Financial Association News on October 19th (Reporter Liu Mengran) - Due to the substantial decrease in the operating rate, the photovoltaic silicon wafer leader TCL Zhonghuan (002129.SZ) appears to be facing a wave of employees resigning. Recently, Financial Association reporters have noticed on various social platforms that its subsidiaries Tianjin Huazhi and Tianjin Huo have experienced employees collectively requesting to terminate labor contracts and provide compensation.

In response, Financial Association reporters learned from multiple company employees that since August this year, Zhonghuan's multiple production bases have started rotating days off. Due to the significant reduction in on-duty shifts, employees' take-home salary in October is far below the normal level. According to the photos provided by employees, at least hundreds of employees are requesting the company management to provide a compensation plan.

Regarding the recent operating load, as well as progress in negotiating resignation compensation with employees and other matters, Financial Association reporters sent interview outlines to the company's public email, but did not receive a response as of the publication deadline. According to feedback from several TCL Zhonghuan Tianjin employees, the negotiations are still ongoing, with the company promising to provide a solution by next Monday (October 21st).

Some employees said they only worked three days in September.

A staff member on-site told Financial Association reporters through social media that the company is currently not actively laying off employees, but there are cases of unreasonable pay cuts. She introduced that currently, most colleagues in the factory area are required to take rotating days off, significantly reducing actual working hours, resulting in very low take-home salaries.

Another former Zhonghuan employee who completed the resignation process this month also told Financial Association reporters that after August, they started a four-shift system and arranged personnel for rotation. He only worked three days in September. Sensing something amiss, he quickly negotiated a resignation and compensation solution with the company. In his view, "Although the compensation is less, staying here also comes with high costs."

It is reported that the paydays for production bases like Tianjin Huazhi and Huo are on the 15th of each month. Due to a large number of employees being on rotating days off, their take-home salaries are far below the normal level. Based on videos provided by multiple employees, on the afternoon of the 17th, there was a gathering of employees at the entrance of Huazhi's factory, requesting the company to terminate labor contracts and provide N+1 compensation.

TCL Zhonghuan is a leading enterprise in photovoltaic silicon wafers. In the first half of this year, the company's monocrystalline silicon photovoltaic capacity increased to 190GW, with photovoltaic material product shipments of about 62GW, a year-on-year increase of 18.3%. The comprehensive market share of silicon wafers is 23.5%, ranking first in the industry.

Since the beginning of this year, due to a temporary imbalance between supply and demand, the photovoltaic industry has gradually entered the bottom of the cycle. According to the interim report disclosed by the silicon wafer factory, intensified market competition has further depressed the prices of core industry chain products, leading to a substantial decline in industry profitability, and even a situation of 'selling more at a loss', resulting in widespread reduction in operating rates to low levels.

However, up to August this year, TCL Zhonghuan still maintained a relatively high operating rate. According to the report of the Silicon Industry Branch, there have been several weeks where two first-line enterprises maintained operating rates of 55% and 95% respectively. The one with the highest operating rate is TCL Zhonghuan.

This situation has also been confirmed by the company's employees. According to their disclosure to the media, starting from February this year until the departure of President Shen (Shen Haoping), the factory has been almost at full production capacity. In their view, although the photovoltaic market has changed, the reforms introduced by the new management have directly affected their ability to ensure normal income.

Jiasino, a research assistant at the Intellectual Property Law Business Research Center of Shanghai Sanda University, told the media that if TCL Zhonghuan arranges for employees to take long breaks, causing them to be unable to work normally, this may be seen as a failure to provide necessary working conditions. Employees have the right to request termination of the labor contract and demand economic compensation as per legal provisions.

He believes that due to the company's long-term reduction in production operating rates, leading to a significant reduction in work hours for employees and corresponding decreases in income, the demand for economic compensation by employees is reasonable when the company fails to provide normal working conditions and remuneration as agreed in the labor contract. Employees also need to gather relevant evidence to prove that the company's actions have indeed affected their working conditions and income.

New CEO to resolve the downturn dilemma

TCL Zhonghuan saw a turning point in August this year. On August 2nd, TCL Zhonghuan announced that, due to work requirements and personal energy considerations, Mr. Shen Haoping applied to resign from the position of CEO of the company. By September 30th this year, the company disclosed that the CEO position would be taken over by President Wang Yanjun, a post-80s executive with years of experience at TCL Zhonghuan.

According to the resume, Wang Yanjun serves as the Vice Chairman and General Manager of TCL Zhonghuan Renewable Energy Technology Co., Ltd., and has previously held positions such as Senior Vice President (SVP) of the company. Public information also indicates that Wang Yanjun joined Tianjin Huanou, a subsidiary of TCL Zhonghuan, in 2006 and was personally mentored by Shen Haoping.

However, from an operational strategy perspective, after taking office, Wang Yanjun made a significant change from Shen Haoping's previous operational strategy, with the first measure being to reduce the capacity utilization rate. According to statistics released by the Silicon Industry Branch last week, the capacity utilization rates of two first-tier enterprises were maintained at around 55% and 50% respectively. Industry insiders revealed that by late August of this year, tcl zhonghuan's capacity utilization rate was still at around 70%.

In fact, adjusting the capacity utilization rate has become the current unavoidable choice for TCL Zhonghuan and other photovoltaic factories in response to the industry cycle. Recently, Chairman Li Dongsheng admitted in a conversation on CCTV that 'TCL Zhonghuan's performance is the worst since entering the photovoltaic industry. Even in the previous cycle, tcl zhonghuan did not incur losses in any semi-annual period.'

He believes that the more products the industry sells now, the more losses it incurs, due to a distorted or even collapsing market system where everyone is losing money. This abnormal market phenomenon is unsustainable.

As the Chairman of TCL, he talked about the adjustments in the panel industry, mentioning 'on one hand, it involves mergers and reorganizations, allowing some companies to strategically exit the market; on the other hand, through industry self-discipline, companies can produce the products needed according to market demands, avoiding irrational competition, and ultimately stabilizing the overall industry operational situation.'

However, at TCL Zhonghuan, even an ordinary grassroots employee can feel the impact of the change in CEO. Under the new operational strategy, frontline employees who are scheduled for time off are the most affected. Some industry insiders commented that insufficient operation capacity resulted in low salaries, cancellation of employee benefits, and ultimately led to a situation where employees demanded compensation and then resigned.

The industry expects the silicon wafer sector to continue to reduce capacity utilization rates.

As a leader in silicon wafer production, TCL Zhonghuan is also facing operational pressure. The interim report shows that in the first half of this year, TCL Zhonghuan achieved a total operating income of 16.213 billion yuan, a year-on-year decrease of 53.54%; the net income attributable to shareholders was a loss of 3.064 billion yuan, compared to a profit of 4.536 billion yuan in the same period last year.

Among them, the silicon wafer business achieved a revenue of 10.432 billion yuan, with a year-on-year decline of over 60%, accounting for 64.34% of total revenue. The gross margin of this business dropped significantly by 34.13 percentage points, to only -9.25%.

Facing the irrational low prices in the current industry chain, silicon wafers were among the earliest to unite for self-rescue. On August 27 this year, TCL Zhonghuan and another leading silicon wafer company Longi Green Energy both announced price adjustments, with Longi's new average price increase of 5 cents/piece. At the same time, other second and third-tier silicon wafer manufacturers followed suit in adjusting prices.

According to feedback from industry insiders, due to limited end demand, there is intense price fluctuation between silicon wafers and downstream battery components, facing a significant challenge in price adjustments as the supply-demand relationship has not significantly improved.

At the same time, there are significant discrepancies in the production scheduling of silicon wafers. According to the industry association's enterprise production statistics disclosed on October 10, domestic silicon wafer output in October is expected to be between 46-48 GW, showing signs of production recovery as demand peaks in the fourth quarter approach.

However, the latest reports indicate that under inventory pressures, the increase in silicon wafer production rates lacks support. According to information released by SMM on October 18, the current silicon wafer inventory is still around 4.7 billion pieces, with levels exceeding 5 billion pieces at the peak prior to the holiday; infolink also believes that current inventory levels are around 5 billion pieces, facing ongoing difficult shipping conditions amidst a weak market demand.

Some industry analysts informed Caixin that silicon wafer companies are under significant pressure to reduce production. With silicon wafer prices under pressure to reduce inventory, while companies are reluctant to further reduce production rates, if prices continue to decline, they may only achieve stability by further reducing production rates.