At present, the global PV market has fallen into a "cold winter period" due to a severe contraction in European installed capacity. China's PV manufacturers have added to the current situation of the domestic market in mainland China because of the above reasons. They are also in the dilemma of internal and external problems, and a considerable number of manufacturers are not yet alive.

Global PV Market Scan

NPDSolarbuzz Vice President FinlayColville told the 2012 Solarbzz Solar PV Symposium in Shanghai on July 19-20 that when analyzing the global PV market supply and demand situation, China, India and Canada will become the largest markets in the second half of 2012. However, as the prices of polysilicon, silicon wafers, batteries, and modules have fallen, excess capacity has manifested varying degrees of performance in crystalline silicon and thin films and in different regions. The market share of thin films is decreasing quarter by quarter, and historically the first time the threat of crystalline silicon has been lost. The capacity of German crystalline silicon cells will account for 20% of the world's total in 2011 and will fall below 2% in 2013.

The demand for the United States and Japan is growing. In a speech, senior analyst Junko Movellan stated that in July 2012, Japan had just introduced the green investment tax exemption bill for public utilities, and vendors were considering giving up their original business strategy, from all production in Japan to contract outsourcing. Because domestic demand in Japan has soared, exports have decreased, and imports have soared.

Colville pointed out that the previous situation in which a company went upstream and downstream was no longer needed. In order to increase competitiveness, the market segmentation business model has become the mainstream. Unlike the semiconductor market, there is no universal roadmap for the photovoltaic industry. Supply and demand conditions and survival competition determine the evolution of photovoltaic technology.

The supply-demand balance is affecting ASP through the value chain. ASP's continued decline has stimulated new demand, but corporate profits have also been eroded. At present, reducing costs has become a key factor in solving the company's loss-making operations.

In the first quarter of 2011, ASP of polysilicon was the main cost, and in 2012, the cost of silicon wafers and modules plummeted. Silicon and non-silicon costs will be reduced from US$1.25/W in the first quarter of 2011 to US$0.61/W in the fourth quarter of 2012. The cost reductions in mainland China and Taiwan are more pronounced than those in Europe, America and Japan.

Even though revenues have risen, the profits of polysilicon have continued to decline quarter by quarter. In the first quarter of 2012, the battery manufacturers realized positive profits, and the profits of the wafer makers fell by one-digit figures. The gross profit of downstream manufacturers doubled QoQ, and rebounded to the profit level in the second quarter of 2011.

External problems of Chinese manufacturers

With photovoltaics as a high-growth field, different regions have come up with different survival strategies. Some countries have a tendency to demand localized manufacturing. Although the method used is different from investment and financing, the ultimate goal is the same, that is, increase the number of domestic employment. In this way, the adjustment of the photovoltaic industry and the survival of enterprises are becoming a political tool through trade protectionism.

The “double counter” that the United States has carried out for the purpose of protecting local manufacturers has caused a severe blow to China's photovoltaic cell manufacturers. The performance of major Chinese manufacturers in the first half of 2012 has fallen sharply, and the annual results will certainly be very ugly. Although Astor’s tough guys are respectful and admirable, the final outcome and the further impact on the manufacturers are still unknown.

However, according to the People's Daily, China's imports of polysilicon from the United States and South Korea in 2011 increased by 432% from 2008, and the average price dropped from US$300/kg to more than US$20. These low-cost polysilicons have had a major impact on China's polysilicon industry. China’s Ministry of Commerce announced on the 20th that it has decided to initiate anti-dumping and anti-subsidy investigations on imports of solar grade polycrystalline silicon originating in the United States and anti-dumping investigations on imported solar grade polysilicon originating in South Korea. The survey was jointly initiated by four Chinese polysilicon companies, including Jiangsu Zhongneng, Jiangxi Saiwei, Luoyang Zhongsi, and Chongqing Daquan. They found that the U.S. federal and state governments provided a large amount of subsidies to polysilicon companies, which enabled U.S. manufacturers to obtain cost and price advantages, resulting in U.S. companies exporting polysilicon to China at low prices.

Tensions of internal misery before golden decade

JA Solar CEO Fang Fang cited the research report of EuPD2012 that after the introduction of the on-grid tariff policy in Europe, investors who pursued investment returns pushed the first blowout in the market. At present, as the on-grid tariffs are lowered, the investment-driven market gradually shrinks, and some regions are entering the stage of parity Internet access. Ordinary power users will become the main driver of the market, forming the second blowout. Other global PV markets, including China, will follow similar growth cycles.

Fang Peng pointed out in his description of China's photovoltaic price-to-price online access road map that at present, the actual cost of photovoltaic power generation in more than half of China's regions is already lower than the national average electricity price for industrial and commercial use. Module prices have become increasingly stable, and future BOS will become a major factor in system cost reduction.

The photovoltaic industry has just entered the production-driven period of dozens of manufacturers in the initial technology drive period of several hundred manufacturers. Manufacturers who can integrate resources for large-scale manufacturing will have competitive advantages, and the photovoltaic industry will soon enter the golden decade of development. After that, after continuous integration, the remaining 4 or 5 major manufacturers will occupy the major market share during the market saturation period.

In China's PV market, fierce competition has caused ASPs of Astor, Hanwha, Suntech, TRW and Yingli to drastically decline, resulting in a sharp decline in gross profit margin and sales revenue, and a sharp rise in operating costs and net interest expense ratios. In the first quarter of 2012, the Altmann Z-values ​​of major PV companies in China were all less than 1, and even some companies were less than 0, indicating that their financial status was already in the risk area.

The basic requirement for the health status of the photovoltaic industry is that the ROE is higher than the bank loan interest rate. Assume that the ROE is 8%. In the first quarter of 2012, the average asset turnover rate of the five companies was 12.2%, and the average equity multiple was 3.8 The income tax rate is calculated at 20%. According to their average operating costs and net interest expense ratios, and other indicators, the basic gross margin requirement is calculated to be 26.5%, while the actual average gross margin is only 2.5%. This is too low. Gross margin is far below health.

Xu Dajiang, vice president of Trina Solar, pointed out that the subsidy policies of various governments are on the decline. From the second half of 2011, the capital market's investment in photovoltaic manufacturers also showed a rapid shrinking trend. However, in the Chinese market, the number of manufacturers of external export modules has not only decreased, but has increased from more than 370 in 2011 to more than 420 in 2012. This shows that industry consolidation has not occurred. The increase is 200-500MW of manufacturers, the industry should seriously consider their survival mode and competitiveness.

For the United States' "double opposition" toward China's battery manufacturers, he said that in 2012, the global demand for photovoltaics will be about 30 GW, which will continue to rise in the next few years. In the long run, the political factors will eventually fail to abide by economic laws. However, in the short-term, individual companies must survive by trying to find ways not to become martyrs, and to persist in the spring of the photovoltaic industry.

In the serious discussion of the gap, there are still some easy ridicule. Some speakers pointed out that the United States' "double opposition" does not have much impact on China's silicon wafer makers. It may only be that some regions will change (such as South Korea and Taiwan, etc.). GCL-Poly is the only beneficiary of Chinese manufacturers in the “double reverse” case, and domestic polycrystalline masks are likely to increase prices.

China's PV power plants: Looks very beautiful, there are actually traps. Wang Sicheng, a researcher at the National Development and Reform Commission's Energy Institute, pointed out that China's PV power plant market has policies and regulations that are clear, and there are no shortage of technologies and funds, but there are no uniform standards for various charges. Coordination among the relevant management departments such as the power grid, the National Development and Reform Commission, and the Ministry of Finance is currently the biggest problem. In fact, this can only be solved if all the parties come together for half a day. However, since all departments only consider their own powers and interests, the issue is still pending.

The photovoltaic power plant construction market has many problems that cannot be seen from a beautiful appearance. For example, grid construction is inconsistent with national planning. Now we need to build a photovoltaic power plant that will require about RMB 304 million in capital. The policy is set by the grid company, and the developers will pay the electricity price. However, grid companies have pushed for delays with various excuses, allowing developers to spend money on their own. Even after the power station is completed, the grid company will not be allowed to access the network. Before the construction of the station, when the developers were looking for a power grid design company, the other party offered several hundred thousand yuan, which was highly irrational and very unreasonable.

Many sectors such as land, firefighting, and earthquake prevention saw this market promising, so they have reached out to grab food and let developers take too much pressure.

In addition, due to the limited capacity of China's power grid, it is basically in a state of rotation. A 10MW power station will have an annual revenue of 1.5 million yuan at full capacity. If the land tax is appropriate for 1 yuan/m2, but now the standard takes into account factors such as regional differences, the range is 1-6 yuan/m2, and there are too many variable factors. In many areas, more than 2 yuan will basically swallow up the profits of the developers. Photovoltaic provinces such as Jiangsu have a similar phenomenon.

Wang Sicheng revealed that a 50MW photovoltaic power station project of Baosteel has only 1 million yuan for the cost of anti-seismic testing, and it simply treats the developer as a "Tang Yao meat."

He also stated that China currently does not have a real power market, which is basically monopolized by the country's top 5 power grid companies. This has led to many problems.

For example, Shandong Weiqiao Group owns a power plant to supply power for its own company and also sends power to neighboring counties, and its electricity price is 1/3 lower than the national grid. Weiqiao and the power grid are deeply opposed to this. The Shandong Electric Power Bureau has organized 1,500 people, and the other party has also organized tens of thousands of people. The conflict between the two sides is very serious. In addition, serious fights have also taken place between the Shaanxi Provincial Local Power Group (Electrical Power) and the National Grid Shaanxi Branch to compete for power supply sites. Wang Sicheng said that this is actually caused by unreasonable institutional reasons.

In addition, for the government's electricity price subsidies, he disclosed that in 2013, the new policy of subsidizing after the installation and acceptance was changed to electricity price subsidies may be implemented. This can effectively avoid a series of problems such as the inability to generate electricity or change hands after the completion of the photovoltaic power plant.

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