnam's solar subsidy policy on solar inverter companies, let's first understand the important role of solar inverters in photovoltaic systems. Solar inverters are an indispensable key equipment in solar photovoltaic power generation systems. They are responsible for converting the direct current generated by solar panels into alternating current, so that Solar Power can be connected to the grid or used by household and commercial electrical equipment. In addition,the inverter also has monitoring and protection functions to ensure the safe, stable and efficient operation of the entire photovoltaic system.
With the global emphasis on clean energy, Vietnam's solar market has also achieved significant development in recent years. As an important means to promote the development of the solar industry, changes in subsidy policies have had a profound impact on the entire industry chain, including solar inverter companies.

I. Overview of Vietnam's solar subsidy policy
(I) Early subsidy policies and results
During the period from 2017 to 2019, the Vietnamese government provided a fixed electricity price subsidy of 9.35 cents per kilowatt-hour for grid-connected solar power generation projects for a period of 20 years. This subsidy policy has greatly stimulated market vitality, making Vietnam's solar installed capacity achieve explosive growth in a short period of time. For example, in 2019 alone, Vietnam added about 4.5 GW of solar installed capacity, becoming the world's fifth largest solar market.
During this period, the rooftop solar market has also developed rapidly, and a large number of companies and households have installed solar systems to enjoy the benefits of subsidies. This has also driven the demand for small and medium-sized solar inverters and promoted the business expansion of inverter companies in the Vietnamese market.
(II) Adjustment and impact of subsidy policies from 2020 to 2025
In 2020, the Vietnamese government adjusted its subsidy policy and set the subsidized electricity price at 7.09 cents per kilowatt-hour for grid-connected solar power stations, 8.38 cents per kilowatt-hour for rooftop solar projects, and 7.69 cents per kilowatt-hour for floating solar projects, according to the type and scale of the project. Although this adjustment reduced the subsidy intensity, it still had a positive impact on the market. In the second half of 2020, Vietnam saw another surge in solar installations, with a large number of solar projects connected to the grid.
However, Vietnam's subsidy policy changed significantly again in 2025, with the government withdrawing some of the previously promised electricity price discounts, reducing subsidies by 34% to 50%, and requiring payment in local currency, equivalent to only 4.7 cents per kilowatt-hour. This sudden policy change has sparked investor concerns and protests, with many solar and wind investors saying they could default on a total of $13 billion in equity investments if the government does not honor its original preferential promises.

2. The market impact of changes in Vietnam's solar subsidy policy on solar inverter companies
(I) Market demand fluctuations
In the early stage of subsidy policy adjustment: When subsidy policies are increased or new subsidy policies are introduced, such as Vietnam's high subsidy policies from 2017 to 2019, market demand will be stimulated to grow rapidly. The increased return on investment of solar power generation projects has attracted more developers and investors to enter the market, thereby driving demand for solar inverters. The order volume of inverter companies has increased significantly, and the market is in short supply.
Subsidy policy reduction or unstable period: When subsidy policy is reduced or unstable, such as subsidy reduction in 2025, market demand will be suppressed. On the one hand, the lower return on investment of projects has made some developers and investors wait and see about investing in solar projects, delaying or canceling project plans, resulting in a decrease in inverter demand. On the other hand, the expected decline in the income of grid-connected projects may also affect the normal operation and maintenance of the projects, and thus affect the subsequent market demand for inverters. For example, some projects may reduce the demand for upgrading or replacing inverters due to poor returns.
(II) Changes in market competition pattern
Preferential subsidy policy period: During the stage when subsidy policies were more favorable, the rapid development of the market attracted many domestic and foreign solar inverter companies to enter the Vietnamese market. As market competition intensified, companies adopted competitive strategies such as price cuts, improving product quality and service levels in order to compete for market share. Although this has promoted market prosperity and technological progress to a certain extent, it has also squeezed the profit margins of companies and may also lead to disorderly competition in the market.
After the subsidy policy adjustment: The adjustment of the subsidy policy has changed the market environment. Some weaker inverter companies may gradually withdraw from the market due to their inability to adapt to the new market environment, and the market share will be concentrated on companies with technological advantages, brand advantages and cost advantages. For example, Huawei, Sungrow and other companies that are leading in technological innovation and product quality can continue to maintain strong competitiveness in the Vietnamese market with their strong comprehensive strength after the subsidy policy changes, and their market share will be further expanded.

3. Impact on the cost and profit of solar inverter companies

(I) Cost

Production cost: Changes in subsidy policies may affect the production cost of inverter companies. When market demand grows rapidly, the supply of raw materials is tight and procurement costs may rise. For example, during the peak period of market demand driven by subsidy policies, the supply of key electronic components such as chips and capacitors may be in short supply, resulting in price increases. In addition, in order to expand production scale to meet market demand, companies may need to increase investment in production equipment and recruit more employees, thereby increasing fixed asset investment and labor costs.

Operating cost: Adjustments to subsidy policies will also affect the operating costs of companies. When the subsidy policy is stable and the market demand is strong, enterprises can arrange production and sales stably, and the operating costs are relatively low. However, when the subsidy policy changes or is cut frequently, enterprises need to constantly adjust production plans and optimize inventory management to cope with fluctuations in market demand, which increases the operating costs and management difficulties of enterprises.
(II) Profit
During the period of favorable subsidy policies: Although the market competition is fierce, due to the strong market demand, enterprises can achieve profit growth by expanding sales scale. High subsidies make the investment returns of solar power generation projects higher, and enterprises can sell inverter products at relatively high prices, thereby obtaining better profit margins.
After the subsidy policy is cut: The reduction of subsidy policies directly leads to a decline in project investment returns. In order to maintain market competitiveness, inverter companies often need to reduce product prices. If enterprises cannot effectively reduce production and operating costs, profit margins will be severely squeezed, and even losses may occur.

4. Impact on the technology research and development and innovation of solar inverter enterprises
(I) Technology research and development motivation under the support of subsidy policies
Driven by subsidy policies, the solar energy market has developed rapidly. In order to meet market demand and improve competitiveness, inverter companies have a stronger motivation to carry out technology research and development and innovation. Enterprises will increase their investment in research and development and strive to improve the conversion efficiency, reliability and intelligence level of inverters. For example, some companies have developed more efficient inverter topologies and more advanced control algorithms, which have improved the energy conversion efficiency of inverters and reduced the energy consumption of the system.
At the same time, subsidy policies have also provided market application opportunities for some emerging inverter technologies, such as micro inverters and string inverters. With the support of subsidy policies, these new technologies can enter the market faster, be applied and verified in practice, and thus promote the diversified development of inverter technology.
(II) Technology innovation pressure after changes in subsidy policies
The reduction or instability of subsidy policies has made enterprises face greater market competition pressure and cost control pressure, which has also prompted enterprises to improve product performance and cost performance through technological innovation to meet market challenges. Enterprises need to continuously optimize product design, adopt more advanced production processes and materials, reduce production costs, and improve product quality and reliability. For example, some enterprises have reduced the size and weight of inverters by developing new heat dissipation technologies and compact designs, while also improving the protection level and service life of products.
In addition, with the continuous development of the solar energy market and the increasing demand for energy management systems, inverter companies also need to strengthen technology research and development in smart grid access, energy storage system integration, etc. to meet the market's higher requirements for inverters. For example, the development of inverters with intelligent monitoring and control functions can achieve real-time monitoring and optimization control of solar power generation systems, and improve the overall performance and stability of the system.

5. Response strategies of solar inverter companies
(I) Strengthen market research and forecasting
Solar inverter companies should pay close attention to the changing trends of Vietnam's solar subsidy policies, strengthen market research and analysis, and accurately grasp the dynamic changes in market demand. By establishing a complete market information collection and analysis system, timely understand the impact of policy adjustments on the market, and make preparations in advance. For example, companies can establish good cooperative relations with local industry associations, government departments, research institutions, etc. to obtain the latest policy information and market data.
At the same time, enterprises should also strengthen the analysis of competitors, understand the product characteristics, market strategies and technological innovation of competitors, so as to formulate differentiated market competition strategies and improve their own competitiveness.
(II) Optimize product structure and cost control
According to changes in market demand, enterprises should adjust product structure in a timely manner and optimize product series. In the case of subsidy policy cuts, increase investment in the research and development and production of high-efficiency and low-cost inverter products to meet the market demand for cost-effective products. For example, develop small and medium-sized inverter products suitable for distributed solar power generation systems, as well as smart inverter products with multi-functional integration.
Strengthening cost control is one of the important measures to cope with changes in subsidy policies. Enterprises should reduce the production cost of products by optimizing production processes, improving production efficiency, and reducing raw material procurement costs. At the same time, strengthen supply chain management, establish long-term and stable cooperative relationships with suppliers, ensure the stable supply and quality of raw materials, and reduce procurement costs and inventory costs.
(III) Expand diversified markets and cooperation
The uncertainty of Vietnam's solar subsidy policy has prompted inverter companies to actively expand diversified markets. In addition to the Vietnamese market, companies can turn their attention to the solar markets of other Southeast Asian countries and other parts of the world to reduce the risk of dependence on a single market. For example, some companies in Southeast Asian countries such as Thailand and Malaysia are also actively involved in the construction of solar energy projects and carry out sales and services of inverter products.
Strengthening cooperation with upstream and downstream companies in the industrial chain is also an effective way to cope with changes in subsidy policies. Inverter companies can establish close cooperative relationships with solar panel manufacturers, system integrators, installers, etc. to jointly cope with market challenges. Through cooperation, companies can achieve resource sharing, complementary advantages, and improve the competitiveness of the entire industrial chain. For example, cooperate with panel manufacturers to optimize the design and compatibility testing of the system to provide customers with a one-stop solar energy solution.

(IV) Improve technological innovation and service quality
Enterprises should continue to increase investment in technology research and development and continuously improve the technical level and performance indicators of products. In the context of changes in subsidy policies, technological innovation is the key to maintaining the competitiveness of enterprises. For example, develop more efficient inverter conversion technology, more advanced intelligent control algorithms, and more reliable energy storage system integration solutions to meet the market demand for high-performance inverters.
At the same time, strengthening the construction of after-sales service teams and improving service quality are also important means for enterprises to win market share. Enterprises can establish a complete after-sales service network, respond to customer needs in a timely manner, and provide customers with high-quality installation, commissioning, maintenance and training services. Through good after-sales service, customer satisfaction and loyalty can be enhanced, and a good brand image can be established.

In summary, the changes in Vietnam's solar subsidy policy have had a profound impact on solar inverter companies in many aspects. From market demand fluctuations to changes in the market competition pattern, from the impact of costs and profits to the promotion of technology research and development and innovation, inverter companies are required to actively respond and adopt effective strategies to adapt to the market environment brought about by policy changes. Through keen insight into market trends, optimization and adjustment of product structure, strengthening of cost control, expansion of diversified markets, technological innovation and improvement of service quality, solar inverter companies can maintain competitiveness in the Vietnamese solar market and achieve sustainable development. In the future, as the global energy transition accelerates, solar energy, as an important part of clean energy, still has huge market potential. Although Vietnam's policy adjustments in the field of solar energy have brought certain challenges, they also provide companies with opportunities to re-examine their development strategies and enhance their core competitiveness in order to better grasp the development opportunities of the global solar market.