Intellifusion Financial APP learned that Morgan Stanley Fund stated in a report that the photovoltaic industry, as one of the important representatives of new quality production in the past two years, has experienced repeated bottoming out due to temporary overcapacity and insufficient demand. However, at the end of August, the industry seemed to undergo a change, with the two leading silicon wafer companies in China announcing price increases. At present, the price of the photovoltaic industry chain is at the bottom, and overseas interest rates may enter a rate cut cycle in the future, with the prospect of lower interest rates. The increase in photovoltaic project yield may stimulate demand beyond expectations. The current outlook for the sector is low, with low valuations, and low institutional holdings, making sector allocation cost-effective and worthy of attention.

The "darkest moment" of the photovoltaic industry

In recent years, China has been continuously developing new energy transformation, and the photovoltaic industry is an important path to promote China's energy green and low-carbon transformation and achieve green and low-carbon development. Since 2021, the photovoltaic industry has expanded rapidly, with many manufacturers entering cross-border, rapid capacity release, and the lack of complete and frequent technological iterations, leading to the "roller coaster" state of the photovoltaic industry chain, gradually narrowing profit margins, and prices breaking the cost line in multiple links.

Since 2022, the price of silicon wafers in China has fluctuated and declined, with prices of various types of silicon wafers falling. In June 2024, the market price of monocrystalline silicon wafers (156mmX156mm) from first-tier manufacturers was only 1.2 yuan/piece.

Data Source: Wind, Data Range: August 2011-August 2024

In this context, what followed was the frequent termination or postponement of photovoltaic projects by companies. Data from the China Photovoltaic Industry Association (CPIA) shows that the scale of terminated/postponed projects in the silicon material, silicon wafer, battery, and component links reached 0.3 million tons/15GW/60GW/20GW respectively, with more than 20 related projects. Affected by overcapacity and the low prices in the industry chain, the industry's capacity utilization rate is also at a low level, with the main chain links at around 60%, inventory remaining at a high level, and even some companies ceasing production.

Survival of the fittest, bullish for the long-term development of the industry

Despite experiencing a 'darkest moment' in the past two years, the leading position of China's photovoltaic industry in the global market remains stable.

On the domestic front, the demand for installations has surged in recent years. According to data from the Ministry of Ecology and Environment, China's photovoltaic installed capacity increased by 55 GW in 2021, 87 GW in 2022, and is expected to sharply increase to 216 GW in 2023.

Data source: Ministry of Ecology and Environment

In terms of 'going global,' according to customs data, the total export value of China's new energy vehicles, photovoltaic products, and lithium batteries, known as the 'new three items,' reached 1.06 trillion yuan in 2023, surpassing the trillion yuan mark for the first time and growing by 29.9%. Chinese companies have moved beyond being the 'world's factory 1.0' and have entered the globalized 2.0 stage by actively expanding overseas.

The surplus production capacity in the photovoltaic industry will affect the profitability of the entire industry chain in the short term, but in the medium to long term, it will drive the 'survival of the fittest' within the industry, allowing more competitive companies to emerge and even go overseas, while outdated production capacity gradually exits the market.

The Silicon Branch of the China Nonferrous Metals Industry Association recently stated that in the medium to long term, as production capacities in each link of the industry chain are cleared at an accelerated pace, market prices are expected to return to a reasonable level. After experiencing a short-term period of price sell-off, the market supply and demand is expected to remain on a positive trend in the medium to long term, and prices are expected to gradually stabilize.

The recovery is expected, highlighting the cost-effectiveness of the photovoltaic industry.

Currently, the photovoltaic industry chain is in the adjustment phase following its expansion, which is a painful period in its growth process. In fact, in terms of policies, the photovoltaic industry has always been one of the industries that the country attaches great importance to, with favorable news often emerging.

On August 21, the National Development and Reform Commission and the National Energy Administration issued the "Implementation Plan for Large-scale Equipment Renewal in Key Energy Areas", proposing that by 2027, the investment scale of equipment in key energy areas will increase by more than 25% compared to 2023, and the photovoltaic industry will achieve equipment renewal and technological transformation, and also mentioned supporting the grid-type transformation of photovoltaic power stations. Over the past decade, the photovoltaic industry has undergone multiple iterations and upgrades in technology and equipment. With the maturity of third-generation photovoltaic technology, there will be an improvement in both cost and conversion efficiency, and energy equipment manufacturers, supporting component manufacturers, and new raw material supply companies are expected to benefit from it.