The situation is dire! Industry insiders bluntly said: "The risk accumulation of China's photovoltaic industry has been far better than in the past"

"In February this year, we reviewed the operation of China's photovoltaic industry chain in the whole year of last year (2023), and I remember that I used a word to describe it, called mixed blessings and sorrows. On July 25, at the seminar on the development review of the photovoltaic industry in the first half of 2024 and the outlook for the second half of the year, Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, said.

In Wang Bohua's view, the current "fire" of China's photovoltaic is reflected in the continuous expansion of the scale of manufacturing and application. Statistics from the China Photovoltaic Industry Association show that in the first half of 2024, the output of polysilicon, silicon wafers, cells, and modules will all increase by more than 32% year-on-year; In the first half of 2024, the new installed capacity of domestic PV will be 102.48GW, a year-on-year increase of 30.7%; In terms of exports, in the first half of 2024, domestic exports of wafers, cells, and modules increased by 34.5%, 32.1%, and 19.7% year-on-year, respectively.

In terms of industrial chain prices and manufacturing output value, the market situation has fallen into the "freezing" point. According to the statistics of the China Photovoltaic Industry Association, in the first half of 2024, domestic polysilicon and wafer prices will fall by more than 40%, and cell and module prices will fall by more than 15%; In the first half of 2024, the output value of domestic photovoltaic manufacturing (excluding inverters) will be about 538.6 billion yuan, a year-on-year decrease of 36.5%; In terms of import and export, in the first half of 2024, the total export value of photovoltaic products (silicon wafers, cells, modules) in mainland China was about US$18.67 billion, down 35.4% year-on-year.

"Now the situation of the entire photovoltaic industry is very grim, and it is not enough to say that 'grim' feels like it is not enough to describe the current situation." Wang Bohua said.

Industry adjustment "should be heavy and fast"

For the current Chinese photovoltaic industry, if the status quo is described as "ice and fire", then the field of "fire" is mainly concentrated at the macro level of the industry.

However, if we look at each specific company, we can see the difficult picture of many industry participants struggling to survive in the "involution".

Wang Bohua mentioned at the seminar that according to the semi-annual report data of some listed companies, it can be seen that the net profit of most of the main industrial chain enterprises is in a state of loss, and more seriously, the loss in the second quarter is worse than that in the first quarter, which is a manifestation of the current severe situation.

"Prices in many links have fallen below the cost line. For example, the price of polysilicon has fallen below the cost line, and typical polysilicon companies have been affected. At the same time, module bid opening prices have continued to decline, currently in the range of 7 to 8 cents per watt, leading to increasing corporate losses. Now this loss situation is a loss of the whole industry chain, the loss of the whole industry, and such a situation is rare in the history of Chinese photovoltaics, I have not encountered it. Wang Bohua emphasized.

In addition, according to its introduction, there are more and more projects terminated and postponed in the main domestic photovoltaic industry chain, and there are more and more cases of enterprises declining or even stopping production.

Wang Bohua pointed out that although the production capacity of China's photovoltaic industry is still growing, the growth rate has fallen sharply, and the current growth rate is only a quarter of the same period last year, and the number and scale of projects are also the same. In the first half of this year, more than 20 projects have announced the termination or postponement of the four main materials of photovoltaic (polysilicon, cells, modules, and silicon wafers), and the operating rate of polysilicon is basically around 60%, although individual head enterprises can reach 80%, but the operating rate of most enterprises remains at 50% to 60%. At the same time, the number of factories that have stopped production is also increasing.

"It's such a serious situation, we need to adjust, but it's very difficult. It is not easy for the 'old players' in the industry to turn around, and the 'new players' still need to be precipitated. Wang Bohua said.

In his view, the "old players" in China's photovoltaic industry are facing heavy burdens, and there are both new and old burdens. Among them, the new burden refers to the very fast progress of the construction of vertically integrated production capacity of the head photovoltaic enterprises in recent years, which can expand the benefits when the industry is booming, but when the industry is in a recession, the whole line loses blood, which aggravates the loss. The old burden refers to the poor clearing of the old production capacity, resulting in serious losses in accrual.

"Many production lines have not yet returned to their original costs, and now they have to be eliminated in advance." Wang Bohua said.

"We always said that the old production line could be upgraded, but in practice there were also difficulties. Some production lines have no upgrade value at all, such as the plant is not large enough and the equipment size is not equal, resulting in no room for transformation and upgrading. Even if there is a production line that can be upgraded, it is difficult to debug, and the cost performance is still insufficient. Wang Bohua further said.

Wang Bohua said that the lack of ability of "new players" in the photovoltaic industry to continue technological development and innovation has led to many new production lines falling behind as soon as they are put into operation. In addition, new enterprises have less accumulation of intellectual property rights, unlike old enterprises that have precipitation. Leading companies have also become aware of this problem, and the call for rights protection in the field of intellectual property rights is increasing. In the past, the way to quickly improve the ability to build factories by poaching people and buying equipment will now encounter more difficulties.

In terms of overseas markets, Wang Bohua said that at present, the world's leading photovoltaic markets such as the United States, Europe, India, Brazil and South Africa have introduced trade barrier policies to restrict the direct export of mainland products, and the overseas production capacity of mainland enterprises has begun to encounter trade barriers.

"The cold weather of the industry will eventually affect the entire industrial chain, and upstream enterprises and regulatory departments in the industrial chain need to make response plans. Payment arrears, triangular debt systemic risk and 'loss-making production' are difficult to become the norm, and the industry should pay close attention to the quality of products at current prices. In terms of order delivery and product quality risks, the current industrial return on investment is likely to be lower than expected, and enterprises need to strengthen cash flow reserves to prevent cash flow risks. Wang Bohua said.

He appealed at the seminar: "The risk of China's photovoltaic industry is far more affected than in the past under the current volume, and it needs to be adjusted as soon as possible before the accumulation is difficult to return. ”

Wang Bohua pointed out that from a historical perspective, the adjustment time of the photovoltaic industry is inversely proportional to the depth of adjustment, so the industry adjustment should be heavy and fast; From a realistic point of view, the competition inside and outside the industry is fierce, and the industry needs to "travel lightly", and the integration time should not be too long.

He suggested that the industry authorities need to strengthen the guidance of advanced production capacity construction, and local governments need to strictly control unreasonable rescue behaviors; Enterprises should prudently invest in new industries, and encourage targeted acquisition of new production capacity left over from the exit of cross-border enterprises from the industry; Financial institutions need to avoid "blood transfusion" to the production capacity that is about to be liquidated, promote the liquidation of backward production capacity, and encourage mergers and acquisitions of enterprises.

Gao Jifan, chairman of Trina Solar, also suggested that in the future, the photovoltaic industry will experience fierce competition in the process of clearing production capacity, and it is necessary to stand at the height of the whole society and actively guide the industry to better integrate.

"I suggest that when guiding the industry to clear, local governments and financial institutions should not simply support those enterprises that have entered the predicament or are about to be cleared, but should guide the integration and mergers and acquisitions of leading enterprises to these enterprises, accelerate industrial agglomeration, break the scattered and chaotic situation in the past, and let the industry move towards an orderly and healthy development track as soon as possible, so that the financial resources invested in the whole society can also become more valuable." Gao Jifan said.

The key to breaking the game: global manufacturing

In recent years, the strategic cooperation between the Middle East and China has become increasingly close, especially under the framework of the "Belt and Road" initiative, compared with the North American and European markets where the trade environment is changing more and more drastically, the Middle East is becoming a new "hot land" for Chinese enterprises, and going to the Middle East is also becoming an important "starting point" for Chinese photovoltaic enterprises to break the status quo of "involution".

7月16日晚间，A股光伏龙头之一晶科能源股份有限公司（下称“晶科能源”，688223. SH）发布公告称：“全资子公司JinkoSolar Middle East DMCC（晶科中东）与The Public Investment Fund of the Kingdom of Saudi Arabia（PIF，沙特公共投资基金”）全资子公司Renewable Energy Localization Company（RELC），以及Vision Industries Company（VI）签订《股东协议》，将在沙特阿拉伯王国成立合资公司建设10GW高效电池及组件项目，合资公司将纳入公司合并报表范围。 ”

According to the announcement, in the joint venture company established this time, Jinko Middle East, RELC and VI hold 40%, 40% and 20% of the shares respectively, and each shareholder subscribes according to the proportion of shareholding after the establishment. Subsequently, the joint venture will be the main construction body of Jinko's Middle East project, with an estimated total investment of approximately 3.693 billion Saudi riyals (approximately US$985 million).

In response to the specific situation of the company's "landing" in Saudi Arabia, Qian Jing, vice president of JinkoSolar, was interviewed by a reporter from the Economic Observer during the seminar on the development review of the photovoltaic industry in the first half of 2024 and the outlook for the second half of the year.

As for the reasons for the location of the fourth overseas factory in Saudi Arabia, Qian Jing said, first, under the guidance of the national "Vision 2030", Saudi Arabia is one of the regions with the fastest development of new energy in the Middle East, and JinkoSolar has laid the foundation in Saudi Arabia, occupying 70% of the market share; Second, customers in the Middle East have higher expectations for technical solutions and products, have more understanding of technology, have the most diverse application scenarios, and customers are the most picky; Third, the factory is located in the manufacturing cluster in southern Saudi Arabia, with a good industrial base and convenient sea and land transportation. In addition, NEOM New Town, where the factory is located, will be powered by 100% renewable energy, which means that Jinko's Saudi Arabia plant will become another 100% green power factory, truly green manufacturing.

"The investment and construction of photovoltaic projects in Saudi Arabia will accelerate JinkoSolar's transformation from 'global sales' to 'global manufacturing', which may be a feasible solution to crack the industry's 'era of low profits'." Qian Jing told reporters.

"We share a clear and common goal with the Saudi Public Investment Fund and VI to leverage Jinko's advanced technology, manufacturing capabilities, experience, and global marketing network to meet local and surrounding market supply and other regional needs. The construction of the Saudi factory is the beginning of Jinko's new round of global innovation and cooperation model, which will accelerate our transformation from global sales to global manufacturing, and become a global manufacturing made-in-world brand. Qian Jing said.

"This is very similar to the end of the last century, when German, Japanese, American and other old auto giants came to China to set up joint venture car factories. They brought technology, experience, systems, culture, and management, and China provided capital, policies, and markets. Now, history repeats itself, only this time a Chinese PV company like Jinko has become the main enterprise of the chain and has the main control. Qian Jing said.