The photovoltaic (PV) industry is undergoing a dramatic transformation, marked by a steep decline in component prices, which have recently fallen below one yuan per wattThe repercussions of this price drop are being felt throughout the sector, pressuring many secondary enterprises into selling at a lossCompanies like Longi Green Energy, a major player in the market, are grappling with the complexities of reduced demand and rising operational challenges.
In response to the rumors circulating about layoffs, a spokesperson from Longi Green Energy's secretariat stated that they do not currently have a specific percentage or a number of positions being cut, as organizational restructuring will be determined based on future market conditions and production capacity expansion.
On December 14, Longi Green reported a share price of 20.3 yuan, with a market capitalization of approximately 154.1 billion yuanFrom a peak of 49 yuan at the start of the year, the share price has plummeted by almost 60%, resulting in a staggering loss of approximately 217.5 billion yuan in market value.
So, what has led to this volatility at Longi Green Energy? The firm primarily engages in the R&D, production, and sales of monocrystalline silicon rods, wafers, batteries, and solar modules, providing essential products and system solutions for both centralized and distributed solar energy installations.
As of this year, the majority of Longi Green's revenue is derived from its solar modules and batteries, with reports from the first half of the year showing that solar cells contributed 74.6% and silicon wafers accounted for 22.5% of their income.
Over the past couple of years, as the global and Chinese solar power capacity surged, Longi Green expanded its production capabilities substantiallyTheir silicon wafers and modules enjoyed a sharp increase in both volume and prices, leading to an impressive rise in the company's performance, with shares soaring from under 10 yuan to a peak of 73 yuan, and market capitalization exceeding 500 billion yuan
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However, as market dynamics shifted, Longi Green faced a correction, with shares fluctuating downwards to the current valuation.
In terms of performance, from 2019 to 2022, Longi Green's revenues grew from 32.89 billion yuan to 129 billion yuanNet profits also saw a consistent increase over those years, from 5.28 billion yuan to 14.81 billion yuanHowever, preliminary reports from 2023 indicate a concerning trend, with a revenue of 94.1 billion yuan in the first three quarters—an 8.55% increase year-on-year—which reveals a marked slowdown, particularly evident in the third quarter when revenues and net profits saw declines of 19% and 44%, respectively.
Despite reaching historical highs in revenues and profits, the growth rate has significantly declined compared to previous years, correlating with fluctuations in stock price, which often reflect underlying operational performance.
The solar photovoltaic industry has experienced significant developments in recent years, characterized by rapid expansion from leading companies aggressively scaling up their manufacturing capacities.
This year, Longi Green has made multiple investment announcements, significantly ramping up production capacityIn January, for instance, they revealed plans to expand their West Xian production capacity for high-efficiency monocrystalline batteries from 15 GW to 29 GW, alongside plans for a new annual production facility for 100 GW of silicon wafers and 50 GW of monochrome batteriesFurthermore, they reported a projected investment of 7.77 billion yuan in March to build a 30 GW high-efficiency battery project in Ordos.
In April, Longi Green signed agreements with local governments in Tongchuan to invest in a 12 GW production project as part of a broader strategy to enhance their operational footprint.
Nevertheless, skepticism surrounding overcapacity emerged, as many critics pointed out the potential discrepancy between production increases and actual demand.
On July 5, Longi Green addressed concerns regarding overcapacity via investor relations, asserting that the situation is of a structural nature; advanced production still fails to meet market demands for high-efficiency products
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They maintained that any proposed capacity expansion plans would be flexible, adapting to market supply and demand dynamics.
In the first half of the year, the new solar power installations in China saw a massive increaseAccording to data from the National Energy Administration, China added 78.42 million kilowatts of new solar capacity—an impressive growth of 154% compared to the prior yearBy the end of June, the total installed capacity reached 470 million kilowatts, with centralized solar accounting for 272 million kilowatts and distributed systems for 198 million.
Despite this growth, the rapid installation rates of solar energy do not appear to keep pace with the expanding capacities within the industryMany insiders point out a glaring structural surplus, with a stagnation in downstream demand across the photovoltaic supply chainCompanies eager to meet performance targets and expand market share are prioritizing output over profitability, which has led to a substantial increase in production regardless of existing demand.
The coronary of the surplus phenomenon is poignantly illustrated through the astonishing decline in solar module prices.
Currently, solar module prices have tumbled from two yuan per watt earlier in the year to below one yuanIn December, procurement activities indicated many companies quoting prices around 0.95 yuan per watt, with some bidding as low as 0.86 yuanIndustry reports from November showed that approximately 34 GW of purchases were awarded at an average price of around 1.098 yuan per watt—a stark contrast to the 1.8 to 1.9 yuan per watt reported at the year's beginning.
Industry analysts note, “With the current market prices hovering around one yuan per watt, Longi might manage to sell for slightly above that margin, yet to maintain profitability would be a challenge for many second-tier firms, often leading them to incur losses.”
In addition to modules, prices for polysilicon—the primary raw material used in manufacturing solar panels—have also shown a downward trend
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Recent data indicated a single-crystal polysilicon price dipping below 60,000 yuan per ton, indicating a decline of over 60% since the start of the year.
The simultaneous plunge in solar component and polysilicon prices has wreaked havoc across the solar industry, resulting in lowered operational rates and a slowdown in the pace of production launches.
Recently, there have been reports of significant reductions in output and workforce layoffs among several solar companiesTop-tier companies have reportedly been cutting employees by as much as 15% to 20%, with Longi Green facing rumors of cutting around 10,000 positionsOther firms involved in battery production, such as Aiko Solar, have been noted for intended reductions in production by about 30%.
Over the past three years, Longi Green's workforce has surged, jumping from 46,600 in 2020 to over 60,600 by 2022.
Regarding the rising speculation about layoffs, representatives from Longi Green clarified that annual performance evaluations typically inform end-of-year organizational adjustments, labeling them as standard operational practices.
In addressing ongoing rumors regarding workforce reductions, the spokesperson conveyed a cautious stance, emphasizing that future talent planning is contingent on numerous factors including market fluctuations and capacity expansion contextsTherefore, there remains an absence of concrete long-range planning, given the rapidly shifting market.
Longi Green indicated during their Q3 earnings call in September that they are progressing their expansion plans and adapting new technologies for productionExisting production lines would undergo adjustments and upgrades reflective of current market conditions.
In the wake of plummeting solar module prices, many publicly listed solar companies are witnessing consecutive declines in market valuation
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