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    Photovoltaic industry "arms race" started again

    Jun 10,2023 | Daxtromn power

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    The "arms race" in the photovoltaic industry has started again.
    On June 6, LONGi Green Energy and Tongwei, the two leading companies with a market capitalization of 100 billion yuan, successively announced plans to expand production, and the investment in the expansion projects exceeded 10 billion yuan.
    Coincidentally, JA Solar, JinkoSolar, etc. have also recently announced production expansion. Among them, JinkoSolar plans to build a vertically integrated large base project with an annual output of 56GW in Shanxi. The investment amount has reached 56 billion yuan.
    The Shell Finance reporter noted that strengthening the integrated layout and seizing opportunities for iterations of photovoltaic cell technology has become the common goal of leading companies to expand production.
    Expansion of tens of billions of production is not uncommon: the four leaders with a market value of 100 billion have announced expansion of production
    On June 6, Tongwei Co., Ltd. (600438.SH) announced that it plans to invest in a project with an annual output of 25GW of solar cells and 20GW of photovoltaic modules in Shuangliu District, Chengdu. The project will be constructed in two phases, one of which is a battery project with an annual output of 25GW, with an estimated fixed asset investment of 7.5 billion yuan. The second phase is a module project with an annual output of 20GW, and the estimated investment in fixed assets is 3 billion yuan. The first and second phases of the project are expected to be completed and put into operation in 2024 and 2025, respectively.
    Tongwei shares said that the company will rationally use its own funds and loans from financial institutions to coordinate funding arrangements to ensure the smooth implementation of the project.

    Also on June 6, LONGi Green Energy (601012.SH) announced that it intends to invest in the construction of an annual production of 20GW monocrystalline silicon ingots, 24GW monocrystalline cells and supporting projects in Xi'an, Shaanxi Province.
    The overall plan of the project is divided into three phases, of which the first phase is the annual production of 20GW monocrystalline silicon rod project and 12GW single crystal battery project, the second phase is the annual production of 12GW single crystal battery project, and the third phase is reserved for expansion and supporting industrial chain projects , and at the same time supporting the construction of the LONGi Global Innovation Center project.
    According to the announcement, the estimated investment of the first phase of the project is 7.5 billion yuan (including working capital), and it is expected to gradually start production in the second half of 2024 and reach production before the end of 2025. The second and third phases of the project will be negotiated separately by LONGi Green Energy and the Management Committee of Xi'an Economic and Technological Development Zone based on the implementation of the first phase of the project and the demand of the photovoltaic market to determine the start time and construction period. Among them, the estimated investment amount of the second phase project is 3.5 billion yuan (including working capital), and the investment amount of the third phase project is estimated separately based on the investment content negotiated by the two parties. The supporting LONGi Global Innovation Center project is estimated to be invested by LONGi Green Energy or its affiliated institutions. 1.5 billion.

    In addition to Tongwei and LONGi Green Energy, JA Solar (002459.SZ) and JinkoSolar (688223.SH), which also have a market capitalization of more than 100 billion yuan, have also recently disclosed plans to expand production.
    On June 5, JA Solar disclosed that it intends to invest in the construction of a project with an annual output of 30GW crystal pulling, 10GW silicon wafers, and 10GW modules in Ordos High-tech Zone. The total investment of the project is expected to be 6.02 billion yuan, and the construction period is expected to be 36 months. .

    On May 24, JinkoSolar disclosed that it planned to build a vertically integrated large base project with an annual output of 56GW in the Shanxi Transformation Comprehensive Reform Demonstration Zone, with a total investment of about 56 billion yuan. The huge amount of investment in the project has even attracted regulatory attention.
    Another industry leader, Trina Solar (688599.SH), also announced on May 29 that it intends to invest in the construction of a 25GW annual output of monocrystalline rods and supporting projects in Shifang Economic Development Zone, Sichuan. The total investment of the project is about 10.7 billion yuan, of which Trina Solar contributed about 8.7 billion yuan, and the Shifang state-owned company contributed about 2 billion yuan.
    "In many industries, a production expansion plan of hundreds of millions of yuan is already considered a large scale, but in the photovoltaic industry, it is not uncommon to see expansions of tens of billions of scale." Some practitioners in the photovoltaic industry expressed emotion to the Shell Finance reporter.
    Consolidate the moat: aim at the integrated layout and technology iteration window
    The Shell Finance reporter noticed that strengthening the integrated layout has become the common goal of leading enterprises to expand production.
    For example, Tongwei Co., Ltd. cut into downstream components from upstream silicon materials in the second half of last year. Relying on the cost advantage, Tongwei won a considerable market share in the layout of modules in the year, and tied for ninth place with Hanwha Q cells in the 2022 global module shipment ranking released by the third-party organization InfoLink.
    Liu Hanyuan, chairman of the board of directors of Tongwei Group, said in an interview with Shell Finance and other media in late May: "In the past two years, everyone believes that integration is the direction of industry development, so Tongwei entered the module industry in the second half of last year." Tongwei announced that the company will continue to strengthen its advantageous production capacity structure centering on core links such as high-purity crystalline silicon, high-efficiency solar cells, and high-efficiency solar modules.
    JA Solar also stated that the Ordos New District project will help the company form a complete vertically integrated industrial chain layout in the northwest region, and after it is put into production, it can increase market share and integrated profitability.
    The opportunities brought about by the iteration of photovoltaic cell technology have also become the driving force for the expansion of leading production.
    JinkoSolar said that its planned vertically integrated large base project with an annual output of 56GW in Shanxi will be the largest N-type integrated production base in the industry. .
    A person in the photovoltaic industry told the Shell Finance reporter that in addition to the factor of the industry leader’s continuous expansion of production, the competition for market share, the window of opportunity brought by the iteration of N-type technology, the entire industry of silicon materials, silicon wafers, cells, and components The chain continues to have new disruptors entering the market. For the current industry leaders, continuous expansion of production and consolidation of the moat has become an inevitable choice.
    Behind the expansion of production: whether there is excess production capacity is controversial again
    As leading companies successively throw out huge expansion plans, the controversy over whether there has been overcapacity in the photovoltaic industry has once again raged.
    For photovoltaic companies, the demand for photovoltaic installed capacity brought about by the global energy transition under the dual carbon goals is the most fundamental demand to support large-scale production expansion.
    "With the support of long-term deterministic demand, the photovoltaic cell industry faces a broad market space, which will provide good support for the digestion of production capacity of this vertical integration project." JinkoSolar sent a letter of concern to the Shanghai Stock Exchange on the expansion project in early June The reply quoted the data of the International Renewable Energy Agency (IRENA) - to achieve the 1.5°C Paris climate target, the global solar photovoltaic capacity in operation needs to reach 5200GW by 2030, and the total global solar photovoltaic installed capacity needs to exceed 14000GW by 2050 . According to statistics from the China Photovoltaic Industry Association and others, in 2022, the world's newly installed photovoltaic capacity will be 230GW, and the cumulative photovoltaic installed capacity will be 1156GW. There is a huge gap compared with the 2030 goal and the 2050 goal. Therefore, the vast market provides support for the digestion of project capacity.
    Some head component manufacturers also told Shell Finance and Economics reporters that photovoltaic production capacity is a dynamic concept. Currently, the expansion of production capacity announced by enterprises requires a construction period to be finalized. It is inappropriate to determine whether there is excess capacity in the announced capacity expansion.
    Zhou Yuan, Secretary-General of the PGO Green Energy Ecological Cooperation Organization, said in an exclusive interview with a Shell Finance reporter in March this year that it is normal for a relatively fast-growing industry to have a moderate excess capacity under good profits and market expectations. The competition in the industry can stimulate enterprises in the industry to adopt measures such as increasing research and development, reducing costs, and improving services to gain advantages, thereby promoting the development of the industry.
    "But a short-term and sharp surplus will cause harm to the industry." Zhou Yuan said that under the fierce market competition, some enterprises, especially new ones, may fail due to lack of perfect sales channels, which may lead to capital turnover. . The photovoltaic industry is relatively asset-heavy, and the amount of investment is relatively large, often billions or even tens of billions. In addition to the promotion of capital, local governments are also willing to give tax incentives and other incentives. Driven by multiple factors, there is indeed a certain Overheating, we call on the industry to restore some calmness and adjust the rhythm of its own expansion appropriately.