China's PV industry integration is in the midst of pain

"Only when the water recedes, I know who is swimming naked." The famous quote of investment guru Buffett is undoubtedly a true portrayal of the global photovoltaic industry that is currently unable to escape in the mud.

Solar photovoltaic, a strategic emerging and star industry that once made countless investors smash into the money bag and create a high-speed growth myth. At the beginning of the spring of last year, the spring blossoms are blooming, and the entire photovoltaic industry is still shining. Struggling in the cold winter: low demand, overcapacity, price wars, double-reverse investigations... An industry that relies on sun exposure is now enveloped by a thick haze.

Internal and external difficulties, photovoltaic companies that could make money by simply expanding production capacity have to quietly adjust their way, or extend the industrial chain, or rush to the domestic market, or force brand building... Most people are convinced that since energy is the rigidity of social development Demand, while traditional energy is decreasing, the development of the solar photovoltaic industry is imperative, as long as the darkest moments will be able to usher in the dawn. However, this time the night is much longer than people think. A cruel fact is placed in front of every PV company, and as a Chinese PV company that accounts for more than 50% of the world's total: With the continuous downward adjustment or cessation of subsidies in overseas markets, overseas markets have contracted sharply, while domestically installed capacity has increased. It is impossible to effectively consume the existing capacity, and the industry reshuffle is inevitable.

Zhejiang SMEs first slammed the tide

In September last year, a news quietly spread in the photovoltaic industry: in view of the spread of the European debt crisis and the reduction of subsidies in photovoltaic countries such as Germany and Italy, in the past few months, more than 50 solar energy companies have fallen in the country, and three-thirds One company is in a semi-discontinued state. As evidence, the photovoltaic companies such as Suntech, Jingao, China Light and Power, and LDK, which are listed in the US, suffered losses in the second quarter.

After the financial crisis, the world PV market grew rapidly in 2010. The installations of Germany and Italy, the world's two major PV installation countries, have doubled, and the market size has reached about 60 billion US dollars, prompting a large amount of investment to the photovoltaic industry. The photovoltaic industry has developed rapidly and expanded blindly. A large number of enterprises have entered this industry. Taking Zhejiang as an example, in September 2011, there were about 205 PV companies in Zhejiang, of which about 110 were established after September 2010, and the scale is below 100MW. The products of small and medium-sized enterprises are mostly concentrated in the field of lower photovoltaic modules entering the threshold. The low technical content does not have core competitiveness. The influx of a large number of enterprises causes overcapacity and the development of the industry is limited.

The serious overcapacity has led to the current production of small businesses close to the break-even point, and the merger or closure has become a few choices for enterprises. This also indicates the arrival of a round of industry reshuffle in the photovoltaic industry, and many PV companies, especially small enterprises, are facing the fate of being eliminated.

In the face of the "wind and rain" of overseas markets, the situation of small and medium-sized PV companies that were not dominant will be inevitable. According to statistics, in 2010, domestic small and medium-sized PV enterprises accounted for 67% of total exports; but in 2011, this figure plummeted to 34%, and in 2012 it was estimated to be less than 20%. Most people who are small and medium-sized enterprises can share in the overseas market are pessimistic.
Zhejiang Xiecheng Silicon Industry Bankruptcy

On January 17, 2012, a person in charge of the administrative office of Zhejiang Xiecheng Silicon Industry Co., Ltd. (hereinafter referred to as Xiecheng Silicon Industry) confirmed to the media that the company was in bankruptcy liquidation. "At present, the company has completely stopped production, and there will be new results after May." The person in charge said. As a result, Xiecheng Silicon has become the first bankrupt company in the domestic polysilicon industry after the “2011 PV Storm”, causing huge shocks in the industry.

In June 2008, as the parent company of Xiecheng Silicon, Xinchengda Group has painted a beautiful picture to the local area: a total investment of 4 billion yuan, 400 megawatts of solar photovoltaic cells and 3,300 tons / year The polysilicon production and construction project will be born in Jiaxing Port Area. The total investment of the first phase of the project is about 800 million yuan. The project will be completed and put into operation within 5 years. It is estimated that the annual sales income will reach 12 billion yuan. This is not common in the local area. Xiecheng Silicon originally planned to build all the projects in five years. I didn't think that all the investment had not been completed yet. The company came to an end in the fourth year.

In this regard, some insiders pointed out that in fact, the polysilicon enterprises trapped in the dilemma are not just a joint venture. A number of companies tried to go public before, but they all ran aground due to the plunge in polysilicon prices. Among them, Leshan Power and Tianwei Baobian have announced that the polysilicon production line of the joint venture company Ledian Tianwei Silicon will stop production due to the inversion of production costs. At that time, most of the domestic small and medium-sized polysilicon enterprises have stopped production, and the dilemma faced by Xiecheng Silicon Industry is only one aspect. The integration of the photovoltaic industry is inevitable, and many companies will also swallow the bitter fruit of blind expansion. This is just another big reshuffle faced by domestic polysilicon enterprises after the Ministry of Industry and Information Technology and other departments jointly issued the threshold for “Plastic Industry Access Conditions”.

The polysilicon industry is a field with high requirements for technology and large-scale production. Before the high-purity raw polysilicon was controlled by three overseas companies, Heimock, Wacker and Mitsubishi, until the domestic solar photovoltaic industry was surging, the self-sufficiency rate of polysilicon was great. Step up, although a certain domestic PV giant introduced the US 10,000-ton full-scale raw high-purity polysilicon production equipment, but the production cost and product quality are still far from the foreign silicon giants. This shows that the introduction of equipment and mastering the core technology is completely different. The high-purity polysilicon used in China is still heavily dependent on imports. Without real core technology and cost advantages, when the crisis is coming to a close, it seems to be the only choice.

There is no integration without the basis of profit distribution.

Last year, when many PV business owners were at a loss, Shen Fuxin gave a self-rescue plan for Zhejiang PV companies, which is “the development of the group”. The specific measures for this program are to select local PV leading enterprises in each region, such as Ningbo and Hangzhou, such as Qihui and Chint, which will lead the integration of PV SMEs to achieve a win-win situation for the company.

On October 28th, it was reported that Qihui Sunshine will integrate 20 small and medium-sized photovoltaic enterprises in Kaihua and set up Kaihua Huihui Company. By Sun Hui Sunshine Holdings, 20 small enterprises will participate in the share management experience. SMEs do the foundry of Yuhui.
However, this beautiful idea has been denied by Yan Huiguang: "This is just an intention." The reason why Huihui started integration is that the original intention is to establish contact with these small enterprises and distributors to seize customers. . On the other hand, it is hoped that the cost advantages of small businesses can be integrated to reduce the overall cost. However, at present, small businesses do not have any profits, and all of them are losing money. Without the basis of profit distribution, integration cannot be discussed. At that time, the person in charge of Sunshine Sunshine also said: "At present, the trough period faced by the PV industry is not a short period of low, but will continue. If SMEs adopt a shutdown strategy even if they do not produce, it is impossible to maintain it for too long, because it is expected When will the market be revived?"

Prior to the Zhengtai Solar Chairman Qiu Zhanxi also said that there is no plan to integrate SMEs. He also said that Chint Solar's current demand for capacity expansion is not large. Even if expansion is needed, it hopes to be upgraded through the introduction of new technologies and new equipment, regardless of the means of integrating SMEs.

The photovoltaic industry is originally a high-input industry. Compared with traditional industries of the same scale, any PV company has an amazing amount of investment. When the market suddenly shrinks, the weak demand of downstream demand will push the total fixed assets such as upstream PV equipment. The decline in value. The logic of “no integration without profit distribution” is ridiculous—if SMEs have profits, they will accept integration and fall under the roof of others? But this slightly absurd logic just reflects such an indisputable Fact: In the winter of the whole industry, even the huge "Northeast Tiger" has to carefully retain its energy in order to survive the long winter. Investment itself is risky. SMEs must follow the rules of the market and make themselves bigger and stronger in order to survive in a level playing field.

LDK led the layoffs

On April 3, Q-Cells, one of Germany's largest PV companies, filed a bankruptcy application with the local court. The company's full-year loss in 2011 amounted to 864 million euros (about 1.1 billion US dollars), and the decline in prices and sales of the products made it impossible. The Q-Cells are hard to work with. As the most affected by this, Jiangxi Saiwei, its 15,000-ton polysilicon expansion project, which is tailor-made for Q-Cells, has become a huge burden for Saiwei.

On April 6th, an employee who claimed to be Jiangxi LDK Solar High-Tech Co., Ltd. (hereinafter referred to as “Lev”) said on the Internet that his company will lay off a large number of people, and those who have worked for less than three years will be All dismissed. Suddenly spread on the Internet quickly, causing widespread concern.

Although before the official announcement, the company said that the optimization of the cost is not layoffs, but the paper can not contain the fire after all, the serious overcapacity, the debt level of the amazing Saiwei has been in deep crisis, layoffs are inevitable. Subsequently, the company officially released the announcement of the layoffs and related rules. On April 8, the Xinyi Silicon Wafer Factory, which has the largest number of employees in Saiwei, began to lay off employees. A Saiwei internal executive confirmed that employees who have been working in Saiwei for less than 2 years will be dismissed.
A number of Saiwei employees confirmed separately that the company's layoffs were divided into two batches. The first batch of layoffs began on April 8th, mainly for the Silicon Division of Xinyu Plant. The second batch will also be launched in the next few days, and the specific plan is unknown. And a Saiwei insider revealed that all the two batches of layoffs will be completed by the 15th of this month.

The specific criteria for the first batch of layoffs are: employees who have been working in Saiwei for less than 2 years will be dismissed. At the same time, the compensation plan for the employees who have been laid off is: one month's salary for less than one year of work, one half and one month's salary for one year and less than one and a half years, and two months' salary for one year and a half less than two years. . The compensation component is settled according to the average monthly salary of 12 months forward. The upper deputy director and the employees above the assistant level (including the deputy supervisor and the assistant) are not within the scope of the layoffs. The hierarchy of Saiwei internal employees is from the bottom up: employee-squad leader-duty director-deputy director. For employees who have worked for 2 years, they will not be compensated if they voluntarily resign. If you work in Saiwei for 2 years and your job shop is saturated, you will also be placed at home. The salary for waiting is 600 yuan per month.

Some departmental employees also revealed that their departments have raised the standard of layoffs to employees who have worked for less than three years. Employees who have worked for three years have arranged for diversion. If the work is more than three years and the workshop staff is saturated, a long vacation will be arranged. The rest of March will be 660 yuan per month.

The Silicon Wafer Division of Saiwei Xinyu Plant is the largest department in the entire Saiwei area, with a total of 10,000 employees. Li Longji, assistant to the chairman of Saiwei, told the reporter that Saiwei currently has 25,000 employees. Regarding the total size of the layoffs, Li Longji of the company's public relations department did not respond to the rumors of “thousands of people.” The semi-official news said that 3,000 people were laid off, and another insider revealed that the company will boost system integration in the future. The business is looking for a turnaround, and the scale of layoffs is much larger than 3000, or more than 6000.

OFweek editorial point of view: Until the end of last year, Saiwei has been raising funds through various channels. According to officially released data, it has obtained more than 3 billion working capital through the issuance of short-term and medium-term bonds for the purchase of production. Raw materials, payment for goods and compensation for losses, but also plans to invest in a high-purity polysilicon production line with a capacity of 30,000 tons in Inner Mongolia, trying to fight for the spring of PV in 2012. But in 2012, for PV, it is not far from the “2012” in the US blockbuster – not only does spring come, but the temperature in winter is lower. In the face of such a downturn, the company must not continue to earn a living. Whether it is for the company's management or for all employees, this is a very difficult decision, but Saiwei is also a good model for the entire industry. Hard support is not the last word. Only by adapting to market changes, taking the initiative to make changes can survive and rise rapidly when the industry recovers. Imagine if Saiwei can make adjustments early, the situation may be much better than it is now. The development of large companies has a benchmarking effect on the entire industry. The successful transformation of Saiwei can undoubtedly have a great incentive for the entire photovoltaic industry.
Self-help saves his life

Following the introduction of the unified on-grid tariff rules by the state, many PV companies still hope that the country will introduce more preferential policies to support the development of the industry, especially when the photovoltaic industry is in a precarious state. This desire is particularly strong. In the "two sessions" that have just passed, the sensitivities of the "photo-stopping" and "preventing" of the photovoltaic companies are also sufficient.

However, the photovoltaic industry is an emerging field. The government mainly guides and encourages it at the macro level, such as designating relevant legal policies and using economic leverage such as finance and taxation to provide support, just as VIP customers have some opportunities for priority development.

In the current situation of overcapacity, the survival of the fittest will be an inevitable choice for PV companies. In the context of reshuffle, optimizing integration will be the future direction of SMEs. However, integration is not so easy. How to redistribute the original resources of the enterprise and maximize the complementary advantages will be a problem that Chinese PV companies must consider.

The development of the photovoltaic industry always revolves around the controversy of speed and quality. One of the major problems facing the development of China's PV industry is that it is too speedy and ignores the quality of development. Most companies focus on expanding the scale and production capacity of enterprises, ignoring the research on core technologies, often falling into big but not strong. situation. In addition, most domestic PV companies use price as a means of competition to expand the production scale and reduce the price of photovoltaic modules to open up the market, which has caused overcapacity in the PV market this year.

The current popular view remains: "Only companies with a certain scale can be competitive." This view is not unreasonable. Large-scale production can indeed bring about cost reduction. However, for Chinese PV companies that lack core technology, it is obviously not practical to try to take all the links. The fact that Zhongsheng Optoelectronics recently shut down the wafer factory further proves that the strategy of vertical integration (silicon, battery and component operation at the same time) is completely unworkable. All PV companies can only take advantage of the strengths and gain their strengths. The Chinese PV industry can smoothly survive the winter and welcome the spring that is still far away but will surely come.

The survival of the fittest is the eternal natural law, and the pain that the photovoltaic industry is experiencing has once again been staged in other industries. It is impossible to turn a butterfly into a dance without experiencing the pain of breaking it. The "good-hearted person" who cuts the skull with a scissors may be the murderer. The same is true for the photovoltaic industry. After undergoing crazy and disorderly development, only through industry integration can we clear the outline of the industry, realize the transformation from pure manufacturing industry to research and development of high-tech industries, reduce production costs and improve product quality. To make the products truly universal, so as to change people's production lifestyle and even change the grand vision of the whole world. Although the process of integration and transformation is very difficult and the road is far away, we are moving forward and seeing the dawn.

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