Why spend another 28 billion to expand production against the market? Silicon King Tongwei shares responded

Under the pessimistic overcapacity of the photovoltaic industry, Silicon King Tongwei Co., Ltd. made another move to expand production.

12On the evening of the 25th, Tongwei Co., Ltd. (600438.SH) announced that it would invest in the construction of a green substrate integration project in the Zhunger Economic Development Zone, Zhunger Banner, Ordos City, with a total investment of about 28 billion yuan, including an annual output of 500,000 tons of green substrates (industrial silicon), 400,000 tons of high-purity crystalline silicon projects and supporting facilities, which will be constructed in two phases.

In the first half of this year, the photovoltaic track ushered in a wave of expansion. With the continuous increase of production capacity in the industry, the price of the industrial chain has been declining, and the voice of overcapacity in the industry is endless, and the pessimistic atmosphere is strong.The expansion of Tongwei shares is based on such an industrial background, which inevitably causes concern in the industry, and there are many negative voices on the investor platform.

12On January 26, a reporter from Jiemian News called Tongwei Co., Ltd. about why it expanded production against the market, and relevant personnel said that all the company's strategies and project plans have been fully demonstrated, including cost control, industry-leading technology, quality, etc., which can meet the market demand for advanced polysilicon, so comprehensive consideration has promoted the expansion of production.

The person said that Tongwei is optimistic about the development prospects of the industry and will promote a number of expansion projects through existing funds, future cash inflows and corresponding credit reserves.

In the first phase of the above projects, 200,000 tons of green substrates (industrial silicon) and 200,000 tons of high-purity crystalline silicon projects will be built, with an estimated investment of 13 billion to 14 billion yuan; The second phase of the construction of 300,000 tons of green substrate (industrial silicon) and 200,000 tons of high-purity crystalline silicon projects will be launched at the right time according to market conditions.

The project will be constructed in phases, and the construction period of each phase is expected to be 15-18 months, of which the first phase of the project will be completed and put into operation by the end of December 2025, and the construction time of the second phase of the project is still uncertain.

The project is also Tongwei's second polysilicon project in Inner MongoliaWith the help of the rich resource advantages of Inner Mongolia Autonomous Region, it will consolidate its comprehensive competitive advantage in the photovoltaic industry chain.

However, if there are force majeure such as market environment policies and insufficient guarantee of production factors, the project period may also be postponed or the construction time may be adjusted accordingly; If the energy consumption indicators of the project are not available by the end of June 2024, the project can be terminated unconditionally upon the proposal of either party.

Tongwei also mentioned in the announcement that the project may be affected by policy adjustments, the financing status of power station owners, the level of power grid consumption, land supply, technology updates, and rapid product upgrades, and the risk that the project's profitability will not meet expectations.

Tongwei Co., Ltd., which is already the world's leader in polysilicon and batteries, has expanded its production capacity several times this year, involving the entire photovoltaic industry chain.

In June this year, the company invested 10.5 billion yuan in a project with an annual output of 25 GW of solar cells and 20 GW of photovoltaic modules.

8At the beginning of the month, Tongwei Co., Ltd. signed a 400,000-ton green substrate (industrial silicon) project with the People's Government of Guangyuan City and the People's Government of Cangxi County. The semi-annual report released half a month later revealed that it planned to build 300,000 tons of industrial silicon in Damaoqi, Baotou City. The first phase of the above two projects is planned to be completed and put into operation by the end of 2024.

During the same period, Tongwei announced two investments in Leshan City, with a total investment of 20 billion yuan, involving silicon wafers and cells.

As of the first half of this year, Tongwei has formed an annual production capacity of more than 420,000 tons of high-purity crystalline silicon, 90 GW of solar cells and 55 GW of modules.

If the announced Ordos polysilicon project is put into operation, Tongwei's high-purity crystalline silicon production capacity will be doubled.

According to the previous plan, from 2024 to 2026, Tongwei Co., Ltd. expects the company's cumulative production capacity of high-purity crystalline silicon and solar cells to reach 80-1 million tons and 130-150 GW, respectively.

In the context of overcapacity, polysilicon prices have been declining this year, from a high of more than 240,000 yuan/ton at the beginning of the year to about 60,000 yuan/ton at present, a decrease of 75%.

Tongwei's semi-annual report shows that its polysilicon production cost has dropped to less than 40,000 yuan/ton. Based on this calculation, Tongwei's net profit per ton of polysilicon is less than 20,000 yuan/ton.

With prices falling into an avalanche, other polysilicon giants such as Daqo Energy (688303.SH) have already experienced project delays. However, Daqo Energy has recently invested 15 billion yuan to expand the production of 100,000 tons of polysilicon, 300,000 tons of industrial silicon and 2.2 million round silicon cores.

Affected by the decline in polysilicon, Tongwei failed to maintain its year-on-year growth performance in the first three quarters of this year, achieving a net profit attributable to shareholders of listed companies of about 16.302 billion yuan, a year-on-year decrease of 24.98%.

LONGi Green Energy(601012.SH)President Li Zhenguo previously publicly stated that by the end of this year, the whole industry will form a production capacity of more than 700 GW, and there is still capacity in the planning, if not stopped, the industry capacity scale will reach 1000 GW by the end of next year.

In an interview with Jiemian News and other media in November this year, Liu Hanyuan, chairman of the board of directors of Tongwei Group, said that there is no need to worry too much about the problem of overcapacity in the photovoltaic industry, and that the market affairs should be handed over to the market as much as possible, and the government can properly guide them to get through the crisis.

He believes that the 30-year energy transition needs the support of the photovoltaic industry, and the industrial potential is huge. In this context, all investment and demand behaviors under market conditions are a cyclical and spiraling forward movement such as continuous rebalancing and re-excess. The essence of the market economy is to discover demand, balance demand, reduce investment, expand investment, and so on, so the current development trend of the industry is very normal.

"In the future, industries with huge growth space will almost all be rebalanced in just half a year, a year or a slightly longer period of time." Liu Hanyuan said.

As of the close of trading at noon on December 26, Tongwei's share price was 23.61 yuan, down 0.38%, with a market value of 106.292 billion yuan.