On December 6th, the photovoltaic industry hit a low point, but some companies have since started to turn profitable again, signaling the beginning of a new phase of capacity expansion.
According to a survey by the Great Wisdom News Agency, industry experts believe this round of expansion is different from the chaotic growth seen in previous years. The current scale of industrial expansion is smaller, and the balance between supply and demand has improved, reducing the risk of severe overcapacity.
A new wave of PV expansion is on the horizon. Major module manufacturers such as Yingli Green Energy, Trina Solar, JinkoSolar, and Jingao are preparing to increase production. For instance, Yingli’s Hainan base has expanded its capacity from 300MW to 1GW. JinkoSolar aims to reach 2GW by 2014, up from 1.8GW at the end of 2013. Trina Solar currently operates at 2.4GW and plans to expand to 3GW in the coming year.
A component supplier in Jiangsu told the Great Wisdom News Agency that due to increased demand for power station installations in western China, many previously idle production lines have resumed operations. Some mid-sized companies are also planning expansions. For example, Jiangsu Fox New Energy is set to increase its production line capacity from 16 to nearly 30, with a total output of 500MW.
Gu Lijun, a senior consultant at the Solar Photovoltaic Network, noted that the current expansion is much more measured compared to the frenzied growth of a few years ago. The industry has become more concentrated, with most expansion plans focused on large US-listed manufacturers. Smaller A-share PV companies are less active in this space.
An executive from an A-share listed company shared that the industry has gradually become more rational. The wild overexpansion seen in the past is unlikely to repeat. Companies are now more cautious when it comes to increasing production capacity.
Gu Lijun added that while some companies have announced expansion plans, they are proceeding step by step, adjusting their investment pace based on market conditions. The scale of these plans may not be fully realized.
Industry insiders attribute the current expansion to stronger shipments in the second half of the year, improved performance, and optimism about the future of the PV market. In 2014, the global PV market is expected to grow to 42–45GW, a rise of over 20% year-on-year. China is projected to install around 12GW, making it the world's largest PV market.
Smaller overcapacity is expected this time. Industry leaders believe that the balance between supply and demand has improved, making serious overcapacity less likely.
From the demand side, global PV market demand remains strong, with a shift from Europe to emerging markets. The impact of the EU’s anti-dumping and anti-subsidy measures on domestic companies is diminishing, creating more room for Chinese enterprises.
Meng Xianyu, vice chairman of the China Renewable Energy Society, said that next year’s growth will primarily come from emerging markets like China and Japan. Increased domestic demand, company expansion, and changes in global market dynamics all contribute to this trend.
Meng also pointed out that Germany’s installed capacity dropped from 7.6GW last year to around 3GW this year, showing a clear shift in market focus. The global PV market is becoming more scattered and stable, which reduces the impact of European trade policies on Chinese suppliers.
On the supply side, the gross profit margin of PV components—now around 10%, up from 5% earlier this year—is still lower than that of other manufacturing industries. This makes the sector less attractive to new investors, and industry consolidation continues, with some production capacity being phased out.
Gu Lijun noted that even though the gross margin has improved, 10% is still not enough to attract significant capital. The industry is now being viewed more rationally.
In addition, Gu believes that 2014 will continue to see industry consolidation, with some outdated production facilities gradually exiting the market.
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