Text | Sina Finance Liu Lili
The price of silicon wafers, upstream products of photovoltaics, is still declining. At the end of last month, prices of polysilicon, wafers, cells, and modules continued to fall. Judging from the data of the 2023 annual report and the first quarter of 2024, the leading silicon wafer companies are not having a good time, and the landlord's family is almost out of surplus food.
Tongwei Co., Ltd. achieved operating income of 19.57 billion yuan in the first quarter of 2024, a year-on-year decrease of 41.13%; The net profit was a loss of 787 million yuan, compared with a net profit of 8.601 billion yuan in the same period last year. LONGi's revenue in the first quarter of 2024 was 17.67 billion yuan, a year-on-year decrease of 37.59%; The net loss in the first quarter was 2.35 billion yuan, and the prices of modules and wafers fell. Its net profit in 2023 will be 10.75 billion yuan, a year-on-year decrease of 27.41%.
TCL Zhonghuan's performance in 2023 is also miserable, with profits cut in half. In 2023, TCL Zhonghuan's annual revenue will be 59.146 billion, a year-on-year decrease of 11.74%; The net profit attributable to the parent company was 3.416 billion, a year-on-year decrease of 49.90%. Someone calculated that in the past six months, TCL Zhonghuan has lost a total of 3.652 billion.
"I didn't expect the end of silicon wafers to come so quickly." A person in the photovoltaic industry lamented that a new era is coming.
How can this big hole be filled?
Shen Haoping, general manager of TCL Zhonghuan, gave the answer of "3 cents advantage", saying that due to the influence of different investment methods, under the background of high unit depreciation of about 0.01 yuan/W, by the end of 2023, TCL Zhonghuan's full cost will be about 0.03 yuan/W ahead of the industry, which has built an industrial foundation for the implementation of localized manufacturing in overseas barrier markets.
Some people in the industry believe that TCL Central may be fighting a war of attrition to force the integrated friends into a corner. "Li Dongsheng also killed the Samsung panel in this way, maybe the status of the silicon wafer duopoly will completely change in 1-2 years."
Lose money and don't reduce production to win the war of attrition?
"It's always full production, that is, the machine doesn't stop, and the New Year is full of overtime." An employee of a subsidiary of TCL Zhonghuan said. The employee said that he did not know whether the company made money or not, but his factory was running at full capacity. Others said that their factory had just installed 20 slicers this month.
Some people in the photovoltaic industry believe that TCL Zhonghuan may be fighting a war of attrition and forcing the integrated friends into a corner. "If we insist on the first quarter, the integrated wafer factory will have to shut down, and if the integration is not stopped, he will have to be hanged, and the lack of capacity can be vertically integrated, and the overcapacity will still have to return to specialization."
Previously, TCL Zhonghuan has been questioned whether there is a way out for the professional route, because the head photovoltaic enterprises have engaged in integration, and the comprehensive cost of integration is lower. Many of these companies are customers of TCL Zhonghuan, and these upstream and downstream integrated enterprises, if the silicon wafer loses money, they can make a little profit in the cells and modules.
Under the influence of the market downturn, it is indeed difficult for wafer companies with huge production capacity and high inventory to do so now. However, for upstream and downstream integrated photovoltaic manufacturing enterprises, how large the self-built silicon wafer production capacity is, how exciting this round of reshuffle is.
When asked about the production schedule of polysilicon, a leading photovoltaic company said: "Whether silicon wafers are self-supplied or outsourced is now flexible, and when others are willing to sell to us when they lose money, it must be more cost-effective to sourcing from outside." ”
The PV industry has already experienced a wave of capacity expansion. According to data from the China Photovoltaic Industry Association, the output of polysilicon, silicon wafers, cells, and modules will all increase by more than 64% year-on-year in 2023.
At the performance briefing, Shen Haoping, general manager of TCL Zhonghuan, said that the profits of integrated enterprises in the upward cycle will be amplified, and the losses in the downward cycle will also be amplified. The implication is intriguing.
"Now if you are not satisfied with the integration of production, you will have to be consumed by integration in the future, and it is better to fight to the death than to be consumed." Industry insiders said that TCL Zhonghuan's technical reserves are OK, once the price difference is established, improve efficiency and reduce costs + full production and low depreciation, establish supply barriers, new players will not dare to come in, before the lack of production capacity led to external investors to enter the market, now the market is excessive, no one dares to enter easily.
Some financial professionals believe that from the financial report data of TCL Zhonghuan, the loss is mainly due to various price decline provisions and investment loss provisions, adding up to more than 2 billion, and the real main business of silicon wafers still has gross profit in the first quarter, which has dropped to about 5.5%, which may be the confidence of its full production.
"Li Dongsheng also killed Samsung panels in this way, when the industry has overcapacity, cost is king, and this kind of play in Central is a bit of a ruin, maybe the status of the silicon wafer duopoly will be completely changed after 1-2 years." The above-mentioned person said that the first recession of the LCD panel industry, Samsung is also bucking the trend and making every effort to expand production capacity. It is said that at that time, Samsung's LCD panels were sold at a loss, and they had been losing money for 7 years, and they gave up after defeating other competitors.
He believes that the game of the home appliance industry may be repeated in photovoltaics. Analysts believe that the main thing depends on who has sufficient cash flow in their hands to be able to roll up the opponent to survive to the end, and then redivide the market and then raise prices to continue.
Relying on the 3-cent advantage and Industry 4.0 counterattack?
Recently, there is more than one listed company that has been dragged down by overseas investment companies and its performance has plummeted. In the past, there was Tianqi Lithium, and now there is TCL Central.
TCL Zhonghuan said in its 2023 annual report that the main factors affecting the company's performance in the reporting period were not only affected by the downward price decline in the industrial market and the pressure on operating performance, but also the performance and stock price of Maxeon, a shareholding company, fell sharply during the reporting period. The reason is that the price of photovoltaic products in Europe and the United States, where Maxeon's products are mainly marketed, has fallen rapidly, the adjustment of photovoltaic subsidy policies and the high interest rate environment, as well as its own business transformation is slow.
Based on the principle of prudence, TCL Zhonghuan recognized an asset impairment loss of RMB 1.01 billion and a fair value change loss of RMB 440 million on long-term equity investments and financial assets related to Maxeon, respectively.
Some people also believe that from the financial report data, it is speculated that the 3 billion deficit of TCL Zhonghuan is likely to occur in the second half of the year, or even the fourth quarter, and is likely to be caused by the hoarding of a large amount of polysilicon. Because in 2023, TCL Zhonghuan's cash expenditures for the purchase of goods will be 2.888 billion in the first quarter, 3.194 billion in the second quarter, 3.416 billion in the third quarter, and 5.608 billion in the fourth quarter. In the fourth quarter of last year, polysilicon prices rebounded slightly.
But who would have thought that this "little spring" was fleeting, and TCL Central stepped on the wrong rhythm. Since 2023, polysilicon supply and demand have reversed, and prices have plummeted by more than 60%, and there is no sign of stopping the decline so far.
"Although hoarding polysilicon in the downward price range is not a completely wrong choice, TCL Zhonghuan has not failed to gamble on the hasty sale before the price bottom is seen and the large amount of inventory is still difficult to digest." Some analysts think so.
At the earnings briefing, when an investor asked about polysilicon inventory, Zhang Changxu, chief financial officer of TCL Zhonghuan, did not answer directly, saying that he could pay attention to the inventory-related data in the 2023 annual report.
I am willing to gamble only to admit defeat, how can TCL Central make up for this big hole now?
At the performance briefing, Shen Haoping, general manager of TCL Zhonghuan, once again emphasized the "3 cents advantage", saying that due to the influence of different investment methods, under the background of high unit depreciation of about 0.01 yuan/W, by the end of 2023, TCL Zhonghuan's full cost will be about 0.03 yuan/W ahead of the industry, building an industrial foundation for the implementation of localized manufacturing in overseas barrier markets.
Shen Haoping also once again emphasized the industry 4.0 flexible manufacturing that TCL Zhonghuan has been focusing on, saying that in the first quarter of 2024, the sales scale of photovoltaic materials will be about 34.9GW, a year-on-year increase of 40%, and the market share will be 24.9%, continuing to maintain a leading position, and will continue to change to "More Efficiency, More Efficiency, and More Smart (Industry 4.0 customized production lines, flexible manufacturing)".
This suggestion has been questioned by peers as a gimmick, but some former employees of Central said, "At present, from sticking to the board, it is basically a manual auxiliary machine, and the machine has realized automatic loading and unloading, and automatic calling for the return tank." ”
If these legacy issues cannot be resolved through other advantages, TCL Zhonghuan's performance in 2024 is still worrying.