On December 6th, the photovoltaic industry hit a low point, but some companies have started to turn a profit again and are now launching 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 wild growth seen in previous years. The current scale of industrial expansion is relatively small, and the balance between supply and demand has improved, making severe overcapacity less likely.
A new wave of PV expansion is on the horizon. Major manufacturers such as Yingli Green Energy, Trina Solar, JinkoSolar, and Jingao are preparing for increased production. For example, Yingli’s Hainan base has expanded its capacity from 300MW to 1GW, while JinkoSolar expects to reach 2GW by 2014, up from 1.8GW at the end of 2013. Trina Solar currently has a capacity of 2.4GW and plans to grow to 3GW in 2014.
A component supplier in Jiangsu told the Great Wisdom News Agency that due to the rush to install power stations in western regions, many previously idle production lines have resumed operations. Some mid-sized companies are also planning expansions. For instance, Jiangsu Fox New Energy aims to increase its component production capacity from 16 to nearly 30 lines, reaching 500MW.
Gu Lijun, a senior consultant at 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 coming from large U.S.-listed manufacturers. Small A-share PV companies are less active.
An executive at an A-share listed company told the Great Wisdom News Agency that the industry has become more rational, and the extreme overcapacity seen in the past is unlikely to return. Companies are now more cautious when deciding to expand their production capacity.
Gu Lijun added that although some companies have announced expansion plans, they are proceeding step by step, adjusting investment pace based on market conditions. The scale of these plans may not be fully realized.
Industry insiders said the main reason behind the expansion is the significant increase in shipments in the second half of the year, improving performance, and optimism about the PV market in 2014. Global PV market growth is expected to reach 42–45GW, a year-on-year increase of over 20%. China’s installed capacity is projected to be around 12GW, making it the largest PV market globally.
Smaller overcapacity is expected this time. Industry observers believe that despite the new expansion, supply and demand are becoming more balanced, reducing the risk of serious overcapacity.
From the demand side, global PV demand remains strong, with the focus shifting from Europe to emerging markets. The impact of the EU’s anti-dumping measures on domestic companies is diminishing, giving Chinese firms more room to grow.
Meng Xianyu, vice chairman of the China Renewable Energy Society, said that next year’s growth will mainly come from emerging markets like China and Japan. In addition to domestic demand, company expansion and global market shifts are also influencing the industry.
Meng noted that Germany’s installed capacity dropped from 7.6GW last year to about 3GW this year, showing a 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.
From the supply side, the gross margin of PV components, now around 10%, is no longer attractive compared to other manufacturing sectors. This makes it less appealing for large capital inflows, and the industry is still undergoing consolidation, with some capacity being phased out.
Gu Lijun added that while the gross margin has risen from 5% to 10%, it’s still not competitive with other industries. The sector is now viewed more rationally.
In addition, Gu believes that 2014 will continue to see industry consolidation, with some outdated production capacity gradually exiting the market.
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