The Mystery of Photovoltaic Overcapacity: Head Enterprises Are Busy Expanding, Bankruptcy Tide of Small and Medium-sized Manufacturers May Be Coming

China Photovoltaic Industry Association, revealed that the effective capacity of the whole photovoltaic industry chain is expected to reach more than 700 GW by the end of this year. However, according to the forecast of China Photovoltaic Industry Association, in the conservative case, China's new photovoltaic installed capacity is predicted to be about 95-120 GW in 2023-2030; in the optimistic case, China's new photovoltaic installed capacity is predicted to be about 120-140 GW. During the same period, the global PV installed capacity is estimated to be 280-436 GW under the conservative scenario, while the global PV installed capacity is estimated to be about 330-516 GW under the optimistic scenario.

This means that even in the most optimistic case, the scale of photovoltaic capacity expansion this year has far exceeded the new demand.

"The consensus of energy transformation has been formed and the scale of the industry will grow, but the situation of periodic surplus may occur at any time, maybe next month, next quarter, the second half of the year or next year." Li Zhenguo, president of Longji Green Energy, made a statement recently. Gao Jifan, chairman

of Trina Solar, also said recently that China's photovoltaic industry has entered the trillion track, but it should also be noted that China's photovoltaic industry is facing three major challenges: overcapacity, technology iteration and international environment.

Peng Peng said that the formation of photovoltaic overcapacity at this stage is mainly due to the sudden surge in demand in the photovoltaic market two years ago, China put forward the goal of "double carbon" in September 2020, while the EU's determination to transform renewable energy is increasing, coupled with the superimposed factors of the Russian-Ukrainian war, which has stimulated the whole photovoltaic market. This has led to a sharp rise in the profitability of the photovoltaic industry chain, but also attracted a large amount of capital into the photovoltaic industry. Hong Wei, a senior person in

photovoltaic industry, analyzed that photovoltaic industry is a technology-oriented industry. The result of a large amount of capital entering this industry is that the technology iteration speed of photovoltaic industry is accelerated, and the original technical equipment is replaced by new technology before the investment cost can be recovered, resulting in a large number of sunk costs and forming a structural oversupply.

"At present, this period of time (photovoltaic industry) is mainly driven by capital." Hong Wei said, "Now the leader can not control the market, there are constantly billions of enterprises to invest, they make the life cycle of technology iteration very short."

With the warning of photovoltaic overcapacity, there is also a wave of price reduction in the whole industry chain. Since the end of

last year, the price of the whole photovoltaic industry chain has continued to fall. From the point of view of price reduction, silicon materials are the largest, followed by silicon wafers, batteries and components have declined to a certain extent.

According to a report released by Infolink, a photovoltaic industry consultancy, on June 22, the upstream price of silicon materials has gradually approached the bottom in the past week, but the current price range has been approaching the full cost level of the industry as a whole, challenging the profi tability of existing production capacity, and for the new production capacity that has been and will be put into operation in the near future. In the face of the situation of production and loss; the price of silicon wafers continues to drop, which is the same as that of silicon materials. When the current price continues to approach the cost line of manufacturers, the price drop gradually narrows and slows down. At the same time, the demand for solar cells is good, but the price is still affected by the price drop of silicon wafers; The sharp price drop in the component supply chain has begun to narrow, but new orders from component manufacturers are still relatively small, and manufacturers are still actively selling inventory. Silicon Branch of

China Nonferrous Metals Industry Association reported on June 21 that as of this week, the number of domestic silicon enterprises in production remained at 15, of which three enterprises were affected by market price factors to stop production and overhaul, and the time for resumption of production has yet to be determined. In addition, Dongli, Baofeng, Shangji and other projects have been postponed.

"Silicon used to be a structural shortage, but now it is a structural surplus, so the price has fallen." Qi Haishen, executive vice president of Jinchen Stock Company, said that the price of silicon materials has fallen below the cost line. Now is the time to compete for the ability to resist cost pressure. The leading enterprises have abundant cash. Under the price war, some small and medium-sized enterprises may be squeezed out.

Photovoltaic head enterprises have expanded production

, however, while overcapacity sounded the alarm, the photovoltaic head industry has set off a wave of expansion.

On April 18, Trina Solar, an old photovoltaic player, announced that it planned to invest in the construction of a new generation of high-efficiency batteries with an annual output of 10g W and related supporting facilities in Huai'an Economic and Technological Development Zone, with a total investment of about 5 billion yuan.

On May 25, Jingke Energy also launched a heavy production expansion plan to build a vertically integrated base project in Shanxi Transition Comprehensive Reform Zone, including 56 GW monocrystalline rod pulling, 56 GW silicon wafers, 56 GW high-efficiency batteries and 56 GW components, with a total investment of about 56 billion yuan (including liquidity). On the afternoon

of June 6, Longji Green Energy announced that, according to the company's business strategy and capacity layout, the company signed an agreement with the Management Committee of Xi'an Economic and Technological Development Zone to invest in the construction of 20g W monocrystalline silicon rods, 24GW monocrystalline batteries and supporting projects in Xi'an, Shaanxi Province. The estimated investment of the project is about 12.5 billion yuan.

On the same day, Tongwei announced that it would invest in the construction of a 25 GW solar cell and 20 GW photovoltaic module project in Shuangliu District of Chengdu, with an estimated fixed assets investment of 10.5 billion yuan.

Also on June 6, Jingao Science and Technology also announced an integrated capacity expansion project, which plans to invest 60.

Hou Bing, a photovoltaic investment professional and head of investment in Simai Fund, said that the reason why the leading enterprises chose to expand production collectively was to replace the old production capacity and increase the scale of superior production capacity; Second, the market share of leading enterprises is relatively stable, although there may be excess capacity, but at the same time, the industry is also developing, need to expand capacity to maintain market share.

Peng Peng said that this is actually a very typical "prisoner's game" case. In the case of others' expansion of production, if the enterprise does not expand production, it will suffer losses twice: for enterprises, when making decisions, the best choice is to expand their own production, others do not expand production; the second best choice is to expand their own production, others also expand production. Therefore, even in the case of surplus, all photovoltaic enterprises have announced that they will continue to expand production.

In 2021 , there was a turning point in the technological transformation of the photovoltaic industry-the end of the P-type era and the beginning of the N-type era. It is noted that N-type products have also become a key expansion link in the current expansion plan thrown out by the leading enterprises.

"Now most enterprises are transforming and upgrading to N-type products.". Next year should be a mainstream year for the N type. Qi Haishen said that at present, traditional P-type products are facing the crisis of overcapacity and being eliminated by the market.

Jingke Energy insiders said that the company's N-type products were laid out earlier, and the current N-type products are in short supply as a whole, so the company plans to better seize market opportunities by expanding production. "N-type (component) premium has been around 10 cents, in fact, our overall profit contribution is also better.". By the end of this year, we expect that the proportion of N-type (capacity) will exceed 70%. The person said.

In the choice of two technical routes, some listed companies have different fates because of their different choices. In September

2021, Junda completed the acquisition of 51% of Shangrao Jietai New Energy Technology Co., Ltd. (Hereinafter referred to as "Jietai Technology"), thus gaining control of Jietai Technology, and its main business transformed from automotive interior to photovoltaic cells. In 2022, Jietai Technology achieved 10.72 GW of cell shipments, with a year-on-year increase of 88%; achieved operating income of 11.115 billion yuan, with a year-on-year increase of about 120%; net profit 7. Junda shares also successfully turned losses into profits in 2022.

Jietai Technology entered the N-type battery track earlier. According to Junda's statement to investors, the company took the lead in realizing the large-scale production of N-type TOPCon batteries in the industry, and is one of the few specialized manufacturers in the industry that can supply N-type TOPCon batteries on a large scale. At present, the company's N-type battery products are in short supply.

Another listed company that also crossed the border into the photovoltaic industry was not so lucky.

In 2020, Lida acquired 100% equity of Jinzhai Jiayue New Energy Technology Co., Ltd. to enter the photovoltaic cell manufacturing business, which is mainly engaged in PERC monocrystalline silicon solar cells, namely P-type batteries.

However, by 2021, the gross profit margin of Lida's solar cell business has experienced a "sudden brake". At the end of 2020, the gross profit margin of the company's solar cell business was still 24.40%, but by the end of 2021, the gross profit margin of the business had dropped sharply to-1. Lida shares, which had not stepped on the right rhythm, had experienced continuous losses in the past three years. From 2020 to 2022, the net profit attributable to the parent company was -56.0167 million yuan, -71.0294 million yuan and -1692 yuan respectively.

It is worth mentioning that in this round of military expansion competition, the industrial planning of the leading enterprises has pointed to "integration", that is, the layout of the whole industrial chain.

Hongwei said that there are different opinions about the advantages and disadvantages of integration and specialization in different periods of industrial development, but at present, the photovoltaic industry is in the context of capital competition and industrial integration, and photovoltaic enterprises can strive for greater competitiveness by choosing integration.

"The demand for photovoltaic industry is still rising, and even some new application scenarios are constantly emerging, in which case I would like to describe it as" phased overcapacity ". Hongwei said that the background of overcapacity around 2012 was the reduction of photovoltaic subsidies in Europe and the United States, which led to overcapacity in the market. At that time, photovoltaic was still a non-market-oriented industry that relied entirely on subsidies. But now, China has completely abolished photovoltaic subsidies, the era of parity access to the Internet has arrived, and the demand of the photovoltaic market is not the same.

According to the statistics of the National Energy Administration, in 2022, China's photovoltaic installed capacity increased by 87.41 GW, an increase of 59.3% over the same period last year; Among them, centralized photovoltaic increased by 36.3GW, an increase of 41.8% over the previous year, and distributed photovoltaic increased by 51.1GW, an increase of 74.

Also in 2022, China's total export of photovoltaic products (silicon wafers, batteries, modules) was about 51.25 billion US dollars, an increase of 80. The export of modules was about 153.6GW. Year-on-year growth 55. The export volume of silicon wafers was approximately 36.3GW, representing a year-on-year growth of 60.8%; the export volume of batteries was approximately 23.8GW, representing a year-on-year growth of 130.

In Qi Haishen's view, the relative overcapacity is a good thing for the photovoltaic industry, which is conducive to the survival of the fittest. "This industry will soon crush some small and medium-sized enterprises, because the capital investment and R & D strength of small and medium-sized enterprises can not compete with these listed companies and leading enterprises." Qi Haishen said.

But the other side of photovoltaic overcapacity is equally cruel.

Bloomberg New Energy Finance predicted earlier this year that at least three midsize manufacturers could go bankrupt this year. At the same time, at least two people in the industry said that in the near future, there may be a wave of bankruptcies of small and medium-sized photovoltaic manufacturers.

Qi Haishen pointed out that from the second half of this year to the end of the year, there may be signs of bankruptcy of small and medium-sized enterprises.

Hong Wei believes that this wave of bankruptcy of small and medium-sized photovoltaic manufacturers is expected to come next year. "As new demand continues to grow, the outbreak of industrial consolidation will be delayed." Hong Wei said.

In Peng Peng's view, the first wave of small photovoltaic brands affected by the impact of overcapacity, especially those that originally relied on the regional market of a single province or several provinces in China, because when the price of photovoltaic modules is relatively high, although the price of their modules is slightly lower, they can still enjoy the dividends of the whole industry. But when the price war starts, the price reduction that small manufacturers can afford is relatively low, and the cash flow may be exhausted quickly, so they have to withdraw.

According to the prediction of Li Zhenguo, president of Longji Green Energy, more than half of the enterprises will be eliminated in the next two or three years, just like the shuffling of the photovoltaic industry from 2012 to 2014. "In this process, enterprises with fragile finances, inadequate technology and inadequate early brand channels may be the first to be hurt, and it is doubtful whether they can survive in the shuffling process."

For photovoltaic cross-border players, this track may be "more and more rolling".