Finance Associated Press, November 20th (Reporter: Liu Mengran) When the entire photovoltaic industry chain is facing the situation of 'selling more and losing more,' cost reduction may have become an unnecessary option for industry development. From November 17th to 20th, the 7th China International Photovoltaic and Energy Storage Industry Conference was held in Chengdu. During the conference, many entrepreneurs and industry insiders called for the view that continuing to lower prices has contributed less and less to the industry's development, especially as the photovoltaic industry has entered a rare crisis in recent years due to the divergence between prices and costs.

During the conference, the data provided by Wang Bohua, Honorary Chairman of the China Photovoltaic Industry Association, showed that out of 121 listed photovoltaic companies, 39 have experienced losses in net income this year; this year, prices in various parts of the photovoltaic industry have declined by 60%-80% compared to the peak in 2023, with most parts running at a loss in the second half of this year; in the first three quarters of 2024, the output value of the manufacturing end has decreased by over 44.7% year-on-year. Wang Bohua believes that the scale of losses caused by industry fluctuations far exceeds those of the past three industry fluctuations.

The industry's consensus is that it will take some time for the cycle to bottom out and rebound, and the urgency to navigate through the cycle is greater than ever. Li Dong, Vice President of JA Solar Technology (002459.SZ), mentioned in discussions that underperforming companies should consider transitioning earlier. Liu Hanyuan, Chairman of Tongwei Group's Board of Directors, believes that the current photovoltaic industry is undergoing a deep adjustment period. Facing the new cycle and the complex external environment, companies and the industry need to maintain an appropriate pace. 'It is necessary to clearly understand the dual nature of competition, guide the industry to compete moderately, and avoid vicious competition.'

Multiple stages have seen prices fall below costs.

According to data released by the Photovoltaic Industry Association, the newly installed photovoltaic capacity in the first three quarters of this year was 160.88GW, a year-on-year increase of 24.8%. The relevant person in charge of the China Photovoltaic Industry Association revealed at the 'New Energy, New Quality' Green Energy Development Forum held during the same period that the red line for grid connection has been relaxed to 90%. The construction of large-scale projects is accelerating, the progress of grid construction is speeding up, and various measures to support distributed development are boosting the demand for installed capacity. It is expected that the newly installed capacity for the whole year will exceed the initial expectations.

Liu Hanyuan, in an interview with Finance Associated Press and other media outlets, believes that the photovoltaic industry is still in its infancy stage, with development potential 10 to 20 times or even greater than the future market size and demand.

He believes that China holds an absolute advantage in the global photovoltaic industry, with over 85% of the market dominated by mainland Chinese companies. Chinese companies also have a large amount of production capacity in Southeast Asia, not only in terms of production volume but also high product quality, conversion efficiency, and low costs. The production costs of photovoltaic companies in Europe, America, Japan, and South Korea are more than twice that of China's, and despite related tariff protections, they cannot change China's leading position in the global photovoltaic industry.

Reducing costs and increasing efficiency was once the main theme of the solar industry, but faced with the continuous 'internal competition' within the industry chain and the current situation of low-price competition damaging the industry's development, how to achieve balance between 'competition' and 'non-competition' is a difficult problem faced by all solar companies.

Regarding the current situation, Liu Hanyuan believes that appropriate 'competition' and necessary 'competition' are the sources of vitality and driving force for the industry, but it is necessary to avoid vicious competition. Internal competition is dual in nature. In this process, China has maintained its global leadership, maintaining the continuous iteration speed of the entire industry. Guiding this industry to appropriate 'competition', avoiding vicious 'competition', maintaining a certain level of competition and speed while maintaining a good trend for future development.

Gao Jifan, Chairman of Trina Solar Co., Ltd. (688599.SH), mentioned in his speech at the meeting that while recognizing the achievements, it is more important to face the difficulties. In 2024, China's solar industry is experiencing the most severe challenges in history. A variety of factors are compounding, the supply-demand relationship is severely imbalanced, the industry is caught in a vicious cycle of internal competition, which also spills over to the international market, leading to intensified trade protectionism, affecting the interests and image of China's solar industry, and the industry is facing a rare crisis in recent years.

Li Junfeng, Executive Director of China Energy Research Association, believes that in the process of pursuing grid parity, the solar industry has entered a new stage of development. Continuing to reduce costs is possible, but it must be noted that starting from last year or a few months later, the deviation between price and cost has already appeared, indicating the emergence of an issue.

Although reducing costs and improving efficiency are eternal goals of all industries, when prices deviate significantly from costs, this competition becomes unreasonable and even unfair. Li Junfeng points out that we need to clearly distinguish between these two concepts: continuously reducing costs and improving efficiency is a long-term goal, while selling below cost price is unacceptable. This has been a long-standing issue within the industry.

GCL Tech (03800.HK) Co-CEO Lan Tianshi also believes that from the perspectives of cost model and manufacturing cost reduction, we have reached a relatively mature stage. If we continue to pursue high-quality development, it is nothing more than reducing the cost per kilowatt-hour from one cent to a few cents, but this has limited overall marginal contribution.

Industry recovery still requires a 'protracted war'.

Since the beginning of this year, the prices of polysilicon, silicon wafers, batteries, and modules have fallen year-on-year, leading to severe industry losses. The timing of when the cycle will bottom out has always been a focus of the industry. Wang Lubao, Chairman of Meic Stock Co., believes that this round of adjustment in the cycle may continue until the second quarter of 2025. From silicon materials to the entire industry chain, including consumables, are all experiencing losses, and this situation cannot continue. He believes that from raw materials, there should be no selling at a loss, and any industry in long-term loss is unacceptable.

Ja Solar Technology's Vice President Li Dong's forecast tends to be conservative. He believes that the market has been growing rapidly, from the initial 2-3GW to 20-30GW, and further increasing to 100GW, with the current market size reaching 500GW. According to industry data forecasts, by 2030, the market size is expected to reach 1.11 terawatts. Nevertheless, the annual growth rate of the future market is estimated to be between tens of percentage points to a few percentage points.

Therefore, with the market growth slowing down, it has become very difficult to address the current production capacity issues, and this cycle may be even longer. Li Dong believes that some companies may disappear within one or two years, while others may within two or three years, as this is a common pressure faced by all companies. Even if they can survive, the short-term imbalance between supply and demand may slightly improve the company's situation, but due to the significant overcapacity, they will still face considerable pressure in the short term.

Currently, all companies are facing the challenge of traversing the industry cycle. Li Dong believes that companies that want to cross the cycle must have several conditions, including global market, global manufacturing operation, and layout of new technologies. These are the basis for hedging global demand and supply, and trade protection measures.

He believes that outstanding companies can still traverse the cycle, while those performing poorly may face prolonged pressure, and may even be eliminated quickly. The entire industry does indeed face significant pressure, so he suggests that some less favorable companies consider transitioning sooner. This industry is not as optimistic as many people imagine.

Secretary-General of the SEMI China PV Standards Committee, Lv Jinbiao, also expressed on the spot that since the SNEC exhibition this year, major companies in the industry have been reflecting on this issue, especially by the fourth quarter, they have basically reached a consensus and gradually taken some actions. However, there is still a long way to go for a real rebound. The key lies in how the leading companies handle the adjustment opportunities in the first half of next year.

It is worth noting that compared to the billions of losses or even higher losses incurred by leading companies in a year, most supporting companies are small and medium-sized enterprises, which face greater pressure due to their limited reserves. Lv Jinbiao mentioned that it would be extremely difficult for them to incur losses of hundreds of millions in a year. To maintain their position, these supporting companies are still intensifying production efforts. Due to the low selling prices, they are putting significant pressure on the prices of supporting products, with little to no profit, and very tight credit terms, which is a warning sign.