The solar industry is currently enduring a difficult phase, often described as a "winter," due to overcapacity and financial losses.
The solar industry is currently enduring a difficult phase, often described as a "winter," due to overcapacity and financial losses.
During this slump, the overall profitability within the solar supply chain has taken a hit, which is a major factor impeding initial public offerings (IPOs). Based on incomplete data from Yicai, nearly 50 solar companies were in the queue for IPO at the start of last year. However, as of now, 15 have voluntarily withdrawn their applications, leaving fewer than 20 still awaiting.
In contrast to the IPO boom in previous years, only three new listings took place in 2023.
After more than a decade of growth, China's solar industry has built up formidable international competitiveness in terms of manufacturing scale, technological progress, market expansion, and industrial system development.
Nevertheless, it remains a highly cyclical industry currently grappling with oversupply. Since the fourth quarter of last year, losses have surfaced within the sector. Analysts anticipate that the fourth quarter of this year might mark the nadir of the current downturn in the profitability cycle.
Amid the tightening of listing reviews during this downward trend, many companies are halting their A-share IPO procedures. This year alone, 15 solar firms have pulled out their applications, with an intended fundraising total of around CNY 27 billion. Most of them had received acceptance in early 2023 but chose to back out while under inquiry. For example, prominent players like Yi Dao New Energy and Hongxi Energy have suspended their audits. Even some already registered or approved companies such as Sanjing Co., Ltd. and Shengpu Co., Ltd. opted not to issue shares.
Despite the challenges faced by many companies seeking capital through traditional means like A-shares or public offerings on exchanges like Hong Kong's main board (as seen with Zhengxin Optoelectronics), others are still chasing opportunities. Ju Sheng Technology and Ri Yu Photovoltaics, for instance, are actively engaged in IPO counseling despite the unfavorable circumstances. Notably, the acquisition of Ru Yang by Tongwei Co., Ltd., valued up to CNY 5 billion, stands as one of the largest mergers in the field.
Since the beginning of 2023, compared to the numerous successful listings in prior years (with only three in 2023), there has been limited activity. Yongzhen Shares, focusing on photovoltaic frames; Ai Luo Energy, specializing in storage inverter technology; and Laplace, targeting core equipment R&D related to both photovoltaics and semiconductors, have all made inroads into their respective markets recently, albeit still facing difficulties mainly due to imbalances between supply and demand and persistent price declines that have adversely affected profit margins. Dongwu Securities' analysis of around 112 listed firms in the renewable energy sector, including wind, solar, and nuclear, shows the worst performance metrics so far, with revenue drops of nearly 21% and net profits plunging close to 96% in relative comparisons.
According to Xinyi Securities' research, improvements are emerging, particularly in the silicon material sectors, benefiting from cost reductions that have positively impacted gross margins. While wafer operations remain under pressure, cash flows are gradually improving. However, battery divisions face further margin contractions and reduced capital expenditures, and component inventories need to be adjusted to stabilize operational cash flow streams. Relief is expected by 2025, which could ease the prevailing supply-demand conflicts and pave the way for healthier growth paths ahead.
Dongwu Securities analyst Zeng Duohong contends that the current capacity utilization rate of the photovoltaic main chain is only between 50% and 60%, with most segments incurring significant losses. Relying solely on market forces for self-correction is inadequate, and external regulation is required; supply-side reforms may be urgently needed.
Currently, some "anti-involution" measures have been implemented to break the deadlock of low-price competition. For example, on October 18, the China Photovoltaic Association announced that since the second half of 2023, the prices of photovoltaic modules in the Chinese market have continuously declined and are now halved. The bidding market has witnessed extremely low bids where winning prices fall below costs, posing a threat to the photovoltaic manufacturing industry. In response, the association set a minimum cost price for photovoltaic modules at 0.68 yuan/W and stated that bidding below this cost could be illegal.
Furthermore, the U.S. Department of Commerce is launching a Changed Circumstances Review (CCR) to consider partially lifting anti-dumping and countervailing duties on Chinese crystalline silicon solar cells, suggesting a potential relaxation in tariff policies towards Chinese photovoltaic products.