2025 In-depth Analysis of Chinese Smart Hardware & New Energy Supply Chain Going Global: Status, Drivers, Challenges and Recommendations

Current Status

China has formed the most complete global supply chain system in smart hardware and new energy. In lithium batteries, Chinese companies accounted for over 75% of global production capacity in 2024, with dominant players like CATL and BYD. For photovoltaic modules, China produces more than 80% of the world‘s output, led by LONGi, JinkoSolar, etc. In smart hardware like drones and smart homes, brands such as DJI and Xiaomi are deeply embedded in global supply chains.

Drivers

• Cost advantages: Complete industrial chain, relatively low costs in labor, energy and infrastructure, significant economies of scale.
• Rapid technology iteration: Continuous leadership in battery energy density, photovoltaic conversion efficiency, smart manufacturing; highest number of patents globally.
• Market demand: Global carbon neutrality targets drive booming new energy demand; Europe and the US rely on Chinese supply chains for cost reduction.
• Policy support: Domestic “Belt and Road” and export tax rebates encourage going global; some overseas countries attract factories with subsidies.

Challenges

• Geopolitical risks: U.S. Inflation Reduction Act (IRA) and EU anti-subsidy investigations restrict direct exports, forcing companies to build overseas plants.
• Overcapacity: Overinvestment in domestic new energy sector leads to lower capacity utilization (lithium battery ~60% in 2024), triggering price wars and margin compression.
• Environmental compliance: EU Carbon Border Adjustment Mechanism (CBAM) requires carbon footprint disclosure, increasing export costs; some countries tighten energy efficiency and recycling standards.
• Supply chain resilience: Over-reliance on single nodes (e.g., Indonesia nickel, Congo cobalt) faces resource nationalism and logistics disruption risks.

Recommendations

• Localization: Set up R&D, production and after-sales centers in target markets (e.g., Southeast Asia, Middle East, Europe) to avoid trade barriers. Examples: BYD factory in Thailand, CATL factory in Hungary.
• Technology innovation: Invest in next-gen technologies like solid-state batteries, perovskite photovoltaics, hydrogen energy; use digitalization to optimize supply chain management.
• Diversified sourcing: Diversify sources of critical raw materials, explore battery recycling and substitute materials (e.g., lithium-sulfur, sodium-ion).
• Cooperation & standards: Actively participate in international standard setting; form joint ventures with local firms to enhance brand trust.
• ESG management: Proactively disclose carbon footprints, adopt green manufacturing technologies to meet compliance requirements in markets like EU.