L R AS Published on Tuesday 1 December 2020 - n° 342 - Categories:PV Watch
A look at the development of PV manufacturers in 2020
What happened in 2020? What are the year's key events? How do they fit in with the evolution of both production and the market? What will happen next year? 2021 will be marked by various extensions of the year that is coming to an end, but the future is still to be written.
Producers have remained in cell P mono-PERC : there has been no change in technology in 2020.
What has changed is the format and division of the cells: the novelty is in the larger size of the cells and their cutting to reduce the intensity of the electric current.
Two formats launched in 2019 will become established in 2021: the M10 and M 12 formats, whichappeared in mid-2019, are slowly gaining ground, as other equipment (inverters, trackers, glass, etc.) have to be adapted to the new format.
Double-sided panels: They began to become widespread in 2020 because of their almost identical price and perhaps an additional efficiency.
Format changeover is shaking up the profession: changing formats requires a change in production equipment. The shortage of components (glass in particular) has favoured the large manufacturers.
Giant capacity expansion programmes: The falling cost of new investment tranches has prompted manufacturers to launch massive capacity programmes, both to replace tier 2 or 3 manufacturers who cannot keep up and in the certainty that global demand will continue to grow at an accelerated pace.
Examples of capacity increases applied to the four main phases of panel production
Three points to remember the fundamental phenomenon is the concentration of producers in a dozen, soon to be half a dozen; technology has been neglected in 2020; the financial power of these groups as well as the exceptional profitability of certain groups make it very difficult for a non-Chinese competitor to emerge except with safeguard measures
It is time to look at the development of the photovoltaic market over the past year from the perspective of Chinese manufacturers. Next week, the market will be studied from the point of view of demand or the first few reactions to Chinese domination.
The year 2021 can of course be characterised by the covid, but for PV manufacturers, it is the lack of technological evolution and curiously the concentration of companies that dominate.
Throughout the text, it should be remembered that world demand in 2020 and then 2021 is estimated at 120 GW and then 144 GW.
Producers have remained in the P mono-PERC cell
If in 2018 and 2019, there was talk of the emergence of N-type cells, heterojunction, TOPCon, IBC, Chinese manufacturers considered that the technology was not ready to offer products with a sufficient yield differential to be worth the price premium that this technology required. Few companies ventured into the N-type. While Jolywood is found, and there are lines of experimentation at the major manufacturers (there are reportedly 10 GW in total in China), there is no visible shift among Chinese manufacturers in favour of this technology. They have all stayed with the good old PERC monosilicon P-type cell which existed two years ago and which is still in use today.
What has changed is the cell format and cell division.
If it is not technical innovations that emerge, it is more in the organisation and size of the cells. In June and September 2019, two companies shook up the profession's habits by proposing a different cell format: LONGi proposed a 166 mm format (still called M6) instead of the 156.75 mm G1. This size had to be able to be adopted by the equipment installed. It allowed for a smooth transition and little change of equipment. Three months later, Zhonghuan Semiconductor recommended a 210 mm side format to take advantage of a larger exposure surface, to use cells cut in two or three, and to use overlapping cell junctions in order to make power generation compatible with the technical possibilities.
Having understood its error of recommendation, LONGi, joined by JA Solar and JinkoSolar, proposed an intermediate size at 182 mm (called M10) which was less disruptive to production lines, had various advantages and launched a media offensive to promote its qualities.
Two formats launched in 2019 will become established in 2021
After the moment of surprise (the end of the year), the year 2020 was that of the choice in favour of one of two formats by the different manufacturers. In favour of the M10, the transition is more moderate, the weight of the panel is lighter, the efficiency is just as good as the larger format. In favour of the M12, everyone is aware that this will be the format that will be imposed in the medium term, because this is the meaning of the story, but also because manufacturing a 400 W or 600 W panel takes the same time, reduces transport, installation and wiring costs, and allows more panels to be placed on a line. Thus the profession is shared between the two formats.
However, although it is theoretically possible to switch from one format to the other (all production equipment offers both choices), in reality it is not practical to change formats because production has to be set up and then adjusted before the machines are fully operational. This applies to production lines of 3 GW or even 5 GW. However, manufacturers do not have much freedom to change these production lines because of their current production capacity. They have to choose now.
This choice of large cell format has been accompanied by a gradual adoption of double-sided panels and the increase in the size of the panels.
Introduced in 2019, double-sided panels are gradually being adopted by developers and are becoming the industry standard: the price difference between single-sided and double-sided panels is negligible. There may be an additional yield premium for the panel depending on its installation, although no scientific study accredits or quantifies this premium. In the second half of 2019, double-sided panels accounted for 30% of new installations in China. In thefirst half of the year, a quarter of Chinese exports to the United States were two-sided. These panels accounted for 30% of deliveries from major manufacturers in the first half of 2020 and this rate is expected to double in the second half of the year. The two-sided approach will therefore become more widespread in 2020.
Format changeover shakes up the profession
From then on, with 182 mm or 210 mm cells cut in two or three, manufacturers offered panels of more than 500 watts and even 800 watts. In addition to the widely advertised advantages that this increases efficiency, reduces costs and simplifies installation, the large manufacturers (known as Tier 1) saw a considerable advantage: these panels reduce or eliminate competition from Tier 2 manufacturers. Tier 3 manufacturers are no longer referred to as Tier 3 manufacturers. These large manufacturers have imposed both a change in cell format and therefore a replacement of production equipment. They have made access to solar glass scarcer (the glass manufacturers had not foreseen such a rapid evolution towards large panel sizes. They do not have the infrastructure to produce panels over 2 metres long). Through their purchasing power, the large manufacturers capture the bulk of the large glass production, which is estimated at between 40 and 50 GW in 2021! This represents a third of the world demand next year.
Thus, the shortage of large-size glass is forcing Tier 2 manufacturers not to present the market with panels comparable to those of the large manufacturers. If we add that some have not modified their production equipment for larger cell formats, that they have little access to international customers because it would require a redesign of their production facilities.They have little access to international customers because a dense commercial network would be needed, and they are mainly oriented towards the Chinese domestic market which is not very dynamic in 2019 and 2020 (around 40 GW installed in 2020 against 55 GW two years ago), competition is disappearing. Only the large manufacturers remain. Thus, in the first half of 2020, the ten main manufacturers supplied 85% of the panels in the world (against 60 to 70% in previous years). Competition is disappearing to the benefit of the largest.
Giant capacity increase programmes
The second major feature of the year 2020 is the launch of giant capacity increase programmes. They are phenomenal. They are linked to the format changeover, and also to the very specific period of 2020: if the tier 2 and 3 manufacturers disappear, there is a place to be taken. Every major cell or panel manufacturer wants to take it over. In addition, each company has understood that size makes it possible to reduce costs, and above all to be more present on the market: LONGi was the first to announce almost every week of the first quarter, an increase in capacity in this or that factory. Others were quieter, multiplying the increase programmes by three, four or five. Thus Trina Solar went from about 15 GW of panel capacity to 50 GW at the end of 2021. The silicon manufacturer Tongwei announced last March that it wanted to increase its capacity from 80,000 tonnes in 2020 to 115,000 - 150,000 tonnes in 2021 (+ 40 to + 90 %), then to 150/220.000 tonnes in 2022 (an increase of 30% to 50% in one year, or a doubling to almost tripling in two years!) Tongwei is also the No. 1 cell manufacturer. Its project is to double its capacity in two years to reach 60 to 80 GW in 2022.
These investments come from two motivationsThe first is that each 1 gigawatt or 10,000 tonne silicon wafer costs much less than the previous wafer. From then on, the whole "phenomenal" increase can be explained by this observation. The second is that the photovoltaic production activity is particularly profitable. Thus, LONGi doubled its net profit between 2018 and 2019. In the first half of the year, net profit increased by 50%. Another figure that speaks for itself: the company's net margin reached 20.5% of turnover in the first six months of 2020.
If we take Tongwei, in the first nine months of 2020, turnover increases slightly (+13%), but net profit increases by 49% compared to 2019. In the third quarter alone, the net margin exceeds 18%, partly due to the rise in silicon prices. Thus, when you have such profit margins, it is in your interest to invest in new production capacity.
Capacity increases applied to the four main phases of panel production
SiliconProduction was disrupted in July and August by flooding and a technical problem at two manufacturers. Prices soared 56% in one month. They allowed manufacturers to take full advantage of the higher average price. Daqo, the only listed company manufacturing only silicon, thus doubled its gross profit in the third quarter.
According to the experts, new production lines should come into operation but in limited quantities.
WafersThe wafer format has been changed: the G1 (158 mm) is increasingly giving way to the M6 (166 mm), which is becoming the reference format. This is temporary, until the larger formats (M10 and M12) are produced in 2021.
The volume of the new installations raises fears of a strong price war on this type of product. In 2021, the supply of wafers should exceed demand, leading to a significant drop in prices.
If we do not know the importance of 2020 investments in silicon and wafers, the main cell manufacturers will have installed 100 GW of cells this year. The six largest cell manufacturers and the top ten integrated groups will have provided 97% of the total capacity additions.
Panel capacity additions will have reached 70 GW this year, half of the projected demand for 2021. The top ten manufacturers account for 78% of this total.
Thus, if no capacity is taken out of production, it is estimated that by the end of 2021 cell capacity will reach 366 GW. Panel production capacity will reach 377 G W. This is two and a half times the estimated demand for panels. Old production lines will be eliminated. Manufacturers who have not been able to keep up with this race to modernise equipment will be eliminated. By the time this happens, the price war will be intense in the first half of the year. It is expected that the price of M6 format cells will fall to 0.76 - 0.78 RMB / W, and that of panels will return to between 1.47 and 1.47 RMB / W (0.101 and 0.104 $ / w) by the end of June 2021, a drop of 13% and 6% respectively.
Three points to remember
The result of this overview is that the year 2020 has been favourable to the accelerated concentration of manufacturers. There are still about ten players who represent 85% of demand (in the 1sthalf of 2020). This figure will quickly be reduced to half a dozen due to the need for financial means to continue capacity increases. This concentration will be to the benefit of the companies that obtain amazing results. The elimination of the second and third rank manufacturers is the consequence of the change in cell format and the amount of investment needed to keep pace with the richest manufacturers.
The other aspect is that this war for market share has occupied the management. Technology has been largely neglected. It has been left to the P-type mono-PERC cells. Perhaps technology will be the preoccupation of 2021. Unless other companies get involved, which will be the subject of next week's debate.
Finally, the financial power of these companies, the profit margin obtained on basic products but sold in billions, allows them to get through difficult times, such as the pandemic, which has not affected them at all. Above all, it gives them the capacity to resist any new arrival on a third market: they can reduce their margins, sell at a loss on the market where there is the emergence of a competitor in order to suffocate it, and continue to dominate world markets that become captive, and at the same time these markets allow them to make fabulous profit margins...