Behind The Wave Of 250 Billion Photovoltaic Industry Expansion: Price War Is Imminent

In 2021, the first shot of photovoltaic enterprises' 10 billion production expansion plan is launched by Jingao technology, a leading enterprise.

On January 25th, the company announced that it plans to build battery and module projects in Yangzhou Economic Development Zone, which will be constructed in two phases with a total investment of 10 billion yuan and will be implemented from this year. A year ago, Tongwei, another leading photovoltaic enterprise in China, also put forward a plan of 10 billion to expand its production. It plans to build an annual output of 30GW high-efficiency photovoltaic cells and supporting projects, with a total investment of 20 billion yuan.

However, one year later, the capital market gave different "attitudes" to the 10 billion yuan expansion plan of the two companies: the next day after the announcement of the expansion news, the stock price of Tongwei stock was up and down, opening the door to a market value of 100 billion yuan; the stock price of Jingao technology was fluctuating, and the latest stock price had broken through the 60 day average.

In one year's time, it is no longer big news for domestic photovoltaic enterprises to expand their production by 10 billion yuan. According to the statistics of 21st century economic reporter, in 2020, 13 major listed photovoltaic companies in China announced more than 40 expansion projects, with a total investment of 236.4 billion yuan.

Such a frenzied expansion tide is the first time in the history of photovoltaic industry in China. Behind this, the promotion of policies, the support of capital and the vertical integration of enterprises ignite the enthusiasm of industrial investment. On the one hand, the long-term carbon neutral goal and the mid and short-term "fourteenth five year plan" have brought support to the new energy industry, opening up the future growth space of the photovoltaic industry; on the other hand, a large amount of capital has poured into photovoltaic shares in the past year, and the share prices of several leading companies have reached historical highs, and photovoltaic has become a star concept in the A-share market.

"The strong resilience of the photovoltaic industry in the epidemic situation last year and the positive signals from the follow-up policy level have given the market confidence to invest in the photovoltaic industry. This makes the photovoltaic leading enterprises are sought after, whether in the actual industry investment or the stock investment in the capital market. " An analyst of the new energy industry told the 21st century economic report that the high expectation was reflected in the share price of the photovoltaic company, and the increase of market value also enhanced the company's valuation level, promoted the smooth financing channels and obtained the foundation for expansion of production.

The prosperity of the industry is booming, which makes the performance of many photovoltaic companies bright in 2020. However, when some organizations are calling for a long-term existence of the photovoltaic industry, the domestic photovoltaic industry is facing a real problem - many links have entered the stage of nominal overcapacity.

Ten years ago, with the same wave of large-scale expansion, the domestic photovoltaic industry paid a painful price for this, and many former photovoltaic giants collapsed. Ten years later, when the prospect of the industry is clear again, it has become an important premise to guard against a new round of photovoltaic overcapacity to maintain the healthy development of the photovoltaic industry.

The tide of production expansion to create history

"Last year, I really experienced a lot of" see you for a long time. " When talking about the phenomenon of industry expansion, a person from a domestic front-line module enterprise told the 21st century economic report that "photovoltaic enterprises are not" poor "at all. Many peers showed their muscles last year

In 2020, the scale-up of photovoltaic industry has set a record. This is a comprehensive expansion of the main manufacturing fields of the photovoltaic industry chain, involving the core links of silicon materials, silicon wafers, cells and modules, and auxiliary materials. According to the statistics of 21st century economic report, 13 listed companies have announced plans to expand production with a total investment of more than 230 billion yuan. Among them, eight listed companies have announced nine 10 billion level expansion projects.

In 2021, new capacity expansion plans follow. Longji Co., Ltd., the two leading photovoltaic enterprises, and Jingao Technology Co., Ltd. opened the prelude to the expansion of production in the new year.

On January 19, Longji Co., Ltd. announced its photovoltaic cell expansion project in Xixian new area of Shaanxi Province. It plans to build 15gw single crystal cells with an annual output of about 8 billion yuan. On January 25, Jingao technology announced a 10 billion yuan investment plan for batteries and modules, with a view to further expand its production capacity of batteries and modules and enhance its vertical integration capacity advantage. The aforementioned analysts told the reporter of the 21st century economic report that the leading enterprises are constantly increasing their production capacity, which indicates that this year's photovoltaic industry will continue the "Crazy" of last year. With the investment of more than 230 billion yuan last year, the total amount has exceeded 250 billion yuan.

In fact, Longji shares and Jingao technology have invested 10 billion yuan last year and launched a number of expansion projects. In 2020, Longji Co., Ltd. issued 10 production expansion announcements, with a total investment of about 29 billion yuan. Although Jingao technology only announced four expansion plans, the total investment has reached 23.7 billion yuan. It is worth mentioning that the expansion projects of the two leading enterprises cover four important links: silicon rods, silicon wafers, batteries and components.

The innovative scale of investment and wide coverage of investment fields are the main features of the wave of expansion of photovoltaic industry launched by leading enterprises last year. It is undeniable that the industry's high momentum, photovoltaic enterprises scramble to expand production is still expected.

According to the statistics released by the National Energy Administration recently, China's newly installed photovoltaic capacity will be about 48.20gw in 2020, exceeding the market expectation. Among them, only in the fourth quarter, the number of new domestic photovoltaic installed capacity exceeded the sum of the previous three quarters, showing the huge driving force of "rush to install".

Behind the substantial expansion of production is the pace of photovoltaic leading enterprises accelerating the vertical integration layout.

The discussion on the vertical integration mode of photovoltaic enterprises began ten years ago. This mode requires photovoltaic enterprises to build a clear and complete industrial chain, which mainly covers silicon materials, silicon wafers, batteries, modules, etc.

With the end of the era of silicon as the king, the distribution of profits in the photovoltaic industry chain is gradually rationalized, which makes the vertical integration enterprises including Jingao technology, Yingli energy and Trina Solar Energy obtain high profit returns in the early years. "The advantages of vertical integration lie in that the main production links can realize cost price supply, the product line is comprehensive, and the cost reduction path driven by scale effect can be better reflected." The above-mentioned people from photovoltaic enterprises told the 21st century economic report that the price rise of silicon materials and silicon wafers last year has made domestic photovoltaic enterprises see the significance of building a vertical integration mode.

Qian Jing, vice president of Jingke energy, once said in an interview with 21st century economic reporter that module enterprises should consider future strategies as appropriate, from pursuing market share to moderately improving their vertical integration degree, so as to cope with the situation that the price rise of photovoltaic materials will block module manufacturers and downstream enterprises.

The vertical integration model was once challenged. In the past decade, the domestic photovoltaic industry has obvious cyclical fluctuation characteristics, and the rapid progress of technology has promoted the continuous decline of costs, which has led to the huge cash flow pressure on the vertical integration enterprises due to the expansion of production and layout. At present, the low price access to the grid and policy support weaken the cyclical characteristics of the photovoltaic industry, and the space for industry cost reduction has narrowed, which makes the vertical integration model feasible for a long time.

However, behind the vertical integration mode, the pace of expansion of photovoltaic enterprises is difficult to stop, and the future competition pattern of photovoltaic industry may be more "chaotic".

Risk of a new round of "fighting"

In the past year, the domestic photovoltaic industry has proved that "standing at the wind outlet, pigs can fly".

Due to the strong growth of demand, up to now, more than 80% of the A-share PV companies have disclosed positive growth in their net profit forecasts for 2020. Among them, there are some manufacturing enterprises mainly engaged in photovoltaic business.

On January 29, dongma science and technology released a performance pre increase announcement. It is estimated that the net profit attributable to shareholders of listed companies will increase by about 103 million yuan to 123 million yuan in 2020 compared with the same period of last year, with a year-on-year increase of 140.66% to 168.10%. The company, which is engaged in the research and development and sales of new materials such as insulating film and optical film, saw a substantial increase in sales of related supporting materials last year due to the increasing demand for high-performance photovoltaic modules.

The biggest achievement of black horse is CNC. This machinery manufacturing enterprise with CNC machine tools and general machine tools as its main products did not set foot in the field of photovoltaic single crystal silicon chip until 2019. However, the new business greatly increased the overall performance of the company last year. It is estimated that the net profit attributable to shareholders of listed companies will be 530 million yuan to 580 million yuan, with a year-on-year increase of 186% to 213%. It is worth mentioning that since November 2020, monocrystalline silicon has signed 29.2 billion sales contracts with Trina Solar, orient rison, Atlas and Chint electric appliances. On January 28, Tongwei joined the purchasing army of monocrystalline silicon wafers, and signed a long-term single contract of 1.306 billion yuan with CNC.

As a matter of fact, the high prospect of the industry is attracting a new group of "Predators" into the photovoltaic industry. At the same time, domestic photovoltaic enterprises have also accelerated the pace of listing.

On January 29, the project of Guangdong Gaojing solar energy Co., Ltd. with an annual output of 50gw of large-scale single crystal silicon chip was started in Jinwan District, Zhuhai. However, Gaojing solar energy, which has invested 17 billion yuan in total, has been established for only one and a half years. However, the investors behind it have the shadow of Zhuhai HUAFA and IDG capital.

In fact, in 2020, the domestic photovoltaic industry indeed ushered in the honeymoon period of capital. According to the statistics of China Photovoltaic Industry Association, there were 13 new photovoltaic enterprises in A-share market last year, and the total number of listed photovoltaic companies reached 80, with a total market value of more than 2 trillion yuan, a double growth compared with 2015.

Moreover, in the A-share market, the direct financing projects of photovoltaic enterprises have also obtained the hot demand of capital. According to the statistics of 21st century economic report, in the past year, 32 A-share photovoltaic companies have raised more than 56 billion yuan from the capital market through IPO, fixed increase and convertible bonds. Almost all of these funds are used to expand the capacity of new projects. In December 2020, Tongwei Co., Ltd. successfully issued a new round of fixed increase, raising about RMB 6 billion for the expansion of multiple battery projects. It is worth noting that a number of well-known public and private institutions participated in the company's fixed increase, including e fund, Ruiyuan fund, Zhuque investment, Hillhead capital, etc. On December 30, Trina Solar announced a financing plan for convertible corporate bonds with a scale of 5.265 billion yuan to prepare for its photovoltaic expansion projects in Yancheng and Suqian.

With the support of capital, photovoltaic enterprises have taken the step of radical expansion of production, and a new round of "fighting" risk may be approaching.

"Affected by the epidemic situation in 2020, the demand of the industry will slightly decrease compared with that in 2019, and the industry concentration will be passively increased. The marginal verification of industrial trend will show that the leading enterprises will have strong shipping capacity and significant competitive advantage under the situation of excess supply and demand in the industry." Anxin Securities believes that 2021 will be the key year for the improvement of the concentration degree of small molecules, and the vertical integration model is expected to become the inevitable choice for leading enterprises to grab market share.

Under the vertical integration mode, the pace of expansion of the industry as a whole may be improved. In the short term, the supply of all links in the photovoltaic industry chain will climb rapidly and face the possibility of exceeding the expected supply.

As a material product in the upstream of the photovoltaic industry chain, silicon wafers have experienced a substantial expansion in the past year. Longji Co., Ltd., Jingao Technology Co., Ltd., Beijing Yuntong Group Co., Ltd., CNC Co., Ltd. and "Xinxing" Gaojing solar energy Co., Ltd. have all put forward the expansion plan of 40-50 GW. Although the new capacity of silicon wafer can not be released immediately in the short term, the supply is less than the demand under the effective capacity, but the nominal overcapacity is an indisputable fact.

The 21st century economic reporter learned from insiders that in the monocrystalline silicon chip field, the industrial pattern with Longji and Zhonghuan as the duopoly will usher in the biggest adjustment in the past five years. Under the expectation that a large number of new capacity will be released in the next two years, a price war is inevitable.

Recently, Longji announced the price of monocrystalline silicon chip in February, which was the same as that in January. But the inflection point may be near. "The current market does not support the immediate price reduction of monocrystalline silicon chips, but for the industry leaders, this war is inevitable. It is better to fight early than late." Industrial securities analysis shows that leading enterprises or take measures to curb the impulse of peers to expand production, and the trend of sword drawing and crossbreeding has appeared, and the time node may be around the Spring Festival.