In 2013, the photovoltaic industry continued to face challenges. Despite repeated risks, the sector managed to turn around overall due to government support for domestic applications. However, during this low-profit period, with high debt ratios and mounting pressures from the "three big mountains" of development—capital, policy, and market—the industry's recovery in 2014 was expected to be slow and arduous, like a marathon.
The industry has entered a phase of low profitability. Recent reports from the *Economic Information Daily* revealed that as the sector matures, the photovoltaic industry still shows rapid expansion in market capacity and technical routes. Yet, it has begun to exhibit traits more typical of traditional industries: low margins and intense cost competition. Gao Jifan, chairman of Changzhou Tianhe, noted that before 2009, profit margins across the PV supply chain were above 25%, with polysilicon profits exceeding 70%. By now, module prices have dropped by over 66%, while production costs have only fallen by 53%.
Dr. Wang Shijiang from the China Photovoltaic Industry Alliance pointed out that by Q3 2011, global overcapacity led to price wars among small and medium-sized Chinese PV companies, resulting in losses by the end of 2012. At that time, the cost of PV modules was about $0.7/W, but selling them at that price resulted in a loss of 10 cents per watt.
By 2013, module costs had dropped to $0.65/W, with sales prices rising back to $0.7/W in the first half of the year, stabilizing later. This allowed many parts of the supply chain to turn losses into profits, except for the polysilicon segment, which remained unprofitable due to low-priced imports from the US, South Korea, and the EU.
Lu Tingxiu, chairman of China Light and Power, attributed the industry’s maturity to two factors: the standardization of production equipment, which is now widely available rather than proprietary, and the high level of integration within the supply chain, leading to overcapacity. As a result, the PV industry is no longer a high-margin sector but has become more like traditional manufacturing.
This shift has led to stark differences among companies. Some, like Aerospace Electromechanical and Yijing Optoelectronics, turned losses into profits, while others, such as Hairun Solar and Tianwei Baobian, faced significant setbacks. Tianwei Baobian reported a loss of 5.2 billion yuan in 2013, becoming one of the largest single-year losses in the sector.
Wang Shijiang explained that the industry’s maturation has eliminated entry barriers, leading to full competition. As a result, capital from other sectors is flowing in, altering the supply-demand dynamics and pushing PV profitability toward levels similar to traditional manufacturing.
Another major challenge is the high debt ratio in the industry. According to Xu Ruilin, secretary general of the Jiangsu Photovoltaic Association, the investment boom in downstream PV sectors in 2010 led to heavy reliance on bank loans. However, when production capacity expanded and prices fell, many companies struggled to maintain cash flow, leading to increased debt burdens.
The high cost of financing further worsens the situation. Most bank loans are short-term, forcing companies to roll over debts frequently. Some rely on guarantee companies, which charge high fees and require large deposits. Shu Hua of GCL-Poly highlighted the vicious cycle between the industry and banks, where high interest rates eat into profits and hinder sustainable growth.
Suntech, once a leading brand, fell into financial distress due to the pressure of debt, illustrating the struggles of even well-known companies. Although some banks have started offering sporadic credits, commercial lenders remain cautious, with most PV loans coming from the China Development Bank.
Finally, private enterprises face a "glass door" when trying to transition into photovoltaic power plant operations. While the government offers subsidies, access to projects is often dominated by central enterprises. This creates an uneven playing field, limiting opportunities for private manufacturers who are key players in the industry.
To address these issues, suggestions include better coordination between central and private enterprises, as well as improved credit support from financial institutions. Only through such measures can the industry overcome its current challenges and move toward a more sustainable future.
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