Electrical Equipment / Components & Telecoms

In the past two days, Aixu Co., Ltd. (600732.SH), a manufacturer engaged in the research and sales of crystalline silicon solar cells, reported the Tongwei incident under its real name. Most investors condemned Tongwei for not talking about "wu ethics".

So, what is the value for us to think deeply about the self-exposure of the “scandal” in the photovoltaic industry?

Tongwei does not talk about "wu ethics", Aishu lifts his own "figure sheet"

On June 10, the "Reporting Materials on the Symposium on Hot and Difficult Issues in the Photovoltaic Industry" (hereinafter referred to as "Reporting Materials") by Aixu at the Symposium on Hot and Difficult Issues in the Photovoltaic Industry was posted on the Internet, and public opinion exploded for a while The pot.

In the report, Aishu stated that “The current situation of the industry appears to be the mismatch between market terminal demand and upstream silicon production capacity. In fact, some companies can create the illusion of a serious shortage of polysilicon and silicon wafers, and boost intermediate traders and industrial chains. It is caused by the hoarding in various links and driving up prices."

For the “part of the companies” mentioned in the report materials, Aishu named Chinese silicon material manufacturers Tongwei Group and Yongxiang Co., Ltd., accusing the latter of breaking the rules of the game and changing the polysilicon price from “monthly pricing” to “weekly bidding” , Which led to crazy increases in raw material prices.

After the "weekly bidding" was implemented, more than a month's time, the price of polysilicon soared by 37.2%, and the price of silicon wafers soared by 23.5%.

Aixu directly pointed out in the report materials that the seriousness of the "weekly bidding" after the implementation: "leads global polysilicon and silicon wafer companies to follow the trend and hype."

Aishu's report reflects the extreme dissatisfaction and helplessness of downstream companies with upstream companies' repeated price increases. How helpless is it?

"Our business activities cannot be carried out normally; after signing the contract, we have to re-negotiate, and the price has to be adjusted before the delivery is negotiated." Aixu said in the report.

In fact, "malicious" price manipulation has happened in the past. For example, on June 7, 2016, the title was "An internal record of a high-level meeting of polycrystalline photovoltaic companies. The truth is shocking! "The article circulated in the photovoltaic industry. The article pointedly pointed out that Longi shares avoided the importance and exaggerated the publicity, and disrupted market competition by deliberately lowering prices.

However, compared with Aishu's report this time, the public opinion was not loud at that time, and it was more of upstream manufacturers' pinching each other. But this time is different. Aishu's report has aroused the resonance of many manufacturers and the high attention of the association.

The first to stand up is the China Photovoltaic Industry Association. On June 11, the China Photovoltaic Industry Association issued the "Appeal on Promoting the Healthy and Sustainable Development of the Photovoltaic Industry" (hereinafter referred to as the "Appeal Document").

The appeal document stated that in order to reduce the adverse impact of the sharp rise in silicon material prices on the development of the industry, the association called on all members and photovoltaic companies to abide by laws and regulations, operate rationally, respect the spirit of contract, and consciously resist excessive use of polysilicon and silicon wafer products. Hoarding goods, driving up prices, and speculative behaviors that are not required by their own production and operation. Consciously resist the malpractice of malicious competition such as low-price dumping of battery components, let the price of silicon materials return to the normal range as soon as possible, and jointly promote the healthy and sustainable development of the industry. At the same time, it is recommended that the relevant departments further clarify the policy, pay attention to the problem of excessively rapid rise in the price of photovoltaic raw materials such as polysilicon, and promptly guide it.

Thinking of Aishu's Report

Knowing the reason, you can know the reason.

Why does Aishu stand up and "resist" regardless of the reputation of the industry?

From an economic perspective, when the supply of goods exceeds demand, the price is lower than the value, and when the demand exceeds the supply, the price is higher than the value. The same is true for silicon material prices. The nature of silicon material price increases is determined by the relationship between supply and demand.

In recent years, driven by the goal of "carbon peak and carbon neutrality", the demand for polysilicon has greatly increased, but the total production capacity is not enough to cover the demand. Under the imbalance between supply and demand, the price of silicon materials is gradually pushed up by the demand side. In 2019, the market price of silicon materials was hovering around 70 yuan, and by the end of 2020, the price had risen to around 83 yuan.

However, at the beginning of 2021, the price of silicon materials began to skyrocket for unknown reasons, and has now exceeded the 200 yuan mark to 220 yuan.

According to data from the China Photovoltaic Industry Association, in the past three months, the price increase of polysilicon has reached more than 2.5 times that of the end of last year.

In just a few months, the price of silicon materials has doubled, and the pressure on the cost side is directly transmitted to the downstream battery and module fields, making downstream manufacturers including Aixu miserable.

It is understood that in addition to the relatively high operating rates of several large factories, most of the second and third-tier component manufacturers currently only maintain operating rates of about 40%, and the operating rates of cell companies are also as low as 50% to 60%.

In the short-term, the "bizarre" surge of silicon materials, Aishu believes that the actual supply of silicon materials can meet market demand. The current mismatch of supply and demand in the industry is only a manifestation. In fact, it is caused by some companies deliberately creating a shortage of polysilicon and silicon wafers, hoarding and driving up prices. .

In the report, Aishu stated that the global terminal demand will hardly reach 180GW in 2021, and the silicon material supply can exceed 190GW, and the industrial chain capacity is matched. Preliminary statistics show that the inventory of the whole industry in April and May increased by 61.8% compared with the end of the first quarter, reaching 68.6GW. The finished products were actually stranded in the industrial chain and idling.

In this regard, it is not difficult to find that the "surprising" rise in the price of upstream silicon materials has forced downstream photovoltaic companies to reduce operating rates, cut production or even stop production. In this context, silicon material manufacturers including Tongwei and Yongxiang Inc. unexpectedly changed the price of polysilicon from "monthly pricing" to "weekly bidding", causing the price of raw materials to rise wildly. The consequence of this is that downstream manufacturers have to choose to default or break the contract due to short-term price fluctuations too fast.

From the perspective of sustainable development, once the contract is breached or breached, it means that the company’s reputation may be severely hit, which is not conducive to the long-term development of the company itself and the industry.

Final words

In addition to the above-mentioned thinking, there are many things worthy of our investigation and reflection. For example, how serious is the “chaos” in the industry that allows a listed company to report to its peers regardless of the consequences; under the “infighting”, are there still the same problems and other unknowns in other links of the photovoltaic industry chain? What about things? Does the exposure of "chaos" reflect that the phenomenon of industry irregularities has a long history, is deeply rooted, and involves the interests of all parties?

Today, Aishu’s report only reflects the current development difficulties and anxiety of downstream companies, and the root of the problem has not been resolved. After the "chaos" is exposed, how the industry advocates or establishes an industrial ecology of price transparency and fair trade in the future is the key to solving the contradiction.