Hanwha Qcells, South Korea's largest solar producer, announced that it will permanently close its Qidong plant in China on June 30, 2024.
PV Industry Network noted that in January this year, the factory also posted a recruitment post on its official account to openly recruit module operators. According to the latest news, Qidong Hanwha has closed down and the equipment is being dismantled.
According to reports, Hanwha Qcells has a total of one office center and three factories in China, located in Shanghai, Qidong, Nantong and Lianyungang. Among them, the Qidong plant has an annual output of 2.1GW of solar cells and 2.1GW of modules, mainly for the European, Japanese and Korean markets.
Prior to the closure of the Chinese plant, Hanwha Qcells had already announced production cuts, the closure of the South Korean plant, and the withdrawal from the Australian market.
As one of the few companies that can compete with Chinese PV manufacturers, Hanwha Qcells has been among the top 10 in the world in terms of PV module shipments. In November last year, the company shut down its 3.5GW module factory in Eumseong, South Korea. Prior to this, the company's module production capacity was about 13.8GW, and its global market share was about 6%.
Shut down the factory and go to the United States!
After shutting down a number of module factories in Asia, Hanwha Qcells plans to invest its entire wealth in the United States.
As the largest manufacturer of crystalline silicon PV modules in the U.S. and the largest module supplier to the residential, C&I PV markets, Hanwha Qcells has deep roots in the U.S.
At the beginning of 2023, Wood Mackenzie, a world-renowned new energy consulting firm, mentioned in the "Q1 2023 U.S. PV Rankings" report that Hanwha Qcells gained a 33.7% market share in the U.S. residential solar module market in 2022, occupying the first place for 18 consecutive quarters.
More than one-third of U.S. solar homes have Hanwha Qcells panels installed, meaning the company has set a new record for the highest market share of a personal residential module supplier over the past decade. In addition, in the fourth quarter of 2022 alone, Hanwha Qcells achieved a market share of 38.9%.
The report also ranks Hanwha Qcells as the leader in the U.S. commercial market, with a market share of 17.7% in 2022. Hanwha Qcells has maintained its No. 1 position in the commercial sector for the past four years.
In the second half of 2023, Hanwha Qcells has invested heavily in expanding its position in the U.S. market as the PV industry sees a boom in building factories in the U.S. market. First, it invested $2.5 billion to build an industrial complex in Bartow County, Georgia, to produce solar ingots, wafers, cells and modules; Subsequently, it invested US$3 billion to support RCE to restart polysilicon factories in the United States. In 2024, it will participate in the first solar recycling alliance in the United States......
While making every effort to expand its presence, Hanwha Qcells is also cracking down on its competitors' business in the United States.
In early 2024, a number of U.S. PV companies, including Hanwha Qcells, submitted an application to the U.S. Trade Representative (USTR) to withdraw the two-year tariff exclusion on bifacial PV modules imported from four Southeast Asian countries: Cambodia, Malaysia, Thailand and Vietnam.
In the face of fierce competition, Hanwha is not the only PV company that has chosen to reduce production and close factories.
In April, German PV module maker Solarwatt announced that it would close its 300MW module manufacturing plant in Dresden, eastern Germany, in August. Detlef Neuhaus, CEO of the company, said: "Producing modules in Germany is an unacceptable burden, but we are investing heavily in other areas. ”
Founded in 1993, Solarwatt is a pioneer in the German solar industry and has been around for more than 30 years. Just in 2021, Solarwatt also opened a new production line and decided to invest in another 10GW of ingot capacity.
Solarwatt's decision follows in Mayerberg's footsteps. In March, Meyer Burger, Germany's largest PV manufacturer, announced the closure of its 1.4GW PV module manufacturing plant in Freiberg, Germany. Meyer Burger said that despite considering the closure of the module plant, cell production at its German plant will support the production of its 2GW module factory currently under construction in the United States.
Compared with other regions, the United States has more support for local PV manufacturing, which has led companies such as Hanwha and Meyer Burger to go all out to the American market. With limited resources, the closure of factories in other regions has become one of the effective strategies for module companies.
The lure of huge subsidies
In August 2022, Biden signed the Inflation Reduction Act (IRA), which plans to reduce the fiscal deficit through tax reform and spend about $370 billion on climate and clean energy, including subsidies for the photovoltaic industry.
According to reports, the U.S. federal level provides two subsidies to photovoltaic manufacturers through IRA - investment tax credit (48C ITC) and manufacturing subsidy (45X MPTC), and only one of the two can be chosen.
The Investment Tax Credit (48C ITC) can be applied for after the completion of the investment in the construction of the factory, and if the employment conditions are met, the tax credit of 30% of the investment amount can be obtained; The manufacturing subsidy (45X MPTC) sets different subsidy amounts for products in each link of the industrial chain, and enterprises can apply for subsidies after selling products to independent third-party customers.
How lucrative is this subsidy?
For example, the manufacturing cost in the U.S., which does not take into account raw materials such as cells and glass, is about 5 cents/W, while the government subsidy is 7 cents/W. The manufacturing costs here cover various costs other than raw materials, such as rent, utilities, labor, insurance, etc. Under the scale effect, the larger the production capacity, the lower the actual cost per watt.
From the perspective of the initial investment in the construction of the factory, a 1GW module production line has an equipment investment of about 15 million US dollars. Suppose you rent a factory, then except for fixed assets, the rest are working capital. And to produce 1GW of product and sell it, the subsidy can reach 70 million US dollars. For example, a Chinese company's new module factory in the United States can pay for itself in about three years with subsidies according to its return on investment model.
According to InfoLink's estimates, the gross profit margin of a single module factory in the United States is about 25% with subsidies, and the gross profit margin of different degrees of integration is expected to be higher. Even if prices fall in the U.S. market, at 25 cents, local manufacturers will be able to rely on subsidies to resist price shocks – and U.S. module makers will still maintain gross margins of more than 10%.
It's no wonder that Freyr, a Norwegian battery company, immediately halted the construction of an unfinished plant near the Arctic Circle when it heard of Washington's announcement, shifting the company's focus to the United States.
Earlier this month, Turkey-based solar PV manufacturer Elin Energy announced its foray into the US market with a solar module manufacturing plant with an annual capacity of 1GW, with plans to expand to 2GW in the future.
Recently, Vietnamese PV module manufacturer Boviet Solar also announced that the company plans to build a PV module manufacturing plant in Greenville, North Carolina, USA.
The layout of Chinese photovoltaic companies in the United States
Since 2023, Chinese photovoltaic companies have also embarked on a journey to build factories in the United States!
In January 2023, JA Solar leased land in Phoenix, Arizona, USA, and invested $60 million to build its first factory in the United States, which is scheduled to be put into operation in the fourth quarter of 2023. When fully operational, the plant will have an annual production capacity of 2GW of modules, making it the largest PV production site in Arizona.
In March of the same year, it was reported that US renewable energy and clean energy developer Invenergy planned to cooperate with LONGi Green Energy to build a 5GW-per-year module plant in Ohio, which is scheduled to start construction in April and be operational by the end of this year. This investment is also LONGi's first entry into the U.S. PV manufacturing market.
Soon after, the person in charge of GCL Technology also revealed that after the Spring Festival, the company's core team had conducted inspections overseas and was paying attention to the options for setting up factories overseas, including the American market; However, it is still under study and judgment, and future overseas plans will be announced in due course. The company focuses on granular silicon products, and believes that if it builds factories overseas, granular silicon can achieve lower labor costs and faster replication than rod silicon.
On May 7, 2024, Gao Jifan, Chairman and General Manager of Trina Solar, said at the photovoltaic special session of the collective performance briefing of the Science and Technology Innovation Board that the company will further deepen its overseas production capacity layout in 2024, of which the company's 5GW US module production capacity is already under construction, and it is expected to start gradually putting into operation in the fourth quarter of 2024.
Previously, Shen Haoping, general manager of TCL Zhonghuan, also said in an interview with the media that Zhonghuan has plans to build a factory in the United States.
In the face of the complex and changeable international situation, many enterprises are still hesitant to wait and see.
How to deal with the unfamiliar legal and political environment?
Can Chinese companies get subsidies?
The hidden cost of building factories overseas.
What is the impact of falling prices in the U.S. market, but also on investment returns?
……
In summary, this year is the first year of IRA implementation, and after the end of the current fiscal year, enterprises can apply for subsidies in the first quarter of 2025 and receive subsidies in the second quarter. In other words, by the middle of next year, enterprises can really settle down.
Another point to note is whether the policy can be sustained if there is a change of political parties in this year's US election.
Overall, the Biden administration has maintained a relatively positive attitude towards the PV industry. In contrast, the main candidate in the 2024 U.S. election, former U.S. President Donald Trump, is more inclined to support the traditional energy industry chain. If Trump is re-elected as president of the United States, will he change the existing PV policy and interrupt support for the development of low-carbon and zero-carbon technologies?
"At present, the attitude of the United States is still unclear, so everyone is very low-key and reluctant to talk about the topic [of building factories in the United States]." Industry insiders say so.