The reform of the photovoltaic solar market, mainly driven by the extremely low prices and overcapacity of raw materials, had created challenges for all manufacturers in the supply chain, even though the growth rate of renewable capacity was the fastest in the past two decades. Many of the major solar manufacturers have announced a change in strategy, with a delay or suspension of production in 2023.
However, the impact has been worse than expected. Last week saw further price cuts, with silicon falling below 50,000 yuan per tonne. The four major sectors of the solar industry, including silicon, wafers, solar cells and modules, may have to suffer losses for some time. And the number of solar companies that stop financing or close their production base may increase.
It is important to note that the global PV industry is led by Chinese solar manufacturers. In 2023, global renewable capacity additions will reach a significant milestone, increasing by almost 50% to nearly 510GW. This growth rate is the fastest in the last two decades and, as the IEA notes, was driven by China. China’s acceleration was exceptional, with 216.88GW of new solar capacity added in 2023, more than the entire world added in 2022.
Top Chinese companies drive the entire industrial chain, and the market has flourished in recent years. But there are signs of a slowdown. PV giant LONGi had slowed down hiring, and its layoff plan was disclosed by other reporters in January 2024.Meanwhile, as the only Chinese photovoltaic company whose market capitalisation ever exceeded 500 billion yuan in the first half of 2022, its market capitalisation has fallen to 142.4 billion yuan in April 2024. Other leading companies such as TCL Zhonghuan, Daqo and AIKO Solar have seen their operating income and net profit fall.
The current economic climate is proving challenging for most Chinese PV companies. Since 2023, the critical point for survival, more than a dozen Chinese solar product manufacturers have had to delay or suspend financing or project construction. And things get worse in 2024. The first to bear the brunt are manufacturing companies across a range of industries
Zhejiang Sunflower Great Health Co. (Sunflower, SZ：300111), a China-based company primarily engaged in pharmaceutical manufacturing, announced on 2 February 2024 that it would have to terminate its investment in a 10GW TOPCon production base and cancel the project venture. This move was estimated to reduce its 2023 net profit attributable to shareholders of listed companies by approximately 4.2 million yuan, subject to confirmation by the auditing organisation.
This project was initiated in March 2023, but did not go well as the subsidiary had decided to stop the procurement of equipment for the high-efficiency solar cell production plant in September 2023. The purchase agreement with Shenzhen S.C New Energy Technology Corporation (SZ：300724) was signed on 14 April 2023 for 826.95 million yuan. It was stated that the delays in the launch of the TOPCon project were mainly due to the slow payment of the lease fee for the facility and uncertainties arising from a significant decline in product prices in the PV market.
Lingda Group Co. (SZ：300125), a leading engineering technology company specialising in new energy development, environmental improvement and energy conservation, announced on 10 April 2024 that it needs to revise its earnings forecast for 2023. Its net loss attributable to the parent company is estimated to be between 249 million yuan and 298 million yuan, compared with the previous forecast of a loss of between 19 million yuan and 38 million yuan, a decrease of 1370%-1660% year on year. And its revenue in 2023 is about 800 million yuan to 1 billion yuan.
The update is due to the temporary shutdown of the production base of GRET Solar, a wholly owned subsidiary of Lingda Group. In order to reduce the loss and overall risks from the unstable or downward trend of the photovoltaic solar market, these solar cell production lines have been stopped from 14 March 2024 to 15 April 2024, which resulted in an impairment provision of 227.8 million yuan on the relevant assets of GRET Solar based on the preliminary valuation, and the adjustment resulted in the correction of the financial indicators.
Lingda Group’s revenue is mainly generated by GRET Solar, with revenue from its monocrystalline solar cells accounting for more than 90% of its total revenue. The temporary suspension of production resulted in the risk of depreciation of plant, inventory and equipment and other assets, which will reduce its main business revenue by 38.7 million yuan, while reducing losses by 5.5 million yuan, according to 2023 data and 2024 prices.
In addition, the construction of another Lingda Group facility was delayed and then stopped in March 2024. The project was launched on 15 June 2023, with Lingda investing 9.15 billion yuan to build a solar cell production base with a production capacity of 20GW. The first phase of the project aims to achieve a production capacity of 10GW of TOPCon solar cells, which should be operational in June 2024, and the second phase will achieve 5GW of TOPCon cells and 5GW of HJT cells. However, the first phase of the project has not met the company’s expectations due to a number of factors affecting the construction progress. Lingda claimed that the required investment of 4.1 billion yuan for the first phase is more than the company’s current funds, and the timing of the financing is uncertain, as the company is suffering great pressure on its operations due to the recent decline in the price of high-efficiency photovoltaic solar cells.
Companies that entered the silicon industry expecting to make a profit may now suffer more than others. Saineng Silicon Industry Co, Ltd, a China-based company mainly engaged in the production and sale of sports equipment and wooden handicrafts, announced that it will start a 10 billion yuan polysilicon production in Henan Province, China, on 8 February 2023. It is estimated to produce 100,000 tonnes of solar-grade silicon per year, with an annual sales value of 29.6 billion yuan, a tax payment of 1.5 billion yuan and provide 500 jobs for local people. It is expected to copy GCL, which is a leading supplier of granular silicon via the silane process. However, no production date has been updated and the project is reported to be on hold.
Gansu Golden Solar Co., Ltd. (Golden Solar, SZ：300093), a leading China-based company mainly engaged in the research and development and deep processing of various kinds of high-tech and special glass, announced the termination of the funds raised to support the high-efficiency HJT cell and module production project totalling 2 billion yuan in November 2023. Golden Solar started large-scale HJT production in 2021, but unfortunately the performance did not meet expectations. Its net loss attributable to parent company in 2021 and 2022 was 202 million yuan and 269 million yuan respectively. And its forecast result for 2023 was estimated to be a net loss of 284 to 385 million yuan.
At the end of the third quarter of 2023, Golden Solar’s total assets were 3.316 billion yuan, while its total liabilities were 3.42 billion yuan. This has resulted in a gearing ratio of 103.12%, putting the company in a precarious position. Its parent company, Ouhao Group (OurHouse), a provider of high-end custom home furnishings, has continued to provide financial support to Golden Solar, waiving 336 million yuan of debt and supporting its fundraising of 939 million yuan, for a total of 1.275 billion yuan. On 15 April 2024, Golden Solar announced that it and its subsidiaries were defendants in nine new litigation and arbitration cases with a total claim of 19,985,862.76 yuan. This represents 80.78% of its net assets as at 31 December 2022. The majority of these cases relate to contractual disputes and are not yet before the courts.
Jiayu Holding Co., Ltd. (Jiayu Group, SZ：300117), an integrated group company engaged in building energy efficiency, smart technology and new energy investment, started production of PERC in 2017 and HJT in 2022. Its situation is similar to that of Golden Solar, or even more challenging.
On 26 January 2024, Jiayu issued an announcement stating that it expected a net loss of 1.2 to 1.5 billion yuan in 2023. In addition, the company’s shares were subject to a delisting risk warning. On 12 April 2024, Jiayu issued a second risk alert announcement regarding the implementation of a delisting risk warning. It was expected that the company would have negative net assets at the end of 2023, with an estimated range of -147,439.33 million yuan to -117,439.33 million yuan. Moreover, a cumulative litigation announcement was published on 10 April, stating that Jiayu Group was sued by Wuxi Autowell for overdue payment of 5,022,400 yuan for photovoltaic equipment.
Mubang High-Tech Co., Ltd. (Mubang High-Tech, SH：603398), a company mainly engaged in educational toys, medical devices, education and precision non-metallic moulds, terminated its framework agreements for the 8GW TOPCon project in Nanchang City and the 10GW TOPCon project in Ezhou City, China, and extended its 10GW solar cell project in Guangxi Province, China.
Royal Group Co., Ltd. (SZ：002329), a China-based dairy giant, had transferred the shares of Royal Green Energy, which is in charge of investment and construction of 20GW TOPCon solar cell project with investment of 10 billion yuan in Anhui Province of China, stopped its 5GW HJT cell project with a total investment of 4.5 billion yuan.
Jiangsu Sunshine Co. Ltd. (SH：600220), a China-based company with a focus on wool production, announced that it would switch its 30 billion yuan integrated PV solar production base in Inner Mongolia, China, to a 50,000 tonne polysilicon production project with an investment of 5 billion yuan in Ningxia, China, which was also delayed.
Allwin Telecommunication Co.ltd. (SZ：002231), halted its 5GW HJT cell project with a total investment of 4.5 billion yuan.
Jiangsu Sunshine Co. Ltd. (SH：600220), a China-based company with a focus on wool production, announced that it would switch its 30 billion yuan integrated PV solar production base in Inner Mongolia, China, to a 50,000 tonnes capacity polysilicon production project with an investment of 5 billion yuan in Ningxia, China, which was also delayed.
Shanxi Coal International Energy Group Co.(SH：600546), a large company originally under China National Petroleum Corporation, stopped its 10GW HJT production project, which was launched in 2021 with an investment of 3 billion yuan.
On 18 March 2024, Jiangxi Haiyuan Composites Technology Co., Ltd.(SZ：002529) terminated its n-type solar cell production project in Chuzhou City, China, and transferred 100% of the shares of its Chuzhou project company to AIKO Solar, a leading solar cell and module manufacturer.
Haiyuan stated that the PV market and prices changed unexpectedly during the promotion of its solar cell production project. After friendly negotiations with the local government, which signed the investment agreement with Haiyuan in December 2022, it was decided to terminate the project in order to reduce investment risks and management costs. The project was planned to be completed in two phases, with a total production capacity of 15GW of high-efficiency n-type solar cells and 3GW of high-efficiency solar modules. The first phase was designed to produce 10GW of TOPCon cells per year and the second phase 5GW of HJT cells and 3GW of modules.
On 2 April 2024, Jiangsu Tongling Electric Co., Ltd. (Tongling Electric, SZ301168), a China-based company specialising in the R&D and production of PV interconnection systems, including PV module junction boxes, connectors, wire harnesses, PV solder ribbons and inverters, recently announced that it will postpone its solar photovoltaic junction box production project with a total investment of 512,369,300 yuan to 31 December 2024. Explaining the reasons for the project extension, Tongling Electric said that the procurement of materials and equipment and the overall technical construction of the project have been delayed due to the unstable market situation and some objective factors.
On 10 April 2024, Jiangsu Xiuqiang Glasswork Co., Ltd. (SZ：300160), one of the largest glass processing manufacturers in China, announced that it will extend the completion date of its smart glass production line project from 10 January 2025 to 31 December 2025. And its BIPV module project has been renamed as BIPV glass and BIPV module project. The total investment of the new project is 248.504 million yuan, of which 248.00 million yuan is from the previous project.
Blindly copying others in the photovoltaic market has led to overcapacity, creating an unsustainable solar market. in an attempt to get a piece of the pie, some producers could lose everything. The consequences of a massive expansion of production will be felt by all. As mentioned above, the top player on the table is also having a tough time. Will that be any consolation for the companies that have to choose between survival and death?
LONGi, the world’s leading PV company, has also slowed down its ram up plan. It has taken a cautious approach to production expansion in the first two years, mainly based on its assessment of risks during the period of rapid changes in technology routes. Its BC technology will be included in all announced investment plans and will be gradually put into production.
LONGi has anticipated a gradual overcapacity in the PV industry and has already made a good response in advance. One is to win the market with differentiated products and launch products with higher efficiency and reliability, i.e. the BC series products that LONGi is currently promoting. On the other hand, it is to reduce costs and improve efficiency and streamlining within the company, streamlining the redundancy of organisations and personnel caused by faster development in the past, and reducing expenses to cope with the current environment, said Mr Zhong Baoshen, Chairman of LONGi on 3 March 2024.
A review of earnings forecasts released between January and February 2024 showed that out of 60 listed Chinese PV companies, 26 experienced a decline in profits, accounting for 43.33%. Of these, 14 reported losses.
Now we await their audited financial reports.
（Picture: Veer）
