The statements made by top national leaders at the Climate Ambition Summit in December 2020 set a 2030 goal for China's carbon reduction path and also brought a long new business cycle for the photovoltaic industry. Benefiting from the industry’s high-growth dividends, in the past year, while photovoltaic concept stocks have been hotly sought after in the capital market, from silicon materials, silicon wafers, cells, modules, solar mounting system, to inverters, glass, film, etc. As auxiliary materials, domestic photovoltaic companies have set off a fierce expansion wave.
According to incomplete statistics from the organization, only the leading photovoltaic companies listed on Longji, Tongwei, JA Solar, and Trina Solar will announce as many as 40 expansion projects in 2020, and the total announced planned investment is as high as 2147.76. 100 million yuan.
This kind of swarming situation has been staged many times in the development history of my country's photovoltaic industry. Under the industry's demand dividend, new and old players often expand aggressively, resulting in overcapacity, deterioration of the competitive landscape, and finally the industry is reshuffled.
Shi Zhengrong, Miao Liansheng, Li Hejun... Behind the ups and downs of these photovoltaic richest men, the leader of the photovoltaic industry has changed several times, experiencing ups and downs every three to five years.
If the planned photovoltaic production capacity in 2020 can be put into production smoothly, it will inevitably bring about a certain degree of overcapacity, and price wars and industry reshuffles are inevitable.
Therefore, some people in the industry call it the "involution" of the photovoltaic industry-under fierce competition pressure, not every player has luck to enjoy this highly prosperous industry feast.
01. Fierce expansion wave
The leading pressure competition, the trend of integrated layout and the joining of new power enterprises have set off a wave of expansion for the entire photovoltaic industry.
In the fierce expansion wave, we can observe three obvious changes and trends:
First of all, the leading companies have better financing conditions and are bound to continue to expand their advantages, so they are also leading in the scale of expansion.
According to the data, in 2020, the 40 expansion projects announced by domestic listed photovoltaic companies, the total investment amount of up to 200 billion yuan, Tongwei shares in the expansion of investment as high as 50 billion yuan; Longji shares in the expansion of investment amount reached 36.3 billion yuan.
Zhonghuan, one of the silicon wafer duopoly, also launched the largest investment plan in history in February this year, and its silicon wafer production capacity is close to that of Longji.
Second, in addition to expanding the original business, more and more photovoltaic companies have begun to implement an integrated layout, that is, extending upstream and downstream, through expansion to participate in silicon materials, silicon wafers, cells, modules, photovoltaic support systems, etc. Two or more fields.
As the world's largest manufacturer of monocrystalline silicon, Longi has also been making efforts in the downstream module field. In 2020, it has replaced JinkoSolar and became the world's largest photovoltaic module manufacturer.
The upstream companies in the supply chain, such as Zhonghuan, Oriental Hope, and Zhongrun Photovoltaic, have also done similar things and have entered the downstream module market in 2020.
Meanwhile, CHIKO Solar, a leading solar mounting system company in the downstream, has begun to move upstream, deploying monocrystalline silicon wafers, solar cells and other fields.
In addition, Tongwei, a leading domestic battery and silicon material company, has also begun to make up for its shortcomings in silicon. In 2020, Tongwei Co., Ltd. will enter the field of monocrystalline silicon wafers through cooperation with JinkoSolar and Trina Solar.
Third, under the market dividend, many new companies have joined the battle and started cross-border expansion.
Among them, in the field of silicon wafers that has received the most attention, both Shanghai Computer and Beijing Express are turning from equipment manufacturers to silicon wafer production.
Both companies began to expand their monocrystalline wafer business in 2019, and at the same time continue to expand their production on a large scale in 2020, trying to get a share of the oligopoly market of Longi and Zhonghuan.
In the field of photovoltaic glass, due to supply shortages and skyrocketing prices in 2020, many new players have begun to flood in, including Fuyao Glass, a leading automotive glass company, Kibing Group, one of the largest glass original glass manufacturers in China, and daily glass Manufacturer Deli shares and so on.
On the whole, with the three major trends of pressured competition from leading players, integrated layout and the addition of new power companies, the entire photovoltaic industry has entered a fierce expansion wave while also laying down the hidden worry of overcapacity.
Except for silicon materials and photovoltaic glass, which are still tightly supplied, other sub-sectors are shrouded in the shadow of overcapacity.
Taking the silicon wafer industry as an example, considering the existing production capacity and expansion plans, it is a high probability event that the domestic silicon wafer production capacity will exceed 300GW in 2021. However, according to the forecast of the Photovoltaic Industry Association, the global PV installed capacity will only be 150GW~170GW in 2021. between.
The photovoltaic module sector also faces the risk of surplus. According to industry statistics, the shipment targets of the six major component companies in 2021 have basically doubled year-on-year. The total target of these six companies alone has exceeded the global new installed capacity figures in 2021.
02, alliances and melee
Under the pressure of fierce industry competition, the entire photovoltaic industry, including the solar mounting system industry, is staged in a melee.
On February 2 this year, LONGi issued an announcement stating that it had signed a 7.3 billion polysilicon material purchase agreement with Jiangsu Zhongneng Silicon Industry, a subsidiary of GCL-Poly Energy.
The news that the two "old enemies" cooperated and formed an alliance shocked many people in the industry.
Longi and GCL used to be "dead rivals" in the industry. As the world's largest monocrystalline silicon leader, Longi and GCL's polycrystalline silicon technology route have always been opposed to each other. In the end, the monocrystalline silicon route defeated polycrystalline silicon and became the mainstream technology.
At the same time as LONGi's rise, GCL, as a leading polysilicon company, also fell into a trough.
The reason why LONGi and GCL are able to "turn enemies into friends" is behind the "appearance and divorce" between LONGi and its old friend Tongwei.
In 2020, the shortage of silicon materials and price increases are one of the main themes of the photovoltaic industry, and this trend has been further extended to 2021. At the beginning of this year, the price of silicon materials rose from 70 yuan/kg to 90 yuan/kg, an increase of 29%, and it seems that there is a continuing upward trend. Some insiders joked that this is an era in which silicon is king.
The price increase of silicon materials allows Tongwei, the leading silicon material, to fully enjoy the dividends in the market, and it also has the confidence to compete with its former ally Longji for pricing power and profit distribution points.
Although there have been various equity participation and cooperation agreements, in the end Longi was afraid of being subject to the threat of Tongwei's silicon materials, and turned to seek a new partner and former rival-GCL-Poly. This seems to be the answer, there are no eternal friends, only eternal interests.
GCL is undoubtedly one of the victors in this alliance and melee. In 2020, GCL has made significant progress in its granular silicon technology. In addition to its cooperation with Longji, GCL has also recently signed a long-term order of 350,000 tons with an estimated total value of 31.7 billion yuan with Zhonghuan, the second giant of silicon wafers.
Since the beginning of 2020, the share price of GCL-Poly Energy has increased by more than 670%, achieving a wonderful counterattack.
On the other hand, LONGi shares, which are threatened by Tongwei Silicon Materials, also make other opponents afraid.
In the past two years, Longi, which has adopted an integrated strategy, has been making efforts in the field of downstream modules and has replaced its former partners as the world's largest photovoltaic module supplier. Zhonghuan, another silicon chip leader, also chose to extend to the downstream component field.
The component manufacturers abandoned by LONGi and Zhonghuan jointly chose new partners for alliance. In 2020, Canadian Solar, Risen Energy, Trina Solar and other component factories have signed large purchase orders with new players in the silicon wafer field on CNC.
Tongwei also chose to cooperate with JinkoSolar and Trina Solar, which were suppressed by LONGi, to enter the field of monocrystalline silicon wafers. At the same time, it also purchases silicon wafers from a new player, Beijing Express.
From rivals to partners, from partners to rivals, the giants form allies, and the waist players hug together to keep warm. Under the pressure of fierce industry competition, photovoltaic arena is staged a vertical and horizontal melee.
03. Price war is imminent
With the support of capital, large companies and leading enterprises that have the ability to carry out an integrated layout are often the strong.
Under the “involution” of the photovoltaic industry, even in the high boom of the industry, there are still many players who have not been able to enjoy this industry dividend.
Looking back at the performance forecasts of photovoltaic companies in 2020, except for Longji, Tongwei, JA Technology, Beijing Express and other companies that have doubled or nearly doubled their net profits, such as GCL Integration, Oriental Risen, Zhongli Group, Yijing Photovoltaic listed companies such as Optoelectronics and Akcome Technology have seen performance declines and even losses.
Among them, Risen Orient’s net profit attributable to the parent in 2020 is expected to fall by 75.35%-83.57% year-on-year, and non-net profit is expected to be a loss. The net profit of GCL Group is expected to be between RMB 2.5 billion and RMB 1.5 billion. The reasons for both losses point to the rise in upstream raw material prices.
The common feature of these loss-making and declining net profit companies is that their main businesses are mostly photovoltaic modules, and their profitability has declined due to the increase in the price of upstream raw materials. At the same time, the scale is relatively small and belongs to the waist enterprise of the industry.
In fact, it is not difficult to see the importance of an integrated strategy. Integrated development can smooth the risk of a single product, thereby improving the stability of development and management. This is also the main consideration for the integrated layout of many photovoltaic companies. Guojin Securities pointed out that it is the general trend to increase the integration of the photovoltaic manufacturing industry chain again.
Leading companies often have stable performance, stronger ability to resist risks, and can better obtain capital support, thereby further extending the industrial chain, expanding production capacity, and consolidating their position in the market. Companies that are not seen by the market are also vulnerable to capital constraints for their expansion and business expansion.
Therefore, large companies and leading enterprises that have the ability to carry out an integrated layout, with the support of capital, are often the strong. However, it is not easy for companies with poor performance and low market value to find opportunities for counterattacks.
Regardless of whether it is silicon material, silicon wafers, cells, modules, or photovoltaic supports, the technical barriers of which link alone are not considered high, it seems that it is not difficult for players upstream and downstream of the industry chain to enter.
However, the low technical barrier does not mean that new players can easily divert the market share of old players.
Cost advantages can also shape the core barriers of enterprises. In the development process of the industry leader LONGi, it is the cost advantage that has become a key factor for its monocrystalline silicon products to quickly seize the market.
Take the silicon wafer field as an example, the new players in the silicon wafer field, CNC and Beijing Express, all started with upstream photovoltaic equipment and have accumulated a certain amount of technology. In 2020, the stock prices of Shanghai Machine CNC and Beijing Express have increased by 623% and 243% respectively, and the optimism of capital has been reflected in the stock prices.
To stand out from the oligopoly structure of Longi and Zhonghuan, both Shanghai Machine CNC and Beijing Express must have the ability to fight price wars, otherwise it will be difficult for capital to maintain their patience.
The risk of short-term overcapacity of silicon wafers is already obvious, and price wars are coming at any time. Industrial Securities pointed out that according to the domestic demand for silicon wafers in 2021 and the cost curve of the silicon wafer industry, it is expected that the price center of silicon wafers in 2021 will be around 2.67 yuan per piece, a drop of about 20%.
On the one hand, the price war will hit the profitability of new players and slow down their expansion. On the other hand, it will temporarily reduce the overall profit rate of the industry, thereby deterring new players who intend to enter the field. This also means that the current capacity planned by photovoltaic companies may not be fully implemented in the future.
In addition, it is worth noting that since state-owned enterprises and central enterprises in the energy sector are the main investors in photovoltaic power plants, price has always been an important consideration in the domestic bidding model. This makes module and solar mounting system manufacturers bid with each other, and the industry's profit margins are constantly being compressed.
In the longer term, the entire photovoltaic industry has grown from a price war to today's leading position in the world. Only through continuous innovation and staying ahead of the competition in terms of cost can we be qualified to enjoy this "photovoltaic feast."
Above news from CHIKO Sales & Marketing department
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