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Jiang Chuya, reporter of Yangtze Business Daily Pentium News

TCL Zhonghuan will build the largest overseas crystal chip factory.

On the evening of July 16, TCL Zhonghuan (002129.SZ) issued an announcement, announcing that it plans to sign a "Shareholder Agreement" with Vision Industries Company and Renewable Energy Localization Company (hereinafter referred to as "RELC"), a subsidiary of Saudi Arabia's Public Investment Fund PIF, to establish a joint venture to jointly build a 20GW photovoltaic crystal wafer factory project in Saudi Arabia with an annual output. The total investment is expected to be approximately US$2.08 billion.

According to the announcement, TCL Zhonghuan holds 40% of the shares through its wholly-owned Singapore subsidiary LumeTech S.A.PTE.LTD., RELC holds 40% and Vision Industries holds 20%. The joint venture's business includes the manufacture, assembly and sales of solar photovoltaic crystals and chips.

TCL Zhonghuan announced that the Middle East project will give full play to the company's advantages in technology, intelligent manufacturing and operation management accumulated over a long period of time in the field of new energy photovoltaics. Relying on PIF's national strategic functions and government resources, as well as Vision Industries and its shareholders' regional resources, industrial investment experience and localization experience, it will establish a technologically advanced photovoltaic industry chain in Saudi Arabia, create a globally competitive green energy industry benchmark in the Middle East, and jointly promote energy transformation in the Middle East.

TCL Zhonghuan's main products include new energy photovoltaic silicon wafers, photovoltaic cells and modules. Among them, photovoltaic silicon wafers accounted for 74.04% of the revenue in 2023 and are the company's main revenue-generating product.

In its 2023 annual report, TCL Zhonghuan disclosed that its full-year silicon wafer shipments increased by 68% year-on-year to 114GW, with an overall silicon wafer market share of 23.4%. In its performance forecast, the company further disclosed that in June 2024, the company's monthly market share of photovoltaic silicon wafer shipments increased to about 30%.

However, due to supply and demand issues in the entire industry chain, the prices of photovoltaic products in major global markets have fluctuated dramatically. Against the backdrop of overcapacity and stimulating competition in the industry, TCL Zhonghuan's performance has been under pressure.

Recently, TCL Zhonghuan released its first-half performance forecast, showing that the company expects to lose 2.9 billion to 3.2 billion yuan in the first half of the year. TCL Zhonghuan's full-year net profit in 2023 is 3.416 billion yuan, and the company's net profit loss in the first quarter of this year was 880 million yuan. This also means that the company's quarterly loss in the second quarter of this year has further expanded month-on-month, and the maximum expected loss in the first half of the year has approached the scale of the company's net profit for the whole of last year.

TCL Zhonghuan said that the company expects to achieve a negative net profit attributable to the parent company in the first half of 2024, but still maintain a positive operating net cash flow and stick to the operating bottom line. The company will accelerate asset turnover efficiency, optimize capital structure, and ensure that the company steadily crosses the bottom of the industry cycle.

Due to unsatisfactory performance, TCL Zhonghuan, one of the four silicon wafer giants, slowed down its expansion. On the evening of May 23, TCL Zhonghuan disclosed the revised draft of the convertible bond issuance plan, reducing the total issuance amount from no more than 13.8 billion yuan to no more than 4.9 billion yuan, a full reduction of 8.9 billion yuan.

The main reason for the reduction in the amount of convertible bond funds planned to be raised is that the company's N-type TOPCon high-efficiency solar cell production capacity expansion plan has been halved.

In addition, as a capital and technology intensive field, TCL Zhonghuan's debt is under pressure. As of the end of 2023, although the company has 10.02 billion yuan in cash on its books, the corresponding interest-bearing liabilities are about 40.4 billion yuan, including 250 million yuan in short-term loans, 4.461 billion yuan in non-current liabilities due within one year, and 35.482 billion yuan in long-term loans. That year, the company's financial expenses reached 904 million yuan. As of the end of March this year, TCL Zhonghuan's cash was 7.855 billion yuan, total liabilities were 65.668 billion yuan, and the asset-liability ratio was 52.56%.