Today, the cold winter of the photovoltaic industry has become more and more difficult for professional cell manufacturers.

Zhongrun Solar, which ranks second in the world in terms of cell shipments in 2024, recently announced that it will go public in Hong Kong. According to the prospectus, Zhongrun Solar will suffer a huge loss of 1.363 billion yuan in 2024. Previously, Zhongrun Solar had tried to list on the A-share market, but to no avail.

Junda Co., Ltd. (SZ:002865), which ranks third in cell shipments, also released its financial report a few days ago: a net loss of 591 million yuan in 2024 and a net profit loss of 1.118 billion yuan after deducting non-profits. If calculated by deducting non-net profit, Junda shares will lose the money earned in the past two years in 2024. Junda shares also applied for listing in Hong Kong twice last year, but there has been no result so far.

Previously, another cell company, Runyang Co., Ltd., was also in deep trouble, looking for buyers everywhere to "continue its life". In February this year, Jiejia Weichuang (SZ: 300724) and Otway (SH: 688516) "turned creditors into shareholders", which temporarily eased the debt pressure of Runyang shares. However, the agreement signed by the two "shareholders" with Runyang shares also has a VAM clause, and Runyang shares must complete the A-share IPO listing or merge into the A-share listed company within the specified time.

In the past year or so, many photovoltaic companies have faced serious financial pressure. Compared with integrated enterprises, specialized cell manufacturers have a harder time to survive, have heavier financial pressure, and are in urgent need of financing and blood transfusion.

However, the inflection point of the industry has not been seen for a long time, and the financing environment is not optimistic, so how can cell companies break through the situation and survive?

Cell manufacturers in dire straits

Specialized cell companies have been squeezed into "sandwich biscuits" in the photovoltaic industry chain.

Due to their mid-range position in the industrial chain, cell companies are vulnerable to upstream and downstream pressures. When downstream demand is strong, cell manufacturers can still make certain profits. However, once the industry fluctuates violently, the poor anti-risk ability of cell manufacturers is exposed. In the face of downstream integrated module companies, their bargaining power is very weak, and the degree of price increase transmission to the downstream is limited, and the profitability is bullied by both the wafer and module segments.

In 2024, cell companies will have a particularly difficult time. The price of TOPCon cells dropped by as much as 40% from RMB 0.47/W at the beginning of the year to RMB 0.28/W at the end of the year. The gross profit margin of Zhongrun Solar in 2024 will drop to -10.1%, and the gross profit margin of cells shown in Aiko's 2024 interim report will be -4.31%. Junda's cell gross profit margin was only 0.48%, and the gross profit margin in the domestic market fell to -1.04%.

In the cold winter, cash is king, but the financial situation of cell companies is worrying.

Junda's financial report shows that in 2024, the company's net cash flow from operating activities will drop sharply to 650 million yuan, a decrease of 66.94% from the same period last year. As of the end of 2024, the total liabilities of Junda Co., Ltd. are 12.572 billion yuan, and the asset-liability ratio is as high as 76.38%.

Junda 2024 financial report

The net cash flow from operating activities of Zhongrun Solar also decreased from 2.691 billion yuan in 2023 to 941 million yuan in 2024, and the asset-liability ratio increased to 83.7%.

Runyang shares are also heavily indebted. As of the end of the third quarter of 2024, Runyang's total debt was 29.862 billion yuan, and the asset-liability ratio was as high as 79.6%.

Even Aiko (SH:600732), which has found a differentiated route for BC technology and is expanding into the module sector, has an asset-liability ratio of 82.9% as of September 30, 2024.

Under huge financial pressure, some cell companies have no choice but to drastically reduce their R&D investment. Junda's financial report shows that the number of R&D personnel has decreased by more than 1,000 people, and there are currently only 324 people, a year-on-year decrease of 75.96%. Correspondingly, R&D investment has also changed from 304 million yuan to 199 million yuan. The size of the R&D team is also shrinking, from 621 at the end of 2022 to 350 by the end of 2024.

The industry adjustment has entered a critical juncture. Even if there is a "rush to install" in the first half of this year to hold up the price of the industrial chain, the industry generally expects that the price will decline in the second half of the year. Cash-strapped companies may not be able to escape the fate of being "cleared" in 2025, and how many of the cell companies can escape this catastrophe?

Rely on TOPCon and integration to get rid of life and death?

In fact, cell companies have never given up looking for a way to break the situation, and some companies have indeed made some gains. There are two main ways to succeed observed by Huaxia Energy Network:

First, some companies have seized the opportunity to iterate on battery technology to N-type. As can be seen from the global ranking of photovoltaic cell shipments in 2024, the iteration of TOPCon technology has played an important role in the "reshuffle" of the cell industry.

However, for cell companies, there may not be much left of the dividends of N-type technology iteration. According to BOCOM International, as of the beginning of this year, the total production capacity of N-type cells was 860GW, which is 41% higher than the 611GW of cell demand in 2024.

In addition, the technology to improve the conversion efficiency of TOPCon has been widely adopted by the industry in a simple and easy way, and further improving the efficiency requires strong R&D capabilities and huge equipment investment. Judging from the current performance and financial strength of cell companies, I am afraid that it will be difficult to afford it.

Second, many cell companies are trying to move from specialization to integration. In this regard, Tongwei (SH:600438) and Aiko are "pioneers".

Tongwei, which is already deeply integrated, has been making great strides since its decision to enter the module segment in 2022, and now ranks fifth in the world in terms of module shipments.

Before Aiko's listing, it had the world's largest PERC cell production capacity. In 2021, after making a breakthrough in the ABC battery, Aiko Co., Ltd. vigorously extended to the module link, and launched the ABC module in 2022. In January this year, the first module of the 10GW high-efficiency crystalline silicon solar cell module project of Aiko Jinan Phase I rolled off the assembly line, and it is expected to be fully put into operation in the second half of this year. Judging from the recent production and sales of ABC modules, Aiko's integration is worth looking forward to.

However, other cell makers' attempts at integration are not optimistic.

The most typical is Runyang, and Runyang's integrated "plate" is very extensive. Previously, it was only "embedded" integration, but by 2023, as the industry reaches its "peak", Runyang's integration is almost crazy, from silicon materials, crystal pulling, slicing, to cells, modules, and power stations, Runyang has "opened" all links of the main industrial chain.

However, as the industry enters a trough, Runyang's integration strategy has also become a burden. Superimposed on the listing obstacles, Runyang stopped work and production, and funds were urgent, so he could only seek to "sell himself". Now after joining the state-owned assets, it is difficult to say when it will be able to completely tide over the difficulties.

Previously, it was rumored on the Internet that Runyang shares were "suspended and suspended".

Zhongrun Solar has also been expanding into the module business and reducing its dependence on the cell business. In the past three years, the revenue from photovoltaic modules accounted for 7.5%, 9.0% and 18.7% of the total revenue, respectively. Although the proportion of the module business has increased, the volume is still small, and the cell business will still account for 81.1% in 2024.

In addition, Zhongrun Solar said that by the end of 2024, its N-type cell production capacity will reach 40GW, which will rise to 50GW after the transformation is completed. However, its effective PV module production capacity is only 8GW, and the integration progress is too slow.

Another company, which claims to "only make cells and make better quality cells", is also trying to diversify its layout and has invested in the construction of 24GW of monocrystalline silicon rod production capacity in Yibin. Yingfa Group, to which it belongs, has formed four major business sectors: photovoltaic cells, photovoltaic power stations, industrial operations, and electronics. It remains to be seen how profitable it will be, and whether it will become a "model" for the transition from specialization to integration.

Accelerating overseas layout is a "life-sustaining elixir".

There are few dividends left for TOPCon, and the road to integration is full of thorns. However, cell companies need to look for more opportunities to break the situation.

On the one hand, we can learn from Aiko's technological differentiation and lay out the next generation of technology.

Huaxia Energy Network has noticed that enterprises have taken action in this regard. Junda Co., Ltd. recently said that in 2024, the conversion efficiency of the company's pilot TBC cells can be increased by 1-1.5 percentage points compared with the efficiency of mainstream N-type cells, and will continue to promote the preparation of mass production of TBC cells. The laboratory efficiency of perovskite tandem cells developed by the company in cooperation with external institutions is 31%, which is at the leading level in the industry.

Infal is also cooperating with LONGi to build the first phase of 6GW of HPBC cell production capacity in 2025.

The technology iteration speed of the photovoltaic industry is getting faster and faster, whether it is BC or perovskite tandem cells, it is not ruled out that there will be a rise, and those who plan in advance will get a piece of the pie.

On the other hand, it is a "life-sustaining elixir" for cell companies to explore overseas markets.

At present, module production capacity in Europe and the United States has begun to take shape. The PV module production capacity in the US market has exceeded 50GW, but other links have not yet formed large-scale production, and the supply chain gap is obvious, resulting in strong cell demand.

In this context, on the one hand, cell exports will clearly benefit.

In

a recent research report, BOCOM International pointed out that the rapid growth trend of cell exports will continue for a long time, and that the excess profits in overseas markets have been monopolized by module companies for a long time in the past, and will gradually shift to cell manufacturers in the future.

What can be proved by the data is the financial report of Junda shares: its gross profit margin in overseas markets reached 6.37%, which is in stark contrast to the domestic gross profit margin of -1.04%.

On the other hand, accelerating the deployment of overseas production capacity can help cell companies break the involution and move towards a new life.

Previously, Tongwei's acquisition of Runyang was considered to have taken a fancy to Runyang's overseas production capacity and sales channels. Runyang has overseas bases and sales networks in the United States, Thailand, Vietnam, Germany, Singapore and other places.

In addition, Zhongrun Solar will build more than 15GW of cell and module production capacity in Cambodia and Laos as early as 2024. Its cell production capacity in Laos could become an important base for exporting to the U.S. market.

Junda announced in 2024 that it plans to invest in the construction of 10GW of high-efficiency photovoltaic cell capacity per year in Oman, which is also believed to be intended to be in the high-priced market in the United States.

However, it is worth noting that a few days ago, South Korea's OCI Holdings announced that it will build a solar cell manufacturing plant with an annual capacity of 2GW in the United States. OCI already operates a solar module factory in Texas, USA, and the opening of the new cell plant means that OCI will achieve a more complete industrial chain layout from upstream cells to module production.

In the face of competition in the global market, especially in the United States, which is a high-premium market, Chinese cell companies need to speed up.

(Please indicate the source for reprinting, article source: Huaxia Energy Network, WeChat ID: hxny3060).