In 2013, the photovoltaic industry remained unstable. Despite recurring risks, the sector managed to turn around overall, thanks to government support for domestic applications. However, during a period of low profitability, high debt levels, and the "three heavy burdens" faced by private enterprises in developing solar power plants, the industry's recovery in 2014 was expected to be slow and challenging, like a long marathon.
Recently, the *Economic Information Daily* reporter visited leading companies such as Changzhou Tianhe, Zhongdian Photovoltaic, and Poly GCL, and found that with the industry maturing, the photovoltaic sector continued to expand its market capacity and technical routes. However, it had not yet stabilized like a mature industry and instead showed signs of entering a "traditional" phase marked by low-profit margins and intense cost competition.
Gao Jifan, chairman of Changzhou Tianhe, noted that before the end of 2009, the net profit margin across the PV industry chain was above 25%, with polysilicon, a key raw material, enjoying profits over 70%. By the end of 2013, the price of PV modules had dropped by more than 66%, while production costs had only decreased by 53%.
Dr. Wang Shijiang from the China Photovoltaic Industry Alliance pointed out that starting from Q3 2011, due to global overcapacity, Chinese small and medium-sized PV companies engaged in price wars, eventually leading to losses by the end of 2012. “At the end of 2012, 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,†he said.
Gao Jifan added that by 2013, the cost of PV modules had dropped to $0.65/W, with prices rising back to $0.7/W in the first half of the year. While this allowed some parts of the supply chain to turn from losses to profits, the polysilicon segment still struggled due to low-priced imports from the U.S., South Korea, and the EU.
Lu Tingxiu, chairman of China Light and Power, believes that the industry’s maturity is the root cause of its shift toward low-profit and low-cost competition. This maturity is evident in two aspects: first, the equipment used in PV production has become widely available rather than proprietary; second, the industry chain has become highly integrated, resulting in overcapacity.
Under these conditions, the fate of PV companies has been split—some succeeded while others failed. For example, Aerospace Electromechanical and Yijing Optoelectronics turned losses into profits, while Hairun Solar and Tianwei Baobian faced significant losses. Tianwei Baobian, in particular, recorded a pre-loss of 5.2 billion yuan, becoming one of the largest losses among listed companies.
Wang Shijiang analyzed that as the industry matures, the entry barriers have disappeared, leading to full competition. This has attracted capital from other industries, shifting the supply-demand balance and bringing PV industry profitability closer to that of traditional manufacturing.
Meanwhile, high debt ratios remain a major issue. According to Xu Ruilin, secretary general of the Jiangsu Photovoltaic Association, the industry’s debt ratio reached 80-85% by the end of 2013, with some companies exceeding 90%. The financial burden has become so heavy that many companies are essentially paying interest to banks.
The high cost of financing is another factor. 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. Lu Tingxiu noted that this has created a vicious cycle where debt continues to grow, further straining the industry.
Shu Hua, president of GCL-Poly, highlighted that the industry and banks are now in a negative loop. With continuous losses and low margins, the debt accumulated during past expansions is difficult to repay, forcing companies to renew loans and pay high interest rates for extended periods.
Suntech, once a top performer, fell into bankruptcy due to capital chain issues. Despite strong brand recognition and product quality, it could not escape the pressure of debt and financing difficulties.
Although some PV companies began receiving sporadic credit support from banks since June 2013, commercial banks remain cautious. About 60% of PV industry loans come from the China Development Bank, benefiting only a few key enterprises.
Xu Ruilin suggested that banks could consider packaging loans into financial products and converting them into equity options, redeeming them when companies improve. This approach might help alleviate the debt burden.
Private enterprises also face challenges in transitioning to solar power plant operations. Although the government offers subsidies, the high investment and long return periods create a "glass door" effect, limiting private participation. Central enterprises often dominate the process, capturing most of the subsidies, while manufacturers struggle to benefit.
Meng Xianyu of the China Renewable Energy Society emphasized that building solar power plants requires significant capital and time, giving central enterprises an advantage in financing and grid connection. Private companies often have to partner with them to gain access.
Wang Shijiang believes that to better support the industry, the State-owned Assets Supervision and Administration Commission should encourage collaboration between central enterprises and private PV firms. Another solution is for banks to provide credit support to private companies transitioning to power plant construction, helping them overcome financing obstacles.
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