The market remained volatile today and turned red in the afternoon thanks to the sudden explosion of new energy. The photovoltaic sector, which had not been seen for a long time, rose across the board.

The sector's full-day turnover exceeded 100 billion, with more than 20 stocks hitting their daily limit, and 6 of them even rose by 20%. Industry leaders Trina Solar, JinkoSolar, Tongwei, and TCL Central also rose by 17.50%, 10.85 %, 9.09%, 9.96%. Longi Green Energy and Sungrow also rose by 7% and 5% respectively.

What happened to such a big change that made the entire photovoltaic sector sit up in a panic?


Today, the China Photovoltaic Industry Association recently organized a "symposium on high-quality development of the photovoltaic industry" in Beijing. Key points of the meeting include:

Optimize the guiding role of management policies in industry production capacity construction and improve key technical indicators;

Encourage industry mergers and reorganizations and smooth the market exit mechanism;

Strengthen the crackdown on vicious competition in sales below cost;

Explore supporting the application of advanced technologies through demonstration projects and changing the situation of winning bids at low prices.

Photovoltaic overcapacity and price wars have become commonplace topics.

The significance of this meeting is to prevent the entire industry from paying the price of large-scale losses and bankruptcy when the situation is too hard to recover from.

In fact, the supply-side reform of photovoltaics has begun long ago and follows the principle of marketization. However, due to the large expansion of production capacity in the past and the relatively large interests involved, the effect of marketization is not obvious. .

Until recently, the United States officially implemented tax increases, and Europe may also follow the United States. The idea of ​​opening up the European and American markets to absorb production capacity has been completely abandoned. I guess both the superiors and the industry have figured it out.

Although cutting overcapacity will be more painful, it is already a step that must be taken.

So if this time is really the last step in the photovoltaic supply-side reform, what will be the impact next?

First of all, just like the supply-side reforms in various industries, some industrial chain companies with weak strength and poor financial data are the first to be eliminated.

At the same time, mergers and acquisitions in the industry will also accelerate, and it is inevitable that the big ones will eat the small ones. After this round of survival of the fittest, large companies will be strengthened and small companies will disappear from the market.

Judging from the results of previous supply-side reforms, the results are the same, so there should be no suspense about this.


For enterprises, the compression of production costs cannot keep up with the speed of price decline, and the reduction of production capacity investment has further amplified the contradiction of excess. The decline in gross profit margin and the impairment loss of inventory assets have become a common nightmare faced by the entire industry, not to mention the first-line leaders. Second and third line!

In the first quarter, Longi's net profit suffered losses (-2.350 billion) even as silicon wafer (+12.26%) and module (+16.55%) shipments continued to grow.

The A-share photovoltaic sector has also been adjusting downward. As of now, the Wind photovoltaic index is 2953.05 points, with a cumulative decline of more than 20% during the year. Compared with the highest point in August 2022, the cumulative decline has reached 52.2%.

In 2022, the supply side of silicon materials will continue to be tight, the price of silicon materials will continue to run at a high level, and the profit distribution in the main industry chain will be in a strong position. With the gradual release of production capacity, the price of silicon materials has increased from a maximum of 300,000 yuan per meal to a mere 40,000 yuan per meal, which is infinitely close to the cost line for silicon material companies to survive. Silicon wafers, batteries, integrated components and other links are also under pressure. The price of components in China is less than 0.8-0.9 yuan/W. It can be clearly seen from the figure below that after experiencing another round of decline this year, these main materials have basically fallen into The battle to defend break-even is over.

Increased volume cannot offset the impact of falling prices. The fundamental reason lies in continued overcapacity.

By the end of 2024, the production capacity of silicon materials, silicon wafers, cells, and modules may reach 1,180GW, 940GW, 1,360GW, and 1,220GW respectively, which is approximately 2.3 times to 3.3 times the new installed capacity demand in 2024. This pile of production capacity It can basically meet the needs of 24-26 years, and most of them must come from China.

But this kind of price involution is inefficient and will soon be unsustainable.

In the past few years, the stock market has been flooded with IPOs. Many companies with no technical background can raise funds as long as they announce cross-border photovoltaics. In order to promote the installation quota, local governments are also adding fuel to the fire and promoting production capacity in large quantities. These funds are involved in duplication of production capacity construction, resulting in waste.

In order to achieve cost advantages, many companies have begun vertical integration, starting from their own advantages and encompassing other upstream and downstream links. They are also the driving force behind the substantial increase in production capacity. It is said that "advanced production capacity is in short supply", but now looking at the crazy implementation of TOPCon production capacity, and price trends, even the battle-tested industry leaders cannot restrain their desire to expand production.


In order to get a bigger share of the pie, we have tried to go overseas to look for growth. We have made new gains, but we have also been treated unfairly.

While the growth rate of photovoltaic installed capacity in Europe and the United States is gradually slowing down, the Middle East has become a market with greater potential, and the policy environment is more friendly.

The NEOM future city, which Saudi Arabia plans to invest US$1 trillion in, will use 100% renewable energy to support urban operations. In the investment in green energy, photovoltaics and hydrogen energy are the focus. Chinese manufacturers have the absolute strength to capture the majority of the share. Since last year, the four major module leaders have won many orders in Saudi Arabia.

Moreover, a considerable part of our exports will be exported to Europe and the United States through Southeast Asia, and will face tariff burdens in the future.

If excess production capacity is not dealt with in a timely manner, how can the advantages of advanced production capacity be used to end the involution of low prices? The industry is faced with a situation where the first line barely maintains profits, while the second and third lines are losing money and is far from reaching the end.

Some time ago, there were reports of parts of Europe using cheap domestically exported components as fences.


In the final analysis, as my country's dominant industry, it should enjoy the barriers brought by its technology cost and brand advantages. However, photovoltaics has now become the focus of criticism in European and American countries. Low-price modules are actually equivalent to carbon neutral subsidies in overseas countries, and secondly, they are forced to If the country's photovoltaic companies lose their comparative advantage and cannot continue to operate, they will eventually go bankrupt. In this way, they will not make any money, and others will have to blame you.

There is no doubt that the current photovoltaic industry needs a supply-side reform to adjust the production capacity structure.


After this meeting, we saw that some small photovoltaic tickets had a good increase, which seemed to subvert our understanding, because if we look at the rhythm of the industry chain, small tickets should not be hyped.

This is precisely the difference between the views of industry and capital. From the perspective of the capital market, small tickets have experienced a very large decline in recent years, and their market value is not high. Therefore, when there is good stimulus, repairs are usually faster and easy in the short term. Outperform the big vote.

But this is only limited to the rebound of small tickets. Looking over a long period of time, the possibility of a large-scale reversal in the fundamentals of these small tickets is not high. On the contrary, it may become worse and worse. In the end, the only thing left is to be acquired. the value of.

So next, we will see that these small tickets begin to enter the downward channel after experiencing a large rebound in stock prices. Those big votes will come later, but their gains will be more lasting, because these companies are the final and biggest winners of the supply-side reform.

However, judging from the market rhythm, after the early rebound, more favorable policies will need to be implemented in order to have the next round of relay. If not, then after a short-term rebound, it is likely to fall again, especially for small tickets. Therefore, the market competition around small tickets will be fierce and the pace will be very fast. Especially in the Hong Kong stock market, there is no limit on the rise or fall, and the rise can be achieved in one step.

In general, the investment strategy is to take advantage of the favorable conditions and make a move. Whether it is a large ticket or a small ticket, there is a high probability that it will rise. If it is just an ultra-short game, small tickets are more flexible, but fast in and out. If you look at the medium and long term, you should still focus on large tickets, especially companies with high-quality fundamentals.