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Economic Observer reporter Zheng Chenye"In February of this year, we reviewed the operation of China's photovoltaic industry chain in the past year (2023). I remember I used a word to describe it at that time, called mixed feelings. Now half a year has passed, and the situation has become more severe. (The situation in the industrial chain has become) like heaven and hell." On July 25, at the seminar on reviewing the development of the photovoltaic industry in the first half of 2024 and looking forward to the situation in the second half of the year, Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, said so.

In Wang Bohua's view, the current "hot" of China's photovoltaic industry is reflected in the continued expansion of the scale of manufacturing and application. According to statistics from the China Photovoltaic Industry Association, in the first half of 2024, the output of polysilicon, silicon wafers, batteries, and modules increased by more than 32% year-on-year; in the first half of 2024, the domestic photovoltaic installed capacity increased by 102.48GW, a year-on-year increase of 30.7%; in terms of exports, in the first half of 2024, the domestic silicon wafer, battery, and module exports increased by 34.5%, 32.1%, and 19.7% year-on-year, respectively.

In terms of industrial chain prices and manufacturing output value, the market situation has fallen to a "freezing" point. According to statistics from the China Photovoltaic Industry Association, in the first half of 2024, the domestic prices of polysilicon and silicon wafers fell by more than 40%, and the prices of cells and modules fell by more than 15%; in the first half of 2024, the output value of domestic photovoltaic manufacturing (excluding inverters) was about 538.6 billion yuan, a year-on-year decrease of 36.5%; in terms of imports and exports, in the first half of 2024, the total export value of my country's photovoltaic products (silicon wafers, cells, modules) was about 18.67 billion US dollars, a year-on-year decrease of 35.4%.

"The current situation of the entire photovoltaic industry is very serious. Just saying 'serious' is not enough to describe the current situation," said Wang Bohua.

Industry adjustments should be “heavy and fast”

For the current Chinese photovoltaic industry, if we use "ice and fire" to describe the current situation, then the "fire" area is mainly concentrated in the macro level of the industry. Standing in the tide of the era of energy transformation, photovoltaics, as a representative of renewable energy, has always been "booming" on the application and manufacturing ends.

But if you focus your observation on specific companies, you can see the difficult picture of many industry participants struggling to survive in the "involution".

Wang Bohua mentioned at the seminar that according to the semi-annual report data of some listed companies, it can be seen that the net profit of most companies in the main industrial chain is in a loss state. What is more serious is that the losses in the second quarter have a tendency to intensify compared with the first quarter. This is a manifestation of the current severe situation.

"The prices in many links have fallen below the cost line. For example, the price of polysilicon has fallen below the cost line, and typical polysilicon companies have been affected. At the same time, the bidding price of components has continued to decline, and is currently in the range of about 7 to 8 cents per watt, causing corporate losses to continue to increase. The current loss situation is a loss for the entire industry chain and a loss for the entire industry. Such a situation is rare in the history of China's photovoltaic industry, and I have not encountered it yet." Wang Bohua emphasized.

In addition, according to him, there are more and more projects being terminated and postponed in the domestic photovoltaic main industry chain, and there are more and more cases of companies' operating rates declining or even stopping production.

Wang Bohua pointed out that although the production capacity of China's photovoltaic industry is still growing, the growth rate has dropped significantly, and the current growth rate is only one-fourth of the same period last year, and the number and scale of projects are also the same. In the four major photovoltaic material links (polysilicon, battery cells, modules, silicon wafers), more than 20 projects have been announced to be terminated or postponed in the first half of this year. The operating rate of polysilicon is basically around 60%. Although some leading companies can reach 80%, the operating rate of most companies remains between 50% and 60%. At the same time, the number of factories that have stopped production is also increasing.

"The situation is so serious that we need to make adjustments, but the adjustments are very difficult. It is not easy for the 'old players' in the industry to turn around, and the 'new players' still need to settle down," said Wang Bohua.

In his opinion, the "old players" in China's photovoltaic industry are facing heavy burdens, both new and old. Among them, the new burden refers to the rapid progress of the top photovoltaic companies in building vertically integrated production capacity in recent years. This approach can expand benefits when the industry is booming, but when the industry is sluggish, the entire line loses blood, which in turn increases losses. The old burden refers to the poor clearance of old production capacity, which has led to serious losses.

"Many production lines have not yet paid back their investment, so they have to be eliminated ahead of schedule," said Wang Bohua.

"We used to say that old production lines can be upgraded, but there are difficulties in actual operation. Some production lines have no value for upgrading at all. For example, the factory building is not large enough or the equipment sizes are not equal, resulting in no room for transformation and upgrading. Even if there are production lines that can be upgraded, debugging is difficult and the cost-effectiveness is still insufficient." Wang Bohua further stated.

"New players" are mainly faced with technical problems. Wang Bohua said that the "new players" in the photovoltaic industry lack the ability to continue technological development and innovation, resulting in many new production lines lagging behind as soon as they are put into production. In addition, new companies have less intellectual property accumulation, unlike old companies. The leading companies have also realized this problem, and the call for rights protection in the field of intellectual property rights is growing. In the past, the method of quickly improving factory construction capabilities by poaching people and buying equipment will now encounter more difficulties.

Regarding overseas markets, Wang Bohua said that currently the world's leading photovoltaic markets such as the United States, Europe, India, Brazil, and South Africa have introduced trade barrier policies to restrict the direct export of my country's products, and my country's enterprises' overseas production capacity has begun to encounter trade barriers.

"The chill in the industry will eventually affect the entire industrial chain, and upstream companies and regulatory authorities in the industrial chain need to make contingency plans. Arrears of payment, systemic risks of triangular debts and 'production at a loss' are unlikely to become the norm, and the industry should pay close attention to product quality at current prices. In terms of order delivery and product quality risks, the current industry investment return rate is likely to be lower than expected, and companies need to strengthen cash flow reserves and guard against corporate cash flow risks." Wang Bohua said.

He called at the seminar: "The risks of China's photovoltaic industry are far greater than in the past at the current scale. Adjustments need to be made as soon as possible before the situation becomes irreversible. It is better to suffer a short pain than a long one."

Wang Bohua pointed out that from a historical perspective, the adjustment time of the photovoltaic industry is inversely proportional to the depth of adjustment, so industry adjustments should be heavy and fast; from a realistic perspective, competition is fierce both inside and outside the industry, and the industry needs to "go into battle lightly", and the integration time should not be too long.

He suggested that industry authorities need to strengthen guidance on advanced production capacity construction, and local governments need to strictly control unreasonable rescue activities; companies should be prudent in launching new investments, and encouraged to acquire new production capacity left behind by cross-border companies exiting the industry in a targeted manner; financial institutions should avoid "blood transfusions" to production capacity that is about to be cleared out, promote the elimination of backward production capacity, and encourage corporate mergers and reorganizations.

Trina SolarGao Jifan, chairman of the photovoltaic industry joint stock company, also suggested on the spot that the future capacity clearance of the photovoltaic industry will undergo a fierce competition process, and we must stand at the height of the whole society and actively guide the industry to better integrate.

"I suggest that when guiding the industry to clear out, local governments and financial institutions should not simply support those companies that are already in trouble or are about to be cleared out, but should guide leading companies to integrate and merge these companies, accelerate industrial agglomeration, break the scattered and chaotic situation of the past, and allow the industry to move towards an orderly and healthy development track as soon as possible, so that the financial resources invested in the whole society can become more valuable." Gao Jifan said.

The key to breakthrough: global manufacturing

In recent years, the strategic cooperation between the Middle East and China has become increasingly close, especially under the framework of the "Belt and Road" initiative. Compared with the North American and European markets where the trade environment is changing increasingly dramatically, the Middle East is becoming a new "hot spot for going overseas" for Chinese companies. Going to the Middle East is also becoming an important "handle" for Chinese photovoltaic companies to break the current "involution" situation.

On the evening of July 16, JinkoSolar Energy Co., Ltd. (hereinafter referred to as "JinkoSolar"), one of the leading photovoltaic companies in the A-share market,JinkoSolar”, 688223.SH) issued an announcement stating: “The wholly-owned subsidiary JinkoSolar Middle East DMCC (Jinko Middle East) signed a “Shareholder Agreement” with the wholly-owned subsidiary of The Public Investment Fund of the Kingdom of Saudi Arabia (PIF), Renewable Energy Localization Company (RELC), and Vision Industries Company (VI) to establish a joint venture in the Kingdom of Saudi Arabia to build a 10GW high-efficiency battery and component project. The joint venture will be included in the company’s consolidated financial statements.”

According to the announcement, in the joint venture established this time, Jinko Middle East, RELC and VI hold 40%, 40% and 20% of the shares respectively. After the establishment, each shareholder will subscribe according to the shareholding ratio. The joint venture will serve as the main body of the construction of the Jinko Middle East project, and the total investment of the project is expected to be about 3.693 billion Saudi riyals (about 985 million US dollars).

Regarding the specific situation of the company's "landing" in Saudi Arabia, during the seminar on the review of the photovoltaic industry's development in the first half of 2024 and the outlook for the second half of the year, JinkoSolar Vice President Qian Jing was interviewed by a reporter from Economic Observer.

As for the reasons for choosing Saudi Arabia as the location for the fourth overseas factory, Qian Jing said that, first, under the guidance of the country's "Vision 2030", Saudi Arabia is one of the fastest-growing regions in the Middle East for new energy, and JinkoSolar has laid a foundation in Saudi Arabia, occupying 70% of the market share; second, Middle Eastern customers have higher expectations for technical solutions and products, have more knowledge of technology, have the most diverse application scenarios, and customers are the most picky; third, the factory is located in the manufacturing cluster in southern Saudi Arabia, with a good industrial foundation and convenient sea and land transportation. In addition, the NEOM new city where the factory is located will achieve 100% renewable energy power supply, which means that JinkoSolar's Saudi Arabia factory will become another 100% green power factory, truly realizing green manufacturing from green.

"Investing in photovoltaic projects in Saudi Arabia will accelerate JinkoSolar's transformation from 'global sales' to 'global manufacturing'. It may be a feasible solution to break the industry's 'era of low profits'," Qian Jing told reporters.

"We, the Saudi Public Investment Fund and VI have clear and common goals. We will combine our respective advantages, JinkoSolar's advanced technology, manufacturing capabilities, accumulated experience, and global marketing service network, and integrate PIF's funds, resources, and influence in the Middle East and even the world to meet the supply of local and surrounding markets, as well as the needs of other regions. The construction of the Saudi factory marks the beginning of a new round of global innovation and cooperation model for JinkoSolar, which will accelerate our transformation from global sales to global manufacturing and become a global made-in-the-world brand." Qian Jing said.

"This is very similar to the end of the last century, when old auto giants such as German, Japanese and American came to China to set up joint venture auto manufacturing plants. They brought technology, experience, systems, culture and management, and China provided funding, policies and markets. Now, history is repeating itself, except that this time Chinese photovoltaic companies like JinkoSolar have become chain leaders and are in control," said Qian Jing.