The richest man in Shaanxi Province has decided not to take a salary.

In the past two years, the photovoltaic industry has experienced cyclical adjustments. With the surge in production capacity, the prices of photovoltaic main materials have plummeted due to weakening demand. In the first quarter of this year, leading companies in the industry such as Longi Green Energy, Tongwei Co., TCL China Star, JA Solar, East Group, and Arctech Solar all unexpectedly suffered quarterly losses and a decline in performance. The once thriving photovoltaic industry is now tightening its belt.

"Long slopes, heavy snow, and many ups and downs." When Longi Green Energy released its 2023 financial report, Chairman Zhong Baoshen unusually placed a letter to all shareholders at the forefront, starting with this sentence.

Overcapacity and price wars have been the "snow slope" that the photovoltaic industry has been climbing since 2023. Even industry leader Longi Green Energy has had to face challenges.

According to the annual report, Longi Green Energy's revenue in 2023 was 129.498 billion yuan, achieving over 120 billion in revenue for the second consecutive year, ranking at the forefront of the industry. However, the net profit attributable to the parent company saw a decline in growth rate for the first time, dropping by 27.41% year-on-year. From the fourth quarter of last year to the first quarter of this year, the company has continuously suffered quarterly losses.

After the release of the financial report on April 30, Longi Green Energy's stock price fell by 4.21%, closing at 18.20 yuan per share, with a market value of 137.9 billion yuan. Compared to the end of April last year, the market value has dropped by over 126 billion yuan. Compared to the peak market value of 528.7 billion yuan in November 2021, it has evaporated by over 390 billion yuan.

Over a month ago, Zhong Baoshen publicly stated that 2024 would be "the most difficult year for Longi in nearly a decade." In terms of internal management, Longi Green Energy has carried out organizational optimization this year, reducing overall positions by around 5%. On April 30, Longi also announced that Zhong Baoshen and President Li Zhengguo have decided not to receive company salaries from the second quarter onwards.

Longi Green Energy is preparing to tighten its belt for a period of time. However, after the release of the financial report, Zhong Baoshen also emphasized that the situation "will not get worse."

However, what the industry is truly concerned about is the imminent reshuffling and transformation of the industry landscape as leading positions change and old and new production capacities are replaced. What will Longi rely on to turn the tide and welcome spring? Can it once again make precise bets on the future?

In 2024, "It won't get any worse."

"The prices have dropped to this level, and many companies are losing cash." Li Zhengguo, the president of Longi Green Energy, said in an interview with CCTV's "Dialogue" program earlier this year, "The photovoltaic industry in 2024 should not get any worse."

As a former "photovoltaic leader," Longi Green Energy reflects the entire industry.

The controlling shareholder of Longi Green Energy, Li Zhengguo, graduated from the Department of Physics at Lanzhou University and is a classmate of the company's chairman, Zhong Baoshen. They jointly devoted their efforts to this company, which is also named after the former president of Lanzhou University, Jiang Longji.

Looking back, Li Zhengguo established Xi'an Xinmeng Electronic Technology Co., Ltd. in the millennium. In 2006, he warmly invited Zhong Baoshen to join, and the company was renamed Longi Group in the same year, officially entering the photovoltaic market.

After entering the game, Longi Green Energy led several technological revolutions, the most famous of which is the "mono-crystalline vs. multi-crystalline silicon" battle. When the company was founded, solar cell silicon materials were still mainly multi-crystalline silicon, but Li Zhengguo and Zhong Baoshen believed that mono-crystalline silicon would be the best development path in the future and firmly placed their bets on it.

This long-term strategy has created a super-industry leader. In 2019, mono-crystalline silicon saw a decisive reversal, with a market share of 65%, and Longi seized the opportunity to become the world's largest manufacturer of mono-crystalline silicon wafers and modules. In 2022, the company's revenue exceeded 100 billion yuan. Currently, Longi's business covers five major sectors: silicon wafers, photovoltaic cell modules, distributed photovoltaic solutions, ground-mounted photovoltaic solutions, and hydrogen energy, with silicon wafers and photovoltaic cell modules accounting for over 95% of total revenue.

In 2023, Longi Green Energy maintained its revenue scale of over 100 billion yuan, but its growth has slowed down.

According to the financial report, the company's revenue only achieved a slight increase of 0.39% last year, and the net profit attributable to the parent company was 10.751 billion yuan, a year-on-year decrease of 27.41%. According to data from East Money Information's Choice, before this, Longi Green Energy's revenue growth rate was mostly above 30%, and in 2022, the company's revenue and net profit both grew by over 60% year-on-year.

In terms of business income, Longi Green Energy's silicon wafer business revenue was 24.519 billion yuan, a significant decrease of 36% year-on-year; component and battery revenue was 99.199 billion yuan, an increase of 17% year-on-year.

Longi Green Energy stated that due to the decline in the value of the cyclical industry chain and the impact of the replacement of old and new production capacity, the company's short-term performance has been affected. In addition, in 2023, Longi Green Energy made a large provision for impairment, with provisions for inventory and fixed asset impairment totaling 6.757 billion yuan.

In the current period of cyclical adjustment in the photovoltaic industry, even the "leading player in photovoltaics" cannot escape unscathed. According to the China Photovoltaic Industry Association, last year's production of silicon materials in China exceeded 1.4 million tons, and the production capacity of silicon wafers, battery wafers, and components all exceeded 700GW, far exceeding the market demand of around 450GW.

With the surge in production capacity, the market demand has weakened, and the prices of photovoltaic main materials have plummeted. The price of silicon wafers has dropped from 4-5 yuan per piece at the beginning of last year to 2-3 yuan per piece at the beginning of this year, a "halving" in price. The price of photovoltaic modules also dropped from around 1.9 yuan/W at the beginning of 2023 to less than 1 yuan/W by the end of the year.

According to "Shijie," even for companies with integrated advantages, a price of 1 yuan/W has already reached the breakeven point. However, in order to compete for the market, the industry has started a price war.

While everyone is desperately lowering prices to grab orders, Longi Green Energy's strategy has appeared to have made mistakes. In the third quarter earnings release last year, Li Zhengguo admitted that when the price of silicon materials fluctuated rapidly at the beginning of the year, Longi adopted a pricing principle of adjusting silicon wafer prices according to the price of silicon materials, which caused certain damage to the profitability of silicon wafers at that time. When competitors seized the market with low-price orders in the second quarter, the company did not follow suit, thereby affecting component sales and deliveries in the fourth quarter.

In other words, the price of Longi's silicon wafers dropped too quickly, but the company, which has always been "cautious," was too conservative in terms of component prices.

Longi, which has been growing rapidly, also experienced quarterly losses. In the fourth quarter of last year, the company incurred a loss of 942 million yuan. However, Longi Green Energy's component sales business did not go unrewarded without resorting to low-price market competition. In 2023, the company's comprehensive gross profit margin reached 18.26%, an increase of 2.88 percentage points from the previous year.

However, the industry's larger controversy over Longi is whether it missed the opportunity to fully transition to N-type TOPCon cells in 2023.

The industry's general consensus is that, based on the different technologies of monocrystalline silicon cells, the previously mainstream P-type PERC cells are already "dying," and major companies are at a crossroads in choosing the next generation of cell technology. In September last year, Longi Green Energy announced its bet on the relatively "niche" BC cells. This move caused a stir in the industry: among the leading "Four Little Dragons" of photovoltaic components, three, led by JinkoSolar, have chosen the relatively mature technology of N-type TOPCon cells and fully invested in it, while Longi once again stood out as the one going its own way.

In the fourth quarter of last year, N-type components were shipped in large quantities. In the 2023 list of photovoltaic component shipments, Longi Green Energy did not achieve the expected 85GW shipment volume at the beginning of last year, relinquishing the "global champion" title it had held for three years to JinkoSolar, and dropping to third place.

As time entered 2024, the situation in the entire industry became even more severe. Price erosion continues, and on April 12, State Power Investment Corporation's first batch of centralized procurement of photovoltaic components in 2024 opened with a minimum bid price of 0.81 yuan/W for N-type components, and a "plunge" price of 0.756 yuan/W for P-type components, both setting new lows.

In the first quarter of 2024, Longi Green Energy achieved operating income of 17.674 billion yuan, a decrease of 37.59% year-on-year, and a net loss of 2.35 billion yuan attributable to the parent company. The first quarter is the off-season for the industry, but the last time Longi incurred a first-quarter loss was 11 years ago.

During the same period, leading companies in terms of performance, including Tongwei Co., Ltd., TCL Central Air-Conditioning Co., Ltd., JA Solar Technology Co., Ltd., Oriental Sunrise Group, and Arctech Solar, all coincidentally experienced quarterly losses and a decline in performance. The photovoltaic industry as a whole seems to have collectively entered its "darkest moment."

In the A-share market, in March of this year, inverter leader Sungrow Power Supply Co., Ltd. surpassed Longi Green Energy and became the company with the highest market value in the photovoltaic sector. On April 30, Sungrow Power Supply's market value reached 153.5 billion yuan.

In the "2024 Hurun Global Rich List" released in March of this year, Li Zhengguo and his wife Li Xiyan ranked 655th on the list with a wealth of 35.5 billion yuan, retaining their position as the richest couple in Shaanxi. However, compared to the previous year, their wealth has shrunk by 30.5 billion yuan, and their ranking has dropped by 424 places.

During the latest performance briefing, Chairman of LONGi Green Energy, Zhong Baoshen, stated that in the current market supply situation, short-term issues are still difficult to resolve without special external influences, but they will not worsen either. Many segments of the industrial chain are operating at a loss, and poorly performing companies will soon be eliminated.

Although the trend of declining prices in the industry chain began in the second half of last year and continued into the first quarter of this year, it has gradually stabilized. Regarding centralized market orders, Zhong Baoshen mentioned that if last year's prices were unpredictable, this year, pricing predictability has increased. LONGi will continue to adhere to a cautious strategy this year, but the company believes there will be no issues achieving its goals.

By 2024, LONGi Green Energy aims to achieve a silicon wafer shipment target of around 135GW and a battery cell and component shipment target of 90-100GW. Zhong Baoshen stated that the company's overall business for the year will show a trend of starting low and ending high, with a gradual increase each quarter, ensuring that the overall shipment growth rate this year will not be lower than the industry's average, and product shipments will also continue to grow steadily.

"The turning point is very difficult to predict," said Zhong Baoshen. However, he emphasized that companies must bring new industry prosperity through innovation, stating that old methods are not feasible.

To be continued...

Longi was firmly promoting the monocrystalline silicon revolution back then, and it is still a topic of great interest to people. Now, the most concerning issue in the industry is whether its favored BC battery route can stage another "comeback" story.

The "N-type substitution" for photovoltaic cells is still ongoing. According to the previous forecast by the China Photovoltaic Industry Association (CPIA), the TOPCon route will maintain a competitive advantage in market share from 2024 to 2030.

However, Longi believes that there are already too many companies expanding production along the TOPCon route, and the improvement in conversion efficiency of TOPCon batteries is limited, representing only transitional technology. Another consensus in the industry is that as a new generation of battery technology, the conversion efficiency of perovskite batteries is higher than that of TOPCon and BC. Currently, the large-scale implementation of perovskite batteries still requires time. Longi's ability to use BC technology to significantly improve battery and component efficiency to a level clearly higher than TOPCon in a short period of time is crucial.

Similar to its previous layout of monocrystalline silicon, Longi is still willing to bet on being "long-term correct." However, it must race against time.

Last year, Longi launched the first generation of HPBC products based on BC technology. In 2023, Longi's Xixian 29GW and Taizhou 4GW high-efficiency HPBC battery production capacity were put into operation. At the performance briefing, Longi's management also revealed that in 2023, the total shipment of HPBC products reached 5.95GW, and the monthly shipments in March and April this year both exceeded 2GW, indicating a substantial increase in production.

Zhong Baoshen wrote in a shareholder letter that 2024 will be a year when "a new generation of BC products emerge, leading the industry's technological iteration."

This year, Longi has also made several innovative moves.

On April 3, Trina Solar disclosed a procurement contract: by the end of 2026, Longi and its affiliates will purchase approximately 425,000 tons of polycrystalline silicon (granular silicon) from its subsidiary Jiangsu Zhongneng and its affiliates. According to the price information released by the Silicon Industry Branch on April 3, the value of this large order is approximately 23.3 billion yuan.

Longi has kept a low profile on this matter and has not publicly disclosed this information. However, the collaboration between the two giants still caused a significant stir in the industry. Back in the day, during the heated battle over polycrystalline silicon, TCL Central Environmental and Trina Solar joined forces to develop polycrystalline silicon, while the young Longi chose to ally with Tongwei to jointly focus on the monocrystalline silicon market, ultimately both achieving dominance and creating two billion-dollar market value companies. The market is not currently calm, and it is difficult to say whether this move will bring about new changes to the industry landscape.

Since the emergence of monocrystalline silicon wafers, there has been little innovation in the silicon wafer field for many years. On March 28, Longi released a new silicon wafer product called "Tai Rui" silicon wafer, once again drawing attention to the market's focus on technological innovation in this familiar field. Longi stated to "Market Boundary" that the Tai Rui silicon wafer adopts a new TRCz pulling crystal process, with advantages such as uniform resistivity and good impurity absorption, and full platform support, which will open up a new path for reducing costs and increasing efficiency for the entire industry.

In addition, at the end of April, a screenshot of a new Longi module named "Hi-MO 9" quietly circulated online, with the highest conversion efficiency marked at 24.4%—this means that if the module goes into mass production, it will be the most efficient product under the current mainstream models, a potential "game-changer," and this new product rumor immediately sparked heated discussions within the photovoltaic industry.

On May 7, Longi Green Energy will release the second generation of HPBC products based on BC technology, stating that the product's power output is more than 5% higher than that of the same specification TOPCon module, and it is expected to achieve mass production in the second half of this year.

Longi stated that in the next three years, the company expects the annual production capacity of monocrystalline silicon wafers to reach 200GW, with Tai Rui silicon wafers accounting for over 80% of the capacity; BC battery annual production capacity will reach 100GW; and monocrystalline module annual production capacity will reach 150GW.

In its financial report, Longi confidently stated, "By 2025, our full product line will be in a very significant leading position." However, the time left for Longi to iterate its products is already very tight.

Li Zhenguo bluntly stated at last year's Shanghai SNEC Photovoltaic Conference that in the next few years, more than half of the photovoltaic manufacturers will be forced to exit the market. Industry reshuffling is coming. From the current perspective, Longi Green Energy is still one of the most cash-rich photovoltaic companies, but who can truly survive the cycle remains to be proven by time.