Financial Services Association, March 14 (Reporters Zhao Zixiang and Liu Mengran) In recent years, demand for photovoltaics has increased, attracting many corporate layouts, but in the face of iterative changes in technology, a clean-up around P-type production capacity has already begun.

In 2020, Lingda Co., Ltd. (300125.SZ) made efforts to lay out the photovoltaic cell industry. Since then, cell sales revenue has occupied an absolute position in revenue. However, its production capacity was too concentrated on the previous-generation P-type technology, and the construction progress of the N-type project fell short of expectations, making the cross-border company's photovoltaic layout challenging.

The current situation of Lingda Co., Ltd.'s shutdown of the Jinzhai plant in Anhui and the postponement of the Tongling project is probably only a microcosm of PV crossovers experiencing the impact of technological iteration. Industry analysts told the Financial Federation reporter that P-type products have been replaced by N-type products, and some PERC production capacity that has not been shut down is mainly integrated companies and larger specialized battery factories, and smaller production lines will continue to be cleared in the future.

P-type production shutdown is expected to increase

Recently, the Jinzhai subsidiary of Lingda Co., Ltd. is rumored to have stopped production. A reporter from the Financial Services Association went to the scene to seek evidence and learned that the subsidiary Jiayue New Energy's Jinzhai battery production base has been shut down. Not only has the P-type battery project already in production been discontinued, but the second phase of the N-type battery project, which is scheduled to be put into operation at the end of last year, has only completed plant frame construction. Not only is there no one on the construction site, but it is also suspected that there is a problem of arrears in project payment.

Regarding the discontinuation of production of Jinzhai Jiayue New Energy, some industry insiders commented on the Financial Association reporter that it is not uncommon for P-type battery factories to stop production, and with technological iterations and changes in market demand, this situation will increase more and more this year.

According to public information, at the beginning of its listing, Lingda Co., Ltd. was mainly engaged in waste heat power generation related businesses. In 2014, it first involved the photovoltaic power generation industry through the acquisition of 100% of the shares of Golmud Shenguang New Energy Co., Ltd.; in 2020, the company paid 287 million yuan in cash to acquire 70% of Jinzhai Jiayue's shares and achieved 100% control in June of the following year, thus officially entering the photovoltaic industry chain.

After the acquisition of Jinzhai Jiayue, the operation of Lingda Co., Ltd. entered a “sweet period”. Revenue from 2020 to 2022 was 282 million yuan, 1,051 million yuan, and 1,598 billion yuan, respectively. Among them, the solar cell business gradually became its main source of revenue, contributing 75% and 92.84% of revenue in 2020 and 2021, respectively.

By the end of 2022, more than 95% of the company's main business revenue came from the high-efficiency crystalline silicon solar cell business carried out by Jinzhai Jiayue, a wholly-owned subsidiary. However, due to multiple factors such as asset deductions and depreciation, the company experienced continuous losses in net profit. From 2020 to 2022, net profit returned to mother was -560.16,700 yuan, -72.6967 million yuan, and -16.928 million yuan, respectively.

A Financial Services Association reporter noticed that in the first half of 2023, Jinzhai Jiayue's solar cell revenue decreased by 25.75% compared to the same period last year. The company said it was mainly due to the impact of the decline in sales models and raw material prices. During the reporting period, the share of contract processing business increased year-on-year. At the same time, the decline in upstream silicon prices in the self-production and self-sales business led to a decline in sales prices to customers, resulting in a decline in the scale of operating income.

There have also been twists and turns in the company's battery sales. On March 9 this year, Lingda Co., Ltd. issued a “Notice on Debt Restructuring”, according to which the wholly-owned subsidiary Jinzhai Jiayue signed photovoltaic cell purchase and sale contracts as the manufacturer and customer Maanshan Longhui Optoelectronics Technology Co., Ltd. on November 10 and November 17, 2022, respectively, with a total contract amount of 8.373 million yuan.

2022 coincides with the upward cycle of the photovoltaic industry. In November of that year, Jinzhai Jiayue delivered all of the goods ordered above to Anhui Jingfei Technology Co., Ltd. in response to Longhui Optoelectronics's request. However, Jinzhai Jiayue Renewable has been slow to receive payment from Longhui Optoelectronics; in the end, it can only take litigation and recovery measures. According to subsequent negotiations, Jingfei Technology paid 4.1761 million yuan as the final settlement amount to Jinzhai Jiayue New Energy.

Can't cross-border enterprises keep up with technological iteration?

In 2022, P-type monocrystalline batteries produced on a large scale still use PERC technology, but by 2023, TopCon batteries will become mainstream in production with an absolute scale advantage. The data shows that in December 2023, the N-type module market bid volume was nearly 70%, and the N-type accelerated technology iteration to replace the P type exceeded industry expectations.

Statistics provided by a component manufacturer to the Financial Federation reporter show that in 2023, the P-type industry has an inventory capacity of about 450 GW+, of which about 100 GW is facing a complete shutdown. Most of the production capacity that has been shut down is due to the problem that the production line is too old. For example, the “166 to 182” production capacity has no room for transformation; or because the reserved width of the plant is insufficient, it cannot be remodeled.

He believes that due to insufficient competitiveness, these production capacities are in a state of loss of cash flow, and that some production sites have already paid back their costs after depreciation has been completed, so they have been shut down. However, some PERC production capacity that has not been shut down is mainly integrated enterprises and larger specialized battery factories, and smaller production lines will be cleared later.

Also, according to the statistics and forecasts of brokerage agencies, by the end of 2023, the total PERC production capacity was about 500 GW, and the PERC production capacity that had already been shut down was about 50.6 GW, accounting for about 10%. According to forecasts, starting in the second half of 2024, it is expected that 39% will be shut down, 17% will be upgraded, and the remaining 34% is yet to be determined. Furthermore, battery production has increased since the latter half of the fourth quarter of last year. It is estimated that PERC batteries currently discontinued at the industry level may have reached the 100 GW level, and some tail battery module companies have begun to seek asset integration.

In previous years, as a popular gateway for capital, photovoltaics also attracted many companies to deploy across borders. Among them, there were winners and losers. Recently, Shijing Technology (301030.SZ) and Mingpai Jewelry (002574.SZ) each announced the signing of a major sales order for N-type cells. The customers were Jingke Energy (688223.SH) and Tianhe Solar (688599.SH) respectively. Prior to setting up the photovoltaic business, Shijing Technology mainly manufactured process pollution prevention and control equipment, while Mingpai Jewelry was engaged in the design, R&D, production and sale of precious metal and gemstone jewelry products.

Industry analysts believe that with the sharp increase in production capacity in all sectors of the photovoltaic industry, the replacement of “advanced production capacity” with previous generation products is accelerating, and the risk of technology iteration has become an important “obstacle” to PV investment. In the 2022 financial report of Lingda Co., Ltd., the company listed “technology upgrade risk” as the number one risk factor, and mentioned that if major breakthroughs occur in other technology routes and mass production efficiency is greatly improved while costs are drastically reduced, then existing PERC technology will face a major impact or even risk being replaced. If Jiayue Renewable Energy cannot keep up with the pace of technological development in the industry, it will face the risk of technology updates and iterations.

In this round of reshuffle and differentiation, more crossovers have borne the brunt. Previously, Mubang Hi-Tech (603398.SH), Sunflower (300111.SZ), Shanmei International (600546.SH), and Aowei Communications (002231.SZ) announced project termination or extension of investment in N-type battery projects, all of which mentioned the impact of technological changes.

At an industry conference held this year, the relevant person in charge of the China Photovoltaic Industry Association mentioned that many companies have also ignored the intensity of competition in the photovoltaic industry and blindly expanded or poured in. Experts suggest that manufacturing enterprises should fully understand the characteristics of the photovoltaic industry's “four fast speeds (rapid technology iteration, rapid industrial growth, rapid cost reduction, rapid market change)” and maintain a sense of awe of the industry and technology.