From Imports to Industry: How Vietnam Built a Solar Export Powerhouse on Chinese Supply Chains

Vietnam’s solar boom was driven by Chinese FDI and low-cost inputs, helping the country capture over a quarter of US solar imports while boosting domestic supplier productivity by around 20–27%. The challenge now is to diversify supply chains, deepen local manufacturing and turn foreign-led export growth into lasting jobs, technology, investment and green industrial capacity.

Vietnam's rise as a major solar-panel manufacturing and export hub shows how developing economies can use foreign investment and global supply chains to enter fast-growing green industries. A World Bank Development Economics study prepared for the World Development Report 2026, involving researchers from the World Bank Group and King's College London, finds that Vietnam's solar boom was built largely on Chinese foreign direct investment (FDI), low-cost imported components and growing links between foreign manufacturers and Vietnamese suppliers. The findings offer important lessons for policymakers, development partners and businesses seeking to turn clean-energy investment into jobs, productivity and stronger domestic industries.

Cheap Chinese inputs gave Vietnam a powerful export advantage

Vietnam's solar-panel exports expanded rapidly between 2018 and 2022, with the country overtaking Malaysia in the US market and eventually accounting for more than a quarter of US solar imports. A major reason was access to inexpensive components.

Researchers identified 161 products that could form part of the solar supply chain, with Vietnamese manufacturers using 106 of them. China was the leading supplier for 67 of those 106 products. In 2022, solar manufacturers in Vietnam purchased inputs from more than 600 different Chinese sellers.

The price advantage was substantial. Solar inputs imported from countries subsidising their production were around 27–32% cheaper than comparable products from countries without such support. Inputs from China were about 50% cheaper than those sourced elsewhere. Chinese components accounted for around 65% of firms' inputs on average.

This shows policymakers that green industrial subsidies can create benefits beyond the country providing them. Developing economies may not have enough public money to compete with the large subsidy programmes of major economies, but they can gain from those policies by attracting investment and connecting domestic companies to international supply chains.

Chinese investment delivers scale but creates concentration risks

Chinese FDI has played an equally important role. In 2022, the study identified 79 firms selling solar panels in Vietnam, with around half foreign-owned and 25 identified as Chinese-owned.

Although domestic companies represented roughly half of solar-panel producers, Chinese FDI firms generated more than 70% of Vietnam's solar-panel exports. Solar-panel producers employed around 27,000 workers in 2022, approximately half of them working for Chinese FDI companies.

Chinese-owned manufacturers also had a strong price advantage. Their exported solar panels were around 38% cheaper than those sold by other producers in Vietnam. For assembled panels exported to the United States, the difference reached approximately 54%.

For Vietnam, this creates both an opportunity and a vulnerability. Chinese investment has helped build manufacturing capacity, employment and export competitiveness, but heavy dependence on one country for capital and components leaves the industry exposed to geopolitical tensions, tariffs and changes in trade or subsidy policies.

Policymakers should therefore pursue diversification rather than replacing Chinese investment. Attracting additional investors and suppliers from other economies while developing commercially viable domestic components could make the industry more resilient.

Local suppliers emerge as the biggest development opportunity

The strongest long-term benefit may be occurring outside the large foreign-owned factories. Chinese manufacturers are increasingly buying from Vietnamese businesses. The share of inputs that Chinese FDI companies sourced domestically increased from less than 10% in 2018 to around 25% in 2023.

By 2022, Vietnam had 242 local suppliers serving solar manufacturers, including around 105 connected to Chinese FDI firms. These suppliers collectively employed approximately 31,000 workers, with around 10,000 working for companies supplying Chinese-owned manufacturers.

More importantly, local businesses appear to become more productive after entering these supply chains. Different statistical methods found labour-productivity gains of roughly 20–27% among suppliers establishing relationships with Chinese FDI solar manufacturers. One major estimate found productivity rising by around 24% during the three years following the establishment of a supplier relationship.

For international development partners, this is an important policy signal. Support should go beyond attracting multinational companies. Financing technology upgrades, worker skills, quality certification, industrial infrastructure and access to capital can help Vietnamese small and medium-sized businesses qualify as suppliers and capture a larger share of the industry's value.

Vietnam now needs to turn solar growth into lasting industrial capability

The next challenge is converting export success into deeper domestic industrial capacity. The research found no statistically significant increase in employment, wages or sales after Vietnamese companies began supplying Chinese FDI manufacturers, despite clear productivity improvements. Higher productivity therefore does not automatically guarantee wider economic benefits.

For private companies, opportunities extend beyond manufacturing complete solar panels. Vietnamese businesses could expand into glass, aluminium, plastics, electrical equipment, electronics, machinery and other components required across the solar value chain.

Government policy should encourage multinational-local supplier partnerships, workforce development, technology transfer, research collaboration and investment in modern machinery. Development institutions can support these efforts through supplier-development programmes, affordable financing, technical assistance and green industrial infrastructure.

The larger lesson is that Vietnam does not need to choose between foreign investment and domestic industry. Its opportunity lies in using FDI to strengthen local capabilities. But maintaining that success will require reducing excessive supply-chain concentration and helping Vietnamese companies move into higher-value activities. If those policies succeed, the country's solar boom could evolve from an export story powered largely by foreign capital and inputs into a more resilient source of domestic productivity, technological capability and green industrial growth.