Three years after falling from the top position in global component shipments, Jingke Energy (688223. SH) has returned to the throne.
As the head of Jingke Energy, Li Xiande has rarely been interviewed by the media and is relatively low-key compared to other private photovoltaic entrepreneurs. The industry can only see his written speech during the annual festivals or major events of Jingke Energy.
In 2006, Li Xiande established Jingke Energy. Five years later, Jingke Energy became the tenth Chinese photovoltaic company to list on the New York Stock Exchange. Under the baptism of multiple industry crises, Jingke has become more and more resilient. In 2016, it ranked first in global photovoltaic module shipments and achieved four consecutive championships.
Afterwards, due to the slower pace of entering the domestic capital market compared to peers, and under the pursuit of competitors such as Longi Green Energy (601012. SH) at that time, Jingke was surpassed by Longi in 2020, ranking second and falling to fourth the following year.
2022 is an extremely crucial year for the development of Jingke Energy. This year, Jingke successfully returned to A, betting on N-type TOPCon technology and rapidly expanding production capacity.
This time, Li Xiande set the rhythm right.
With higher efficiency than PERC and lower costs compared to other N-type technologies, TOPCon has rapidly seized market share in the past two years, and Jinko's market share has steadily increased.
In 2023, Jingke will basically lock in the position of the world's largest component shipment volume, with sales expected to exceed 75 GW and a market share of nearly 15%. In the TOPCon field, Jingke Energy has sold over 45 GW and a market share of about 40%, ranking first in the world in terms of N-type component shipments.
But the return of Jingke Energy as the king has caught up with another downward cycle in photovoltaics. The current component prices in the Chinese market have dropped to almost no profit.
Can Jingke once again maintain its industry position, and what is Li Xiande's perception of this round of industry changes? At the end of January, Li Xiande was interviewed by media such as Interface News at the Shanghai Jingke Center, discussing topics such as enterprise development, industry chain prices, and industry status.
Q: What was the reason why Jingke returned to the top spot in component shipments because it did the right thing? How do you personally feel about this?
Li Xiande: The industry competition is very fierce in 2023. In this context, I am very certain that the Jingke team has achieved such results, which reflects the strong strategic execution ability of the Jingke team.
Jingke does not achieve its current industry position by doing something right.
In 2021, Jingke does face some strong competitors. Afterwards, the company reorganized its strategy by combining executives and external organizations.
At present, Jingke's strategy is to continuously enhance its technological innovation capabilities and enhance product competitiveness. Secondly, global layout, enhancing the ability to serve global customers. Thirdly, the construction of an efficient management system to enhance business competitiveness.
In the future, the company will face problems such as overcapacity in the industry. However, from the perspective of Jinko's current product leadership, market capacity, and capacity effectiveness, I believe that Jinko can overcome the cycle, enhance its position and market share.
Q: How does Jingke Energy plan to become the industry leader?
Li Xiande: How to become the industry leader is not what Jingke wants to talk about. But at least in the process of technological reform from P-type to N-type, Jingke has made a significant contribution.
Nowadays, technology has entered an unmanned zone (Editor's note: Jinko Energy has an absolute advantage in the TOPcon field). We hope that Jinko can continue to promote technological progress, lead industry development, and promote the widespread application of photovoltaics, enhancing the competitiveness of photovoltaics in the energy industry.
What we need most at present is confidence. Don't overestimate the turbulence of one or two years and underestimate the trend of the next decade in the industry. Using these words to describe the industry is more appropriate: the more confident you are in a market downturn, the more you need to be. As costs decrease, photovoltaics are the future of energy.
Photovoltaic companies do not need to overly boast about their products, but more importantly, they know what customers need. Photovoltaics are not consumer goods, but investment goods. Customers need efficiency, low cost, and cost-effectiveness, and everyone is more concerned about profitability, which is the logic of the photovoltaic industry.
Two years ago, when talking about N-type TOPCon, there were still many voices of questioning, even today there are still many voices of questioning, mixed with different statements, but we don't need to defend ourselves. Time is silent, always able to answer all questions.
Q: How can Jingke Plan maintain its market share advantage? How is the order situation of Jingke this year?
Li Xiande: Components are the easiest to enter the industry chain, but also the most difficult to do well in the industry chain. It requires systematic construction. The establishment of a company's brand and market cultivation require a long time. If a new brand wants to enter high-end markets such as Europe and America, most of it cannot be obtained through low prices. In contrast, Jingke has sufficient market layout and global capabilities.
Usually, companies with a large scale like Jingke would sign more than 50% of orders in the previous year to increase their shipment volume this year, in order to ensure the annual production plan. During this process, there will be some market changes and price adjustments, and the current number of signed orders is sufficient to support the company's operations in 2024.
The pace of clearing production capacity cannot be determined
Q: What is your view on the significant price reduction of components that started in the fourth quarter of last year? Currently, the profit margin of the entire industry is relatively low. What is Jingke's pricing strategy for 2024?
Li Xiande: Although Jingke has a large shipment volume and a market share of about 15%, such a market position is not enough to drive price fluctuations in an industry. The imbalance between supply and demand will inevitably lead to a decrease in component prices.
From a management perspective, it is important to make the right choices in uncertain markets. Jingke has a strong market analysis team behind it, but the company guessed the process correctly and did not get the result right.
So during this round of market price reduction, in the bidding projects from January to November 2023, Jinko ranked among the top three in the industry in terms of winning bids. On the contrary, from December to January this year, Jinko hardly won the bid.
From this perspective, it cannot be said that companies blindly push prices down, but it is precisely based on their judgment of last year's market that Jingke did not engage in vicious competition in December of last year and mid January of this year.
In an irrational market, Jinko is very rational and cautious. At present, component prices of 0.85 yuan/W and 0.79 yuan/W in the industry are definitely at a loss.
Q: The bottom of the industry chain prices has recently emerged. How long is the current price before the end of the cyclical adjustment, and what kind of fluctuations and stages may it go through in the future?
Li Xiande: Capacity elimination may be faster than imagined. Around 2017-2018, polycrystalline production capacity was rapidly phased out, especially in situations where market supply exceeded demand. Products that lack profitability and competitiveness in 2023 will not be sustainable and will also be rapidly phased out.
Secondly, production capacity without market capacity and sustained production capacity will also be rapidly phased out. Photovoltaics are a process that requires continuous production to improve efficiency and reduce costs.
Thirdly, production capacity without sustained investment capacity will also be quickly phased out. At present, Jingke TOPCon can achieve an efficiency of 26%, which is expected to increase to 26.5% by the end of this year, and the component power is expected to increase to over 600 W. If there is no such efficient production capacity, there will be no competitiveness.
But the pace of clearing production capacity is unpredictable, and we need to be prepared for a long cycle.
Q: In the fourth quarter of last year, the performance of photovoltaic companies was generally affected. How do you evaluate the performance of Jinko? Performance fluctuations have once again sparked industry reflection on integrated and specialized enterprises. How do we view this?
Li Xiande: There is a certain gap between Jingke's performance in the fourth quarter and expectations, mainly due to the decrease in market prices and relatively insufficient judgment of the price adjustment mechanism compared to contract signing.
At that time, there was an extreme situation in the market where the price was lower than the cost price, which led to Jingke adjusting its prices during the large-scale shipment in December, which had an impact on profitability.
From the perspective of the overall industry, integrated enterprises have strong competitiveness due to their market ability and sustainable operation ability, and are optimistic about their development in 2024.
Some specialized enterprises may face challenges, such as customer loss and product sales issues. Whether to extend the industrial chain at present is a very challenging task, as cultivating the market and establishing a brand is a very long process.
Q: Is the current sentiment in the photovoltaic market too pessimistic?
Li Xiande: The first quarter is the worst time, originally the off-season. Market demand will be lower than the fourth quarter of last year, and production capacity utilization will decline very quickly, causing some panic in the industry. The current signing price of the order will be a burden during the subsequent delivery process.
In the second to third quarter, component prices will be adjusted to a reasonable profit range. I am optimistic about the market demand in 2024, with an additional 20% growth compared to 2023, mainly due to the increase in investment returns of photovoltaic power stations due to the decrease in prices.
The future is still a competition for top enterprises to dominate
Q: In addition to leading enterprises, there are also many dark horses in the second and third lines. What are the future changes in the industry's competitive landscape? Will the differentiation and gap between TOPCon enterprises further widen?
Li Xiande: Photovoltaics is a highly competitive and challenging industry, reflected in various aspects such as market fluctuations, rapid technological iteration, and global trade disputes, so the industry needs professionalism.
Although there are many excellent companies coming to cross-border, I haven't seen any successful cases.
It is important for second tier enterprises to maintain cash and survive, rather than chasing unprofitable orders. Enterprises that have survived several rounds of fluctuations and performed well have strong competitiveness, and future competition will focus on several top companies.
Manufacturing enterprises, especially solar energy enterprises, have significant differences in performance, especially when it comes to their current scale.
If the influence of the Jingke brand can achieve a 1-2 cent premium, then it is believed that Jingke TOPCon products still have a significant cost advantage compared to other enterprises. In terms of efficiency, other top companies of Jingkobe have 1-2 gear advantages. Due to the reasons of scale, the advantages of product competitiveness and production costs will be magnified in performance.
Q: Jinko Energy's debt ratio has always been high, and will the current difficulties in capital market financing affect Jinko's expansion plan?
Li Xiande: The debt ratio has become the most important financial battle for Jingke Energy.
Due to some uncertainty in the capital market, the company's original financing plan was disrupted, resulting in a relatively high debt ratio for Jingke among the top photovoltaic enterprises.
Jingke has a very clear and strategic plan to reduce its debt to asset ratio, and the company will find a balance between profitability and expansion to continuously reduce its debt to asset ratio.
In terms of expanding production, Jinko has now almost stopped all investment plans, only retaining base construction in Shanxi and investment in Vietnam.
Vietnam's investment targets the US market, and the company has a brief demand for orders. The Shanxi base is the trend of future manufacturing, and the industry needs innovation in technology and models. Jingke will persist in completing it. Although the market is facing the challenge of overcapacity, such capacity construction will provide good support for Jingke to improve the competitiveness of the industry in the future.
HJT technology has no opportunity
Q: How do you view the future development of photovoltaic technology? What is the next technological mainstream for TOPCon?
Li Xiande: In this round of new technology industrialization, TOPCon is running very fast. HJT is still facing cost pressure, especially in the current industry situation, and I don't think it will have the opportunity.
One possible direction for future crystal batteries is TBC. The biggest problem with BC batteries is their low double-sided rate, but in niche markets such as rooftops, there are some opportunities for positive high efficiency.
In the longer term, the efficiency of crystalline silicon modules is the limit at 28.7%, and in the future, the combination of perovskite and crystalline silicon will form an advantage. The efficiency of Jingke TOPCon stacked perovskite products has reached 32.33%, but its attenuation can only be maintained for 6000 hours.
The commercialization of perovskite production capacity to compete in the market is expected to take a little longer than expected, or more than five years.
Q: What are the key areas of investment in scientific research and innovation for Jingke in the future?
Li Xiande: In TOPCon, HJT, BC, and even further perovskite technology in the future, Jingke has fully covered it, and will also cover silicon wafers, batteries, and module links.
In addition, Jingke will research the technological bottlenecks and digital construction faced by the integrated large base. The energy storage business has a relatively small proportion and will focus more on core technologies. This part of the business is still in the stage of market cultivation, customer trust establishment, and the establishment of the entire production system. Photovoltaic energy storage will be the main way of supplying electricity in the future, which is also an area that Jingke continues to pay attention to.
Q: In recent years, there have been frequent patent protection disputes in the field of IBC batteries. What is your perspective?
Li Xiande: As a globalized enterprise, Jingke must respect intellectual property protection, which is the responsibility that enterprises should have. There are many ways to obtain a patent, such as authorization, purchase, and exchange, rather than avoiding it.
Jingke has applied for 3500 patents and obtained over 2000. Especially in the field of TOPCon technology, Jingke holds the vast majority of patents, which also provides support for China's industrial development. Jingke also hopes that the industry respects our technological research and development.
Overseas market considerations
Q: What are the considerations and plans of Jingke Energy in its overseas expansion plan?
Li Xiande: China has formed the world's largest manufacturing base, with the most complete industrial chain and the gathering of the world's best talents. Chinese made products are very competitive globally.
Due to laws such as the US 201 and 301, as well as anti Japanese laws in other countries, Chinese companies need to establish factories in third countries and enter the market.
Jingke has over 12 GW of overseas vertically integrated production capacity, making it the largest among all photovoltaic enterprises. The company has successfully built factories in Malaysia, Vietnam, and the United States.
When building factories overseas, the first thing to consider is geopolitical issues; The second is the issue of industrial foundation and industrial chain competitiveness related to costs; The third issue is monetary changes and policy issues. In addition, due to local protection, many power plant investments require elements of localized products.
In regions such as the Middle East, Europe, and the United States, to protect the development of new energy, local enterprises will be supported to provide some policy subsidies. Chinese enterprises also need to consider the issue of government credit, whether policies can be continuously implemented, and whether even if they are implemented, China's photovoltaic products will still be competitive in production.
Q: In the future, what is the proportion and trend of Jingke Energy's performance in overseas markets such as the United States and the Middle East?
Li Xiande: Jingke ranks first in most markets in terms of market share. In the US market, Jingke did not do well in 2022-2023. But Jingke is the only photovoltaic company in China that complies with anti circumvention investigations. Due to smooth customs clearance in the US market, the shipment volume in the US market is expected to increase significantly this year.
The Middle East is the advantage of Jingke, and the company has a market share of over 40% in this area, which will continue to improve in the future. Jingke has a small backlog of inventory in the European market, and with the outbreak of the Red Sea incident, the industry's inventory in Europe will continue to decline.
Q: Recently, Europe has started to introduce some new ESG standards, such as traceability of supply chains, which are new thresholds for photovoltaic exports. How to view it?
Li Xiande: ESG will be the key to entering overseas markets in the future.
ESG is the advantage of Jingke. In addition to its advantages in integration and technology, the most important aspect of Shanxi factory is digitalization. Digital delivery will allow customers to see the overall ESG situation of Jingke, including carbon footprint, supply chain traceability system, etc. Jingke has the ability to meet the ESG requirements of customers in the United States, Europe, and other regions.
Q: What other things will affect the development of the entire industry in the future?
Li Xiande: The upgrading of globalization and future trade will have a significant impact on the entire photovoltaic industry.