Caixin reported on July 30th. The photovoltaic industry is setting off a new wave of going out to the Middle East from "global sales" to "local manufacturing". Since June, many leading companies such as JinkoSolar (688223.SH), TCL Zhonghuan (002129.SZ), GCL Tech (3800.HK), and Hainan Drinda New Energy Technology (002865.SZ) have announced investment plans. The Middle East gradually became a new hot spot for Chinese PV companies to invest in.

Following the Southeast Asian market, the photovoltaic industry has entered version 2.0 of going out to the Middle East. Qian Jing, the vice president of JinkoSolar, said in an interview with Caixin that the new project will be made and used locally, and the product will mainly supply the local market. Starting with the Saudi Arabia factory, JinkoSolar exports not only technology, systems, experience, talent, supply chain, but also corporate culture.

Investing in the Middle East has a promising vision, but building a brand new supply chain system is still the primary challenge. Analysts say that apart from the construction difficulties caused by special climatic conditions, the supply of raw materials in overseas regions will significantly increase production costs. However, JinkoSolar Energy stated that the Saudi project will use renewable energy to reduce energy costs while manufacturing in a green way.

The new mode of going out to the Middle East: localization manufacturing.

In 2017, the Saudi Ministry of Energy proposed the National Renewable Energy Program (NREP), which aims to raise the new energy generation capacity in Saudi Arabia to 58.7 gigawatts by 2030, accounting for 50% of the total.

In July of this year, JinkoSolar announced that its subsidiaries, Jinko Middle East, PIF (Saudi Public Investment Fund PIF) subsidiary RELC, and VI jointly established a joint venture in Saudi Arabia, with each holding 40%, 40%, and 20% respectively. The total investment of the project is approximately $0.985 billion, which will be used to build a 10GW high-efficiency battery and component project, also the largest manufacturing base and investment project of JinkoSolar Energy so far.

From the industry's perspective, JinkoSolar Energy's "going-global" strategy mainly focused on product exports in the early stages. However, with the passage of time, this strategy has evolved from simple global marketing to global manufacturing and even global investment. Qian Jing stated that the global strategy will shift from global marketing and passive global manufacturing to active global manufacturing.

This is also a new attempt of China's photovoltaic industry to go out to the sea. In 2011, the United States began to impose high tariffs on China's anti-dumping and countervailing duties, and China's major PV manufacturing companies began a process of going out to Southeast Asia for more than a decade.

According to incomplete statistics from institutions, nearly 20 Chinese photovoltaic companies have laid out PV upstream and downstream production capacity through joint ventures, mergers and acquisitions, and investments in Southeast Asia. According to industry consulting firm Infolink Consulting, as of 2023, more than 60% of US photovoltaic cell components come from Southeast Asia, with Chinese photovoltaic manufacturing companies behind them.

However, as the photovoltaic tariff exemption period in the four Southeast Asian countries is about to expire and a new round of anti-dumping and countervailing duties investigation on photovoltaic products in the US is launched, the path for Chinese photovoltaic companies to export to the US via Southeast Asia may be blocked. The Middle East has started to become a new hot spot for photovoltaic going out to the sea. Leading companies such as JinkoSolar Energy and TCL Zhonghuan Renewable Energy Technology have announced new production capacity construction plans.

Qian Jing revealed that it is expected that JinkoSolar's Saudi factory will be put into operation in early 2026, and the first battery made in the desert will be produced. The ample financial resources and abundant resources of Saudi Arabia provide sufficient financial guarantees and resource support for large-scale investment projects, which are crucial for the rapid progress of the project.

At present, the photovoltaic industry is in the bottom of the cycle, and the price of the industrial chain is at a low point, with profitability pressure throughout the entire process. This has stimulated the enthusiasm of photovoltaic companies to go out. Qian Jing believes that companies need to adjust their production strategies based on the needs of different markets. Only by producing local, green electricity, supported by local service teams, and providing comprehensive solutions for photovoltaic and energy storage, can this be a good source of productive capacity.

Qian Jing frequently mentioned the importance of local manufacturing in the new round of photovoltaic going out to the sea process. "No matter how good the product cost performance is, no matter how high the efficiency and power are, the excess capacity that is not needed in the future is overcapacity." She believes that local manufacturing with green electricity, local service team support, and photovoltaic and energy storage solutions will be the productive capacity needed in the future.

JinkoSolar Energy plans that the products of the Saudi factory will mainly supply the local market, achieving local consumption. This means that the product pricing of the Saudi factory does not need to take into account the international freight and other costs but only needs to balance the premium factors such as the local production cost.

From "fighting solo" to forming groups.

It should be noted that under the vision of 2030 and the demand for clean energy alternatives, Saudi Arabia and the Middle East region, as emerging markets, have huge development potential. However, as a completely new region that has not been developed, going overseas to the Middle East is still full of risks and challenges.

Some listed company insiders told the reporters of Caijing that the channel of raw material supply in overseas regions may not be as convenient as in China, and may involve more complex transportation and trade links, which may lead to higher costs. In addition, the quality of raw materials in different regions may vary, and enterprises may need to pay higher prices to obtain raw materials that meet production standards, which is the main challenge in the initial stage of going overseas to the Middle East.

However, it is still an inevitable trend for photovoltaic giants to go overseas. Some analysts told the reporters of Caijing that on the one hand, the domestic market, whether it is production or sales, has tended to be saturated, and urgently needs to find new market space. More importantly, the Chinese photovoltaic industry has formed a complete industrial chain from raw material supply, equipment manufacturing to system integration, operation and maintenance services, and has the output capacity for further globalisation.

According to Qian Jing, in the initial stage, Jinko Saudi's factory mainly relies on domestic procurement of raw materials, similar to the "take eggs out" strategy. With the passage of time, Jinko will consider using more local materials, which depends on the development of the local supply chain and cost-benefit analysis. If local suppliers can provide more cost-effective solutions, Jinko Solar may turn to local procurement, which is part of its global strategy.

After learning from the experience of going overseas to Southeast Asia, Chinese companies investing in the Middle East may avoid many detours. In the view of Jinko Solar, the "group-hugging" strategy can reduce risks and share benefits through collective action. Jinko Solar plans to gradually establish a local industrial chain in Saudi Arabia to reduce its dependence on imported materials. This can not only reduce costs, but also improve the stability and sustainability of the supply chain.

It is worth mentioning that TCL Zhonghuan Renewable Energy Technology is also involved in this wave of photovoltaic going overseas to the Middle East. As one of the two leading silicon wafer companies, TCL Zhonghuan and PIF and VI have jointly established a joint venture to build a 20GW annual production of photovoltaic crystalline ingot project in Saudi Arabia. TCL Zhonghuan said that it will support the establishment of industrial capabilities for photovoltaic crystalline wafers in Saudi Arabia, support the cultivation of high-tech talents in the region, promote the green energy transformation in the Middle East, and effectively radiate the markets of the Middle East, North Africa and Europe.

Unlike the previous wave of going overseas to Southeast Asia, this wave of photovoltaic going overseas to the Middle East is mostly in the form of joint ventures. In the investment plans that have been disclosed so far, Jinko Solar and TCL Zhonghuan have adopted the form of joint ventures. Among them, TCL Zhonghuan and PIF and VI hold 40% of the shares in the project subsidiary, and PIF and VI hold 40% and 20% of the shares, respectively.

Qian Jing said that in the senior management of the project company, the form of both parties competing for the position will also be adopted, fully utilizing the advantages of both parties to improve management efficiency and decision-making quality.