During the 7th China International Solar PV and Energy Storage Industry Expo held in Chengdu from November 17th to 20th, when the full industry chain of the photovoltaic industry faced the situation of "selling more at a loss," reducing costs may have become an unnecessary option for industry development. Many entrepreneurs and industry insiders believe that continuing to reduce prices has contributed less and less to the industry's development, especially when the prices deviate from costs, putting the photovoltaic industry in a crisis rarely seen in recent years.

Data provided by Wang Bohua, the Honorary Chairman of the China Photovoltaic Industry Association, during the conference showed that among the 121 listed photovoltaic companies, 39 of them suffered net losses this year; compared to the peak in 2023, prices in various links of the photovoltaic industry have decreased by 60%-80% this year, with most links running at a loss in the second half of the year; in the first three quarters of 2024, the output value of the manufacturing end decreased by over 44.7% year-on-year. Wang Bohua believes that the scale of losses caused by industry fluctuations far exceeds the losses from the three previous industry fluctuations.

Industry consensus is that it will take some time for the cycle to hit bottom and rebound, with a greater urgency to navigate the cycle than ever before. Li Dong, Vice President of JA Solar Technology (002459.SZ), mentioned during discussions that struggling companies should consider transitioning earlier. Liu Hanyuan, Chairman of the Board of Directors of Trina Solar Co., Ltd., believes that the solar industry is currently undergoing a deep adjustment period, facing a complex situation of new cycles and external environments, and that companies and the industry need to maintain an appropriate pace. "It is essential to recognize the dual nature of competition, guide the industry into moderate competition, and avoid malicious competition."

Prices in multiple links have fallen below costs.

According to data released by the Solar Energy Industry Association, the newly installed photovoltaic capacity in the first three quarters of this year reached 160.88GW, a 24.8% year-on-year increase. The head of the China Photovoltaic Industry Association revealed at the "New Energy, New Quality" Green Energy Development Forum that the absorption red line has been relaxed to 90%, large-scale project construction has accelerated, grid construction progress has sped up, and various measures supporting distributed development have boosted installation demand. It is expected that the annual new installations will exceed the initial expectations.

During an interview with various media outlets including CNFOL, Liu Hanyuan believes that the photovoltaic industry is still in its initial stages and compared to future market size and demand, there is still 10 to 20 times or even greater room for development.

He believes that China has an absolute advantage in the global photovoltaic industry, with over 85% of the market dominated by companies from mainland China. Chinese companies also have significant production capacity in Southeast Asia, not only in large quantity but also with high product quality, conversion efficiency, and low costs. The production costs of photovoltaic companies in Europe, America, Japan, and Korea are more than twice that of China, despite related tax protections, they cannot change China's leading position in the global photovoltaic industry.

Reducing costs and increasing efficiency used to be the main theme of the solar industry's development. However, facing the continuous "internal competition" within the industry chain and the current situation where low-price competition harms the development of the industry, how to achieve a balance between "competition" and "non-competition" is a difficult problem that all solar companies are facing.

Regarding the current situation, Liu Hanyuan believes that appropriate "competition" and necessary "competition" are the sources of vitality and driving force for the industry, but it is necessary to avoid vicious competition. Internal competition has a dual nature. In this process, China has maintained its global leadership and the continuous speed of iteration of the entire industry. Guiding this industry to compete moderately, avoiding vicious competition, maintaining a certain level of competition and speed, while maintaining a good trend for future development.

Chairman Gao Jifan of Trina Solar Co., Ltd. (688599.SH) mentioned in his speech at the meeting that while seeing the achievements, one must also squarely face the difficulties ahead. In 2024, China's photovoltaic industry is experiencing the most severe challenge in history. Multiple factors combined to create a serious imbalance in supply and demand. The industry has fallen into a vortex of vicious internal competition, which has also spilled over to the international market, leading to intensified trade protectionism. The interests and image of China's photovoltaic industry have been affected, and the industry has plunged into a crisis rarely seen in recent years.

Li Junfeng, Executive Director of the China Energy Research Society, believes that in the process of pursuing grid parity, the photovoltaic industry has entered a new stage of development. While it is possible to continue to reduce costs, it must be noted that since last year or slightly later, a deviation between price and cost has already emerged, signaling the appearance of a problem.

Although reducing costs and improving efficiency are eternal goals for all industries, when prices deviate significantly from costs, this competition becomes unreasonable or even unfair. Li Junfeng proposes that we need to clearly distinguish between these two concepts: continuously reducing costs and improving benefits is a long-term goal, while selling below cost is unacceptable. This is an issue that the industry has been urging to address.

GCL Tech (03800.HK) Co-CEO Lan Tianshi also believes that from the perspective of cost models and manufacturing cost reduction, we have reached a relatively mature stage. If we continue to pursue high-quality development, it will only further reduce the cost per kilowatt-hour from one cent to a few cents, but this will have limited overall marginal contributions.

The industry's recovery still requires a "prolonged battle".

Since the beginning of this year, the prices of polysilicon, silicon wafers, batteries, and components have all dropped year-on-year, resulting in severe industry losses. The timing of when the cycle will bottom out has always been a focus within the industry. Wang Lubao, Chairman of Meike Co., believes that this round of cycle adjustments may continue until the second quarter of 2025. From silicon materials to the entire industry chain, including consumables, are all experiencing losses. This situation cannot continue. He believes that starting from raw materials, selling at a loss is not acceptable, and any industry enduring long-term losses is not sustainable.

Li Dong, Vice President of JA Solar Technology, tends to be conservative in his predictions. He believes that the past market has been growing rapidly, initially from 2-3GW to 20-30GW, further increasing to 100GW, and currently the market size has reached 500GW. According to industry data forecasts, the market size is expected to reach 1.11 terawatts by 2030. Nevertheless, it is predicted that the annual growth rate of the future market will be between tens of percentage points and a few percentage points.

Therefore, as the market growth slows down, it has become very difficult to solve the current overcapacity issue, and this cycle may be longer. Li Dong believes that some companies may disappear in one or two years, and others may do so in two to three years, which is a common pressure faced by all companies. Even if they can survive, in the short term, the imbalance between supply and demand will slightly improve the company's situation, but due to significant overcapacity, companies will still face great pressure in the short term.

Currently, all companies are facing the challenge of how to navigate through the industry cycle. Li Dong believes that companies that want to navigate the cycle must have several conditions, including market globalization, manufacturing and operational globalization, as well as layout of new technologies. These are the basis for counteracting global demand and supply as well as trade protection measures.

He believes that outstanding companies can still navigate through the cycle, while poorly performing companies may face prolonged pressure, and may even be eliminated quickly. The entire industry is indeed under considerable pressure, suggesting that some underperforming companies may consider transformation sooner rather than later; this industry is not as optimistic as many imagine.

Secretary-General Lu Jinbiao of the SEMI China Photovoltaic Standards Committee also stated on site that since this year's SNEC exhibition, major companies in the industry have been reflecting on this issue, especially by the fourth quarter, they have basically reached a consensus and gradually taken some actions. However, real recovery still has a long way to go. The key is to see how leading companies will seize the opportunity to adjust in the first half of next year.

It is important to note that compared to leading companies incurring losses of tens of billions or even higher losses in a year, most supporting companies are small and medium-sized enterprises, facing greater pressure due to thinner financial reserves. Lu Jinbiao mentioned that it would be very difficult for them to incur billions of losses in a year. In order to sustain their operations, these supporting companies are intensifying their production. However, due to low selling prices, the prices of supporting products are pushed very low, with almost no profits, and the payment terms are also very tight, which is a problem to be wary of.