The decline in prices across the entire photovoltaic industry chain is eroding the performance of enterprises in the entire industry chain. Leading enterprises claim that the industry’s development environment has undergone fundamental changes and the industry is facing a reshuffle.
As of April 30th, all financial reports of enterprises in various links of the photovoltaic industry have been fully disclosed, and major leaders are holding or will soon hold performance briefing meetings in full swing. Overall, due to the imbalance between supply and demand and the downward trend in prices across the entire industry chain, the performance of leading photovoltaic companies and frontline enterprises has experienced varying degrees of decline.
Increased losses in the first quarter
The first quarter of each year has always been the off-season for installation in the photovoltaic industry. However, the difference is that this year, coupled with the significant decline in prices across the entire photovoltaic industry chain, the performance of leading enterprises has experienced a significant drop.
Taking the photovoltaic module sector as an example, among the four major photovoltaic module enterprises, only Jingke Energy (688223. SH) and Trina Solar (688599. SH) achieved profitability, but their profit growth rates decreased by 30% and 70% respectively.
Jingke Energy achieved a revenue of 23.084 billion yuan in the first quarter of 2024, a year-on-year decrease of 0.3%; Realized a net profit attributable to the parent company of 1.176 billion yuan, a year-on-year decrease of 29.09%; Trina Solar (688599. SH) achieved a revenue of RMB 18.256 billion in the first quarter of 2024, a year-on-year decrease of 14.37%; The net profit attributable to shareholders of the listed company was 516 million yuan, a year-on-year decrease of 70.83%.
The main reason for the performance damage of component factories is the significant drop in component product prices.
“The main reason is the decrease in the prices of photovoltaic modules.” Jingke Energy stated that the competition in the photovoltaic market is relatively fierce, and the overall prices of the main industry chain are at a low level, with significant differences in profit levels among different markets. The company’s short-term profitability is suppressed by some low-priced markets while ensuring long-term customer performance.
“Affected by the supply and demand of the photovoltaic industry chain, the selling price of the company’s component products has decreased year-on-year, and the profitability of photovoltaic modules has declined.” Tianhe Solar also stated that the company’s production and operation scale has expanded, and the end of period inventory has increased, corresponding to an increase in procurement cash outflows.
The other two integrated component companies, Longji Green Energy (601012. SH) and Jingao Technology (002459. SZ), incurred losses in the first quarter.
Longji Green Energy achieved a revenue of 17.674 billion yuan in the first quarter of 2024, a year-on-year decrease of 37.59%; Net loss of 2.35 billion yuan; JA Solar achieved a revenue of approximately 15.971 billion yuan in the first quarter, a year-on-year decrease of 22.02%; Realize a net profit loss attributable to shareholders of the listed company of approximately 483 million yuan.
“The company’s development in 2023 has encountered severe challenges.” Zhong Baoshen, Chairman of Longji Green Energy, stated in the latest financial report’s “Letter to Shareholders” that the rapid release of production capacity, imbalance in supply and demand structure, and rapid iteration of new technologies in the photovoltaic industry in 2023 have led to a significant decrease in industry chain prices, the learning costs of HPBC’s new product replacement, and the efficiency decline caused by rapid organizational expansion.
When it comes to whether the company’s choice of photovoltaic technology route in 2023 is too conservative, Zhong Baoshen said, “The company’s consideration is not to pursue short-term profits or cater to market hype hotspots. We believe that TOPCon technology will quickly fall into homogenization, and BC technology will be the direction of the next generation of photovoltaic technology, so investment in TOPCon technology is very conservative. In the future, the company will continue to make investment decisions from the perspective of pursuing long-term market position.”
It is worth noting that the trend of losses not only covers the component links, but also the leading enterprises in the upstream links are experiencing losses.
Although Tongwei Co., Ltd. (600438. SH), a leading enterprise in photovoltaic silicon materials and battery cells, achieved a revenue of 19.57 billion yuan in the first quarter of this year, it incurred a loss of 787 million yuan, and its performance turned from profit to loss year-on-year. In the fourth quarter of 2023, Tongwei Co., Ltd. suffered a loss of 2.728 billion yuan, marking the first quarterly loss for the company in over 7 years.
Yan Ke, the Secretary of the Board of Directors of Tongwei Group, stated at the latest performance briefing, “Last year, the prices of the four links in the industrial chain decreased by 45% to 80%. The company’s fixed asset impairment amounted to 5 billion yuan, mainly for the impairment or scrapping of the PERC battery production line. As of the end of 2023, the company’s book value of the PERC production capacity has been basically processed, making it easier for the company to carry on light equipment in the future. The company expects that the Topcon proportion will be around 80% for the entire year.”
TCL Central (002129. SZ), a leading enterprise in the silicon wafer industry, also incurred a loss of 880 million yuan in the first quarter of this year.
“After experiencing an upward cycle in the past three years, starting from the third quarter of 2023, the photovoltaic industry has entered a downward cycle, and the industrial development environment has undergone fundamental changes.” TCL Central (002129. SZ) stated in its latest disclosed annual report.
Price avalanche caused by supply-demand imbalance
Although the photovoltaic industry has been continuously promoting technological iteration in recent years, the phased and structural imbalance between supply and demand has also led to a rapid decline in prices throughout the entire industry chain.
According to a reporter from First Financial News, the mainstream price of photovoltaic modules, a terminal product in the photovoltaic industry chain, has dropped from 1.8 yuan/watt to 1.85 yuan/watt at the beginning of 2023 to 0.9 yuan/watt to 0.95 yuan/watt at the end of the year, a decrease of nearly 50%.
Taking the price of silicon wafers as an example, according to data from Tonghuashun, calculated based on the average price of mainstream varieties, the average price of photovoltaic silicon wafers decreased by more than 50% in 2023 after experiencing continuous increases in 2021 and 2022.
According to TCL Central’s analysis, the sustainable growth of the future market space in the photovoltaic industry has attracted a large influx of capital, and the continuous expansion of investment by new and old players has led to the accelerated release of production capacity in various links of the photovoltaic manufacturing industry. As of the end of 2023, the production capacity of each link in the industrial chain has reached 900GW to 1000GW, with over 80% concentrated in China. The supply-demand ratio of the industrial chain has developed from 1.02:1 in June 2023 to 2:1 at the end of the year.
“The accelerated elimination and concentration of the industrial chain, as well as the acceleration of market layout, will put the company at risk of intensified market competition.” Tianhe Solar stated that with the expansion of industry production capacity and technological progress, photovoltaic product prices are gradually decreasing, and photovoltaic enterprises are facing more fierce competition in cost control and product performance. In addition, in recent years, some Chinese photovoltaic companies have built new production capacity overseas and increased their efforts to explore overseas markets, intensifying the competition in overseas markets.
It should be noted that the current decline in industrial chain prices seems to have not yet reached a bottom.
“Although silicon material prices have been continuously declining for several weeks, the current price decline is still lower than downstream expectations, and downstream continues to be bearish.” The Silicon Industry Branch of the China Nonferrous Metals Industry Association believes that from the perspective of the entire industry chain, the main links from industrial silicon to photovoltaic modules have fallen below production costs, and the market is showing irrational competition in the short term.
The collective decline in the performance of industry enterprises reflects the deep reshuffle that the industry is experiencing and will continue for a period of time.
“Under the strong driving force of terminal demand and the continuous release of new production capacity, each link in the photovoltaic main industry chain has achieved a significant increase in production.” Tongwei Shares recently stated that with the intensification of industry chain competition and the rapid decline in prices, the trend of survival of the fittest is obvious. For example, some enterprises are the first to experience operating losses, and the survival space of small and medium-sized enterprises will be further compressed.
“The industry will continue to maintain growth this year and will continue to reach a historic high in installed capacity.” Zhong Baoshen said in a recent media interview this year that although the industry is currently in a “cold winter”, the prices in the industry chain have significantly declined, and the price decline will significantly improve the economic efficiency of photovoltaic power generation and stimulate demand.
Zhong Baoshen stated that the growth rate of photovoltaics in the past three years has been very fast. Last year, the new installed capacity in the Chinese market increased by about 150% compared to 2022, accounting for 50% of the global installed capacity. This is an extraordinary achievement in the development of new energy in China. At present, there is overcapacity in the industry, and the market has different views on development expectations. However, overall, in the context of green transformation of the global energy system, the Chinese photovoltaic industry will continue to grow.