Electrical Equipment / Components & Telecoms

In the first two months of 2023, China's export of photovoltaic modules showed a phenomenon of "not weak in the off-season".

The latest disclosed customs data shows that from January to February 2023, China's component exports amounted to 47.8 billion yuan, a year-on-year increase of 9%, ending the continuous month on month decline trend since August last year.

Europe remains the largest market for China's photovoltaic product exports, with over half of the photovoltaic modules shipped to Europe.

Customs data shows that from January to February 2023, the export value of photovoltaic modules in the European region was 27 billion yuan, a year-on-year increase of 58%. Among them, Spain, France, Poland, Greece, Belgium, Denmark and other countries achieved positive month on month growth in export data from January to February. According to customs data, in contrast, the Asian region saw a year-on-year decrease of 36%, while the Latin American region saw a year-on-year decrease of 6%.

The European market has always been highly dependent on importing photovoltaic products from China. In 2022, the high dependence of the European market on Chinese photovoltaic products will not decrease but increase. Customs data shows that in 2022, Chinese photovoltaic enterprises exported a total of 154.8GW of photovoltaic modules, an increase of 74% compared to 2021.

More than half of the photovoltaic modules are exported to the European market. According to customs data, in 2022, China exported 86.6GW of photovoltaic modules to Europe, an increase of 112% compared to the export volume of 40.9GW in 2021.

Guojin Securities believes that against the backdrop of a high base, the export value of photovoltaic products still exceeded expectations and achieved a year-on-year growth of 15% from January to February 2023, and the average monthly amount in the first two months achieved its first month on month growth since August last year (a 22% month on month increase), demonstrating that overseas demand remains strong despite a significant decline in natural gas prices and inventory digestion is good.

However, in the context of localizing photovoltaic manufacturing in Europe and supporting the local photovoltaic industry chain, Chinese photovoltaic manufacturers who are "going abroad" are not without hidden concerns.

On March 16th, as part of the Green Agreement Industry Plan, the official website of the European Commission officially announced proposals for the two cornerstones of the Green Industry Plan, the "Net Zero Industry Law" and the "European Key Raw Materials Act", aiming to increase the local production capacity of key green industries such as photovoltaic and battery to 40% by 2030.

The bearish news of the EU's push for localization of photovoltaic manufacturing in Europe has directly "ignited" the domestic photovoltaic industry, triggering the stock prices of several leading photovoltaic companies to plummet.

The fundamental purpose of the EU's policy is not to restrict China, but to benchmark the US Inflation Reduction Act (IRA). If the EU does not do so, their local enterprises' factory construction, including manufacturing capacity, will 'run' to other countries. Therefore, the fundamental purpose of the policy can be understood as to ensure that local manufacturing is not 'taken away', "said a senior figure in the photovoltaic industry.

When it comes to the impact on Chinese photovoltaic enterprises, the above-mentioned photovoltaic industry insiders stated that the impact of this bill on Chinese photovoltaic enterprises is at least not as significant as the market reaction, and it should not have a substantial impact on Chinese enterprises for two to three years. In the current situation, the EU needs to develop clean energy such as photovoltaic wind power, as well as Chinese photovoltaic products

He believes that the Net Zero Industry Act is currently in the draft stage and has not yet formed a clear legislation. It will take at least another year to complete the legislative process. During this period, there is still a need to explore the content of the bill within the EU. For example, France hopes to include nuclear power, while other EU countries consider only photovoltaic and wind power as green electricity, so there is still controversy within the EU regarding the content of the bill. In addition, from the final implementation of the bill to the cultivation of photovoltaic production capacity by the European Union, I personally believe it will take at least three more years.

Although the proposal for the European Net Zero Industry Act has almost no substantial impact on domestic enterprises in the short to medium term, overseas layout may be one of the feasible strategies for Chinese photovoltaic enterprises under the hidden concerns of import restrictions.

Li Dongsheng, Chairman of TCL Central, a leading photovoltaic silicon wafer company, once again suggested during this year's two sessions that Chinese companies must engage in active global layout in order to maintain the relative advantage of Chinese manufacturing in global competition.

Chinese photovoltaic products account for over 90% of global output, so the globalization of the photovoltaic industry is necessary and inevitable. The global photovoltaic market demand is growing rapidly, and many overseas countries have proposed plans to develop the photovoltaic industry locally. In this context, if Chinese photovoltaic enterprises do not actively expand their global business, opportunities may be taken away by other countries, "said Li Dongsheng.

The aforementioned photovoltaic industry insiders added, For Chinese photovoltaic companies, they can choose to build factories in Europe. According to the Inflation Reduction Act (IRA) in the United States, there will be no traceability investigation of the registered location of the parent company. That is to say, if the relevant companies have factories (production capacity) in Europe or Southeast Asia, they can also avoid the restriction under the Net Zero Industry Act that a country's products cannot exceed 65% of the European market share

In the view of China Post Securities, the current scale of components imported from China in Europe accounts for about 90% of its total demand. In the long run, the 40% localization manufacturing target may have a significant impact on imports, and it is expected to accelerate the promotion of domestic leading photovoltaic enterprises to expand overseas.

Since the beginning of this year, many leading photovoltaic enterprises have set up factories overseas. In January, Jingao Technology announced an investment of $60 million to establish a component manufacturing factory with a maximum production capacity of 2GW in Phoenix, USA. On March 13th, Longji Green Energy planned to collaborate with American clean energy developer Inenergy to build a 5GW photovoltaic module factory in Ohio, USA. The factory is expected to start construction in April this year and be put into operation by the end of 2023.