China News Weekly: Chen Weishan
Published in the 2024th issue of China News Weekly magazine on January 1, 15
"Eight out of 10 modules are produced in China. "This is a true portrayal of China's photovoltaic industry in the global picture.
According to the International Energy Agency (IEA), global spending on solar production (about $2023 billion) will surpass oil production spending (about $3800 billion) for the first time in history in 3700. Among them, China produces 80% of the world's solar panels, 85% of solar cells and 97% of solar silicon wafers. This means that China's photovoltaic industry has an absolute advantage and has become a well-deserved first in the world.
Of course, absolute superiority is not won by lying down, but is shaped in the process of continuous "rolling". In 2011, 2018 and 2023, the domestic PV industry has experienced periodic "bottoming", "module price wars" and "overcapacity" plaguing the entire industry again and again. But at the same time, every time the industry is in a trough, it will always be accompanied by new technological breakthroughs. In May 2023, Gao Jifan, chairman of Trina Solar, publicly stated that China has 5,15 of the world's 12,80 photovoltaic patents, accounting for more than <>% of the world's total.
"Compared with the photovoltaic industry, which has experienced several rounds of ups and downs, the lithium battery industry can only be said to have just begun to experience the baptism of the cycle, and in the future, enterprises represented by CATL will even occupy two-thirds, or even more of the global market share. Li Jigang, general manager of Tianjin Ronbays Coland Technology Co., Ltd., told China News Weekly.
According to data released by the General Administration of Customs, from January to September 2023, six of the top ten companies in the world in terms of installed power battery capacity are Chinese companies. In January ~ October 1, China's lithium-ion battery exports increased by more than 9% year-on-year.
"China will definitely export lithium battery production capacity to the world, and lithium batteries are repeating the path taken by photovoltaics. On the surface, the 'involution' is cruel, but the companies that win in the 'involution' must have global competitiveness. Li Jigang said.
"Shopping" overseas
In 2023, the main battlefield of China's photovoltaic enterprises has shifted overseas.
Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, summarized the export trend of photovoltaic products last year as "volume increase and price reduction". In January ~ October 2023, the export volume of domestic photovoltaic products increased, with the export volume of silicon wafers, cells and modules increasing by 1%, 10% and 90% year-on-year respectively, but the export value in the same period was about 72.34 billion US dollars, a year-on-year decrease of 429.9%.
Behind the decline in exports is the decline in PV product prices last year, from upstream polysilicon to downstream modules.
On September 9 last year, the European Photovoltaic Industry Association sent a letter to the European Commission, saying that high demand has led to the rapid expansion of capacity in China's PV industry chain, fierce competition among Chinese producers, falling market prices, and soaring European module inventories, and this "storm" has caused European module prices to fall to a record low of less than 11.25 euros (about 0.15 yuan) since the beginning of the year.
Chinese PV companies are frequently playing out in overseas markets as they wage "price wars", with module price cuts stimulating installed capacity demand and companies looking to seize the fast-growing market at more competitive prices.
The head of the Middle East and Africa region of a leading module manufacturer told China News Weekly that the installed PV capacity in the Middle East accounted for less than 2022% of the world's total in 5, less than 10 gigawatts. "The whole market has just started, and the growth rate of photovoltaic installed capacity in the Middle East reached more than 1% in January ~ August this year, which is the fastest growing region in the world. In 8, only about 110 GW of modules were exported to Saudi Arabia, and in the first quarter of 2022, it has exceeded 1 GW."
However, he also said frankly that because of the low electricity price of the Middle East photovoltaic power station developer, coupled with the large scale of the project, it is easy to form large-scale centralized procurement, and the implementation span is large, and even needs to complete production and delivery across the years. Chinese module makers are actively bidding on these projects, and they are also taking on the risks posed by fluctuations in the prices of raw materials such as upstream wafers. "The competition is also so fierce that we want to seize more markets in the Middle East, and module margins are actually very small."
However, Lv Jinbiao, deputy director of the silicon industry expert group of the China Nonferrous Metals Industry Association, explained to China News Weekly that the module price reduction to start in 2023 is supported by cost reduction, and is not a vicious "price war" that blindly bargains with each other. "There has never been a year where costs have fallen so dramatically as last year."
In 2023, upstream polysilicon prices will drop sharply, from a high of RMB 0,6/t to RMB 2022,2023/t or RMB 60,110/t, implying a drop of more than RMB 2023.800/W in module costs. The decline in module prices was due to capacity expansion, especially upstream polysilicon capacity expansion. Lv Jinbiao said that polysilicon companies will actively expand production capacity in 1060 and <>, adding about <>,<> tons and <>.<> million tons of polysilicon production capacity, respectively. According to estimates by many institutions, the production capacity of wafers, cells, and modules will exceed <> GW in <>, and if each company plans to implement production capacity, the production capacity of each link will even exceed <>,<> GW.
Obviously, such capacity is not only for the domestic market. Some industry insiders lamented to reporters that for any photovoltaic company, the significance of overseas markets is self-evident, and half or even more than half of the revenue of leading enterprises comes from international business. This is also the reason why Chinese companies began to "roll" overseas markets last year.
The lithium battery industry is going through a similar journey. "The lithium battery industry is basically a 7-year cycle, at the end of 2020, marked by Tesla's introduction of lithium iron phosphate batteries, the industry ushered in a period of rapid growth, capacity expansion, and the current industry is going through a relatively difficult cycle. Li Jigang, general manager of Tianjin Ronbays Coland Technology Co., Ltd., told China News Weekly that the price of lithium batteries still has room for at least 30% or even 50% price decline.
"This means that in the next one or two years, the lithium battery industry will be extremely 'volume', and enterprises will have to embrace 'volume'. In his view, "Chinese companies have 'rolled' Japanese companies other than Panasonic out of the market, and at present, they can only be regarded as equal to Korean companies represented by LG New Energy."
Yu Qingjiao, chairman of the Battery 100 Association, told China News Weekly that under the overcapacity, the pressure of competition in the domestic market will increase, and the enthusiasm of the industrial chain to explore overseas markets will be higher, especially the overseas energy storage market, which is expected to have a good performance in exports.
According to statistics from the China Automotive Power Battery Industry Innovation Alliance, in the first 2023 months of 11, domestic power and energy storage battery exports totaled 133.6 GWh, nearly doubling compared to the whole of 2022.
In the field of power batteries, Chinese companies are rapidly seizing overseas market share in 2023, and last year was also regarded as a harvest period by Yu Qingjiao. SNE Research, a South Korean market research agency, released a ranking of power battery loading volume in markets other than China, which can reflect the changes in the overseas market share of Chinese power battery companies. In the first quarter of 2023, the overseas market share of Chinese enterprises was 29.6%, an increase of 6 percentage points year-on-year.
In January ~ October 2023, the market share of three South Korean companies, LG Energy Solution, SK On and Samsung SDI, fell by 1.10%, and the market share is being eaten up by Chinese companies represented by CATL, which has reached 5.5% in the overseas market in the same period, compared with only 27.6% in the same period last year, which is already on an equal footing with LG Energy Solution, which ranks first.
The advantage of high competition is forced
The cost competitiveness is extremely strong, which is reflected in the photovoltaic industry, and the impact is like two sides of the coin. On the one hand, it can kill all sides overseas, but on the other hand, it faces a painful price war at home.
"Recently, there has been an irrational price close to the cost line of 1 yuan/watt in the photovoltaic module sector, and at this price level, the whole industry chain is difficult to make a profit, and everyone is basically barely surviving. Li Zhenguo, general manager of LONGi Green Energy, said at the company's third-quarter results meeting on the afternoon of October 10 last year.
The process of clearing the industry is inevitably painful, but it is also regarded as a necessary process to eliminate high-cost and technologically backward production capacity.
Lv Jinbiao told reporters that as polysilicon production capacity rises rapidly in 2023, when the price of polysilicon drops to <>,<> or <>,<> yuan per ton in the middle of that year, some small enterprises with an annual output of <>,<> or <>,<> tons of polysilicon will stop production due to cost reasons.
"After breaking through the bottleneck of polysilicon production capacity, the competitiveness of China's photovoltaic industry has been further enhanced. Lv Jinbiao explained that the most intuitive embodiment of the advantages of China's photovoltaic industry is to leave other regions far behind in terms of cost, even if the production capacity of Chinese enterprises in Southeast Asia is higher than that of China, and other regions are not competitive in terms of cost, such as the production cost of European modules is still as high as more than two yuan per watt.
"This is also a problem facing the current overseas layout of production capacity. If it is only used to supply the local market, the scale of production capacity will inevitably be difficult to expand, and there is no cost advantage, and the reason why domestic production capacity can grow rapidly is due to the face of the world market. The global market is still gradually expanding, but the growth rate is different, which is also the reason for the relative optimism about the problem of overcapacity. Lu Jinbiao said.
Some industry insiders also explained to China News Weekly that the outside world does not need to worry too much about the current price decline and industry clearance caused by overcapacity. The advantage of China's photovoltaic industry is that the product cost performance is the best in the world, which is due to the relative overcapacity, production capacity to reach 1.3 times the actual demand to promote the survival of the fittest, China's photovoltaic industry has experienced "three ups and downs", no individual enterprises are eliminated, can not shape the overall advantage of China's photovoltaic industry.
For example, he told reporters that against the backdrop of high polysilicon prices in 2022, an important trend in the industry was thinning, reducing the amount of polysilicon per watt of module demand, resulting in a slight drop in module prices that year. "Only a highly competitive environment can force companies to innovate technology."
Large-scale production reduces costs and selects better technical routes, which is considered to be the key to China's photovoltaic industry, which now accounts for more than 2023% of the world's output in all aspects. Lv Jinbiao said that in <>, the performance of N-type cells represented by TOPCon will exceed expectations, the photoelectric conversion efficiency will be improved, the yield of the production line will continue to improve, and the cost will be well controlled, basically achieving the same price as the previous generation of P-type cells.
Similar to the successful path of the photovoltaic industry, in Li Jigang's view, cultivating the domestic market through industrial policies, continuously reducing costs with scale, and continuing to invest in R&D and iterative technology have ultimately shaped the global competitiveness of the lithium battery industry.
The most typical is the advantage that Chinese companies have achieved in lithium iron phosphate batteries. There are two main types of power batteries: ternary and lithium iron phosphate, ternary batteries are better than lithium iron phosphate in energy density, so car companies often give preference to ternary batteries, at that time only Chinese battery companies were producing lithium iron phosphate batteries, and Japanese and Korean companies led the world with ternary battery technology.
According to data from the China Automotive Power Battery Industry Innovation Alliance, in June 2019, ternary batteries accounted for 6.72% of the installed volume, and lithium iron phosphate accounted for only 8.25%. However, with the continuous decline of new energy vehicle purchase subsidies, the weight of battery cost has gradually increased. At the same time, CATL and BYD and other companies improved the battery structure, improved the overall energy density of the battery system, and met the demand for passenger car mileage, which finally opened up the application space of the lithium iron phosphate battery market.
On April 2023, 4, Ouyang Minggao, an academician of the Chinese Academy of Sciences, said at a public forum that almost every Chinese company has a good battery structure technology, such as BYD's "blade battery", CATL's "Kirin battery", GAC Aion's "magazine battery", etc., "lithium iron phosphate seems to be a battery specially left by God to Chinese."
Gambling on the European and American markets
For the photovoltaic and lithium battery industries, Europe and the United States are important export destinations, which is due to their high gross profit margins.
Zhang Sen, secretary general of the photovoltaic branch of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, told China News Weekly that the price of photovoltaic products in the US market is relatively high, and in the short term, it is difficult for foreign products to enter the US market at low prices due to the impact of two "double anti" measures against China, tariffs such as 201 and 301, and anti-circumvention and forced labor laws. However, in the medium and long term, with the implementation of localized production, enterprises will face the trend of cost reduction and price competition, and the market situation of high prices and high profits will change greatly.
但美国目前仍是毛利较高的市场。2022年，晶科能源毛利率最高的两个市场分别是亚太(以美国为主)和欧洲，分别达到14.34%和13.54%，而同期国内市场的毛利率仅为7.82%。
前述光伏业内人士告诉记者，欧洲其实对组件价格的容忍度更高，例如2022年当组件出货价格达到1.9元/瓦时已经达到国内光伏电站的盈亏平衡点，但是以分布式与户用光伏为主的欧洲市场对价格的敏感度更低。
同时，欧美也是面临较高贸易壁垒的市场。2011年之后，占八九成需求的欧美先后对中国光伏产品启动“双反”调查，所设关税最高超过200%，这对当时国内市场尚未启动的光伏产业而言可谓遭遇“灭顶之灾”。
此后，为规避欧美，特别是美国的贸易壁垒，中国光伏企业开始经营东南亚生产基地。目前，中国企业在东南亚的硅片、电池片、组件产能分别达到9.5GW、44.2GW、42.4GW，后两个环节占全球总产能的8.5%左右。据统计，2022年，越南、马来西亚、泰国、柬埔寨等东南亚四国贡献了美国八成以上的组件进口。
此后，中欧光伏贸易趋于平稳，但美国并未停止针对中国光伏产业设置贸易壁垒。
今年前三季度，隆基绿能的资产减值损失达30.92亿元，同比增长277%。“今年超30亿元的减值中，相当一部分来自于发往美国的产品回运之后的减值。过去几年美国市场中，我们遭受了很严重的损失。”隆基绿能总经理李振国说。
2022年4月，美国商务部启动针对东南亚四国光伏产品的“反规避”调查，意在打击中国组件厂商以东南亚为跳板进入美国市场，但是当年6月便给予两年的“豁免期”，直至2024年6月。
"The new PV capacity is a rigid demand, and if the modules produced by Chinese companies in Southeast Asia are excluded, it will be difficult for local US manufacturers to provide competitively priced products, so they will have to be exempted. Lv Jinbiao said that the local production capacity in the United States is mainly based on First Solar's thin-film modules, and there is a complete industrial chain in the United States, but the previous annual output was only five or six gigawatts, and in its financial report in the third quarter of last year, the selling price of modules per watt was more than two yuan, but the shipment price of Chinese enterprises in the same period has reached 1.2 yuan ~ 1.3 yuan per watt.
An industry insider told China News Weekly that the forecast for the situation after the end of the exemption period in June this year is relatively optimistic, "because it is difficult to find alternative production capacity in the United States in the short term, and the demand for Chinese photovoltaic products is a 'rigid demand' for the United States."
"For lithium battery manufacturers, the United States is still the largest single market in the overseas market, and the United States also occupies a considerable share of the global automotive industry. Chinese companies naturally do not want to give up the huge cake of the US market, but they also see the determination of the United States to put the lithium battery industry chain in the country through the IRA Act. Li Jigang said.
The so-called IRA bill is the "Inflation Reduction Act" signed by Biden in August 2022, in this bill, the US government will provide a tax credit of up to $8,7500 per electric vehicle, and its precondition is that the vehicle is assembled in North America and a certain proportion of key raw materials for battery components must be mined or processed in North America.
On December 2023, 12, the United States once again clarified the details of the IRA Act, which states that electric vehicles that contain any battery components manufactured or assembled by a foreign entity of concern starting in 1 and any critical minerals manufactured or assembled by a foreign entity of concern starting in 2024 will not be eligible for the tax credit.
"At present, enterprises in China, Japan and South Korea are relatively leading in the lithium battery industry. On the one hand, the United States is worried about the large-scale expansion of Chinese companies to the United States, and on the other hand, it is also worried that if Chinese enterprises are completely excluded, technical exchanges will be hindered and the competitiveness of domestic products in the United States will be affected. Li Jigang told reporters that at present, Chinese enterprises are also opening up channels in the "Eight Immortals Crossing the Sea".
CATL is already entering the U.S. market by providing technical assistance and patent licensing support for North American plants. In February 2023, Ford Motor announced plans to build a battery plant with CATL. Among them, Ford will invest US$2.35 billion to build a new lithium iron phosphate battery plant in Michigan, with a 100% stake, while CATL will provide technical assistance and patent licensing support.
In September 2023, due to multiple factors such as the North American auto workers' strike and the IRA bill, Ford Motor announced that it would temporarily suspend the construction of a battery plant. Until November 9, Ford announced that it would restart the gigafactory program, but the planned investment, production capacity and jobs have been reduced to a certain extent, and the production capacity has been reduced to 2023GWh.
A few days ago, a spokesperson for Ford Motor Company made it clear that Ford Motor Company did not see "anything in the IRA Act and guidelines that excludes our technology licensing cooperation with Chinese battery maker CATL from subsidy eligibility." This means that CATL's technical cooperation with Ford is not excluded from the subsidies under the IRA Act, which has come into effect under the new rules.
Yu Qingjiao said that for Chinese power battery companies, the competitive environment in the U.S. market is indeed unfriendly, but there are still opportunities in markets such as energy storage. In the power battery market breakthrough, in addition to building a local factory, technical breakthrough is also one of the options. From the perspective of the cooperation between Ford and CATL, it is feasible to break through technical cooperation, but this method is more suitable for leading enterprises with strong technical reserves.
Nowadays, the domestic lithium battery industry is also like the photovoltaic industry, hoping to avoid trade barriers through various forms of global layout.
Compete for the next generation of the industrial chain
In addition to lithium batteries, the United States hopes to use the IRA that will come into effect this year to exchange subsidies for the return of the PV industry chain, providing subsidies totaling US$0.17/W from silicon to modules.
Some Chinese PV companies have also announced plans to build factories in the United States in 2023, such as JA Solar, which officially announced a two-gigawatt module project in the United States, with an investment of 11.4 billion yuan. LONGi Green Energy will also cooperate with U.S. clean energy companies to build a 5 GW module plant in the United States. Canadian Solar's planned U.S. module plant also has a capacity of 5 GW.
However, Lu Jinbiao said, "The subsidy requirements given by the IRA are too strict, requiring almost every link from upstream to downstream to be produced in the United States, and some states even propose that accessories such as glass, frames, and brackets should be manufactured locally." Another example is that the United States also has restrictions on the degree of automation of factories, and a certain number of workers need to be recruited before they can receive subsidies. Some companies want to test the water with module factories, but if they only have module production capacity and it is difficult to obtain subsidies, they will eventually become 'paper planning' because of the lack of cost advantages."
Suntech went to the United States in 2009 to build a module factory, but it was eventually closed in 2014, and the current more mature overseas production base is in Southeast Asia, he said. However, Chinese companies are still cautious about expanding production capacity in Southeast Asia, as their manufacturing costs are still higher than those in China, and they are also cautious about expanding their module production capacity by 1 GW in Southeast Asia, compared with the usual large-scale expansions in China. "Chinese companies are going out, in addition to examining whether the local market is mature, but also to consider the situation of trade barriers in various places. However, many overseas production capacity layouts are still in the stage of investigation and demonstration, or small-scale experiments, and it is difficult to see the formation of another overseas photovoltaic industry cluster in the short term."
However, Zhang Sen said that although there is no cost advantage in building a factory in the United States, in order to cope with the barriers set by a number of bills, photovoltaic companies can only move their production capacity such as silicon wafers and auxiliary materials overseas, and even build manufacturing plants in the United States to achieve a specific supply chain output to a specific market, so as to achieve the localized supply of "you have me, I have you, China's photovoltaic, and serve the world", so as to bypass trade barriers such as tariffs.
The above-mentioned photovoltaic industry insiders also told reporters that the determination of Europe and the United States to rebuild the local industrial chain should not be underestimated, and the key for Chinese enterprises to maintain their advantages lies in the continuous iteration of technology.
Europe and the United States are stepping up the deployment of next-generation photovoltaic technology. In July 2023, Swedish solar energy company Midsummer invested in an equipment factory in Sweden that received a 7.3230 million euro grant from the European Union's Innovation Fund to produce equipment that will be used to prepare copper indium gallium selenide (CIGS) cells, a type of thin-film solar cell that was represented by the bankrupt Chinese company Hanergy Holdings in the early years.
However, Midsummer shareholders told China News Weekly that the technical route it used was not the same as that of Hanergy Holdings, which at that time used the "post-selenization" technology route, but ultimately failed due to the low yield rate. "The EU Innovation Fund is the sovereign wealth fund of the European Union, and 3230.6000 million euros is not an 'investment' but an 'appropriation', which means that it does not own the company's equity and does not participate in the company's operation, and there will be more than 2023 million euros of subsequent allocation. In <>, the EU Innovation Fund will make only two grants, and the other will be invested in artificial intelligence projects".
The Italian government gave Midsummer a grant of more than 200 million euros and provided application scenarios in exchange for production capacity. Midsummer's plant in Italy will be operational in the first quarter of this year, with a planned capacity of <> megawatts, and the Italian government's grant can cover <>% of the investment in the factory. The shareholder told reporters that copper indium gallium selenide batteries are currently in the stage where they need to reduce costs through large-scale production, coupled with the high electricity price in the EU, there is room to digest higher-cost components. "And Midsummer will soon have production capacity in France."
The above-mentioned Midsummer shareholders told reporters that Europe and the United States do have doubts about crystalline silicon cells, on the one hand, China's advantage in crystalline silicon cells is difficult to shake, and it intends to set up trade barriers, on the other hand, it is indeed difficult to deal with crystalline silicon cells after retirement.
Li Jigang also believes that for the lithium battery industry, the future of the global market competition lies in the technology, in the four main materials of lithium batteries, anode materials, separators, electrolyte certainty are larger, the biggest uncertainty is the cathode material, which is also a factor that determines the capacity of the battery. Whoever can seize the opportunity in the next generation of cathode materials may be the next lithium battery giant, thereby dominating the global competition pattern.
Every iteration of cathode materials is accompanied by the birth of new giants, such as lithium iron manganese oxide batteries and Sony, ternary batteries and LG, lithium iron phosphate batteries and BYD.
Lithium manganese iron phosphate is not a simple upgrade of lithium iron phosphate, it will reduce costs while improving energy density, and theoretically lower than the cost of existing lithium iron phosphate batteries by 10%~15%, becoming the most popular track at present.
Li Jigang said that at this stage, lithium manganese iron phosphate batteries will definitely be "on the car", but in the form of composite use with ternary batteries, that is, CATL M3P batteries, to avoid its shortcomings in technical adaptability with the downstream. At present, various manufacturers, such as Tesla in the United States, ACC in France, LG New Energy in South Korea and other battery manufacturers are making efforts to lithium manganese iron phosphate batteries.
In Li Jigang's view, at present, all manufacturers are competing for the application of lithium manganese iron phosphate, once it breaks through the problem of adaptation with downstream technology, and can reduce costs, it will sweep ternary batteries and lithium iron phosphate batteries.
"It is no longer possible for foreign companies to compete with Chinese companies in the lithium iron phosphate battery track, and the difficulty is not to make a breakthrough in technology, but that it is difficult for Chinese companies to produce cost-effective products that gather competitiveness except for Tesla. Li Jigang said.
"The United States and Europe want to replicate China's style of play and cultivate local industries through industrial policies, but it is difficult to replicate it successfully when China has already taken the lead. Li Jigang analyzed, so the United States and Europe are more focused on the next generation of lithium battery products, "hoping to win back a game in the technical direction of lithium manganese iron phosphate, solid-state batteries and other technologies."
China News Weekly, Issue 2024, 2
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