TCL's "Midfield Battle" in Central

Author | Huang Yu

Editor | Zhou Zhiyu

Four years ago, the photovoltaic industry was booming, and Zhonghuan shares transformed into TCL Zhonghuan, experiencing two glorious years. Now, the global photovoltaic industry is still in a downturn. The core veteran Shen Haoping resigned as CEO, and Chairman Li Dongsheng temporarily took over. TCL Zhonghuan needs to come up with more effective strategies to win this "midfield battle".

On August 8th, at the media exchange meeting of the Ningxia Crystal Wisdom Factory of TCL Zhonghuan, TCL Zhonghuan emphasized that in the domestic red ocean market, the first thing to focus on is relative competitiveness. TCL Zhonghuan must adhere to technological innovation, manufacturing transformation to ensure leadership in manufacturing, costs, and other dimensions. Secondly, the focus should be on financial strength, mainly relying on its own financial health and the support of the group to achieve stable operation.

In the overseas blue ocean market, TCL Zhonghuan should adhere to a global layout of manufacturing and patents. This is also what Li Dongsheng has always said: "If you don't go global, you will be out."

TCL Zhonghuan is an old player in the photovoltaic industry, focusing on monocrystalline silicon rods and monocrystalline silicon wafers, driving the capacity improvement of domestic battery cells and modules with a limited integrated logic. Longi Green Energy and TCL Zhonghuan are known as the "two heroes" of photovoltaic silicon wafers, with their market share basically dominating the industry.

Despite TCL Zhonghuan's strong strategic determination, in today's market environment, whether in the red ocean market or the blue ocean market, it faces tough battles.

Under the industry's stage of excess capacity, how TCL Zhonghuan formulates its capacity strategy is of great concern.

According to TCL Zhonghuan, by the end of last year, TCL Zhonghuan's monocrystalline photovoltaic capacity had increased to 183GW, and it is expected to increase by 9% to 200GW by the end of 2024; the overall market share will increase from 23.4% at the end of last year to over 24% in the first half of this year.

In the process of increasing capacity, TCL Zhonghuan will not add monocrystalline furnaces but mainly increase the capacity of existing equipment through technological improvements.

TCL Zhonghuan's strategy of increasing capacity is contrary to the choices of many other photovoltaic companies. It is worth noting that in order to cope with the profitability challenges brought by excess industry capacity, in recent years, many photovoltaic companies have been reported to have closed some production lines and reduced operating rates.

According to the Silicon Industry Branch of the China Nonferrous Metals Industry Association, the domestic silicon wafer production in July was 50.4GW, a decrease of 1.8% month-on-month, and the cumulative domestic silicon wafer production from January to July was 416.15GW, a year-on-year increase of 37.2%. Specifically, the increase in July came from first-tier companies, with Longi starting to increase production at the beginning of the month, and Zhonghuan maintaining full production capacity; the decrease in July mainly came from integrated and specialized companies, with some small companies being forced to significantly reduce production, leading to an intense price war in the industry.

Why choose to go against the trend?

TCL Zhonghuan's answer is that the company will continue to maintain relative competitiveness based on its own technological and manufacturing advantages, seeking the optimal solution under multiple factors such as comprehensive production, sales, market share, and profitability In addition, TCL China Star believes that the photovoltaic industry is a capital-intensive industry, with high asset depreciation and lower start-up costs, leading to a greater allocation of asset depreciation. Each company has different asset sizes, cost capabilities, and strategies, so there will be different choices.

Of course, the premise for TCL China Star's current decision to increase production is that the industry's downturn cycle will not last too long.

"Although it is difficult to say exactly when the inflection point of the photovoltaic industry will come, we believe that signs of a turning point in the industry may be seen as early as the fourth quarter of this year," said a relevant person from TCL China Star.

He pointed out that the reason for this judgment is that the entire photovoltaic industry is in a state of intense competition, with the industry's overall cash flow at a high level, some companies facing financial constraints, and the entire industry unable to withstand such a long period of massive losses, so the downturn cycle will shorten.

Against the backdrop of intensified domestic competition and the trend of trade against globalization, TCL China Star is also continuously strengthening its globalization layout and enhancing the localization of photovoltaic manufacturing.

In July, TCL China Star signed an agreement with the Public Investment Fund (PIF) of Saudi Arabia and Vision Industries to invest in the establishment of a joint venture company, promoting the localization production of solar photovoltaic crystalline chips in Saudi Arabia with an annual capacity of 20GW. Once implemented, it will become the first local photovoltaic crystalline chip project in Saudi Arabia and currently the largest overseas crystalline chip factory.

Li Dongsheng recently mentioned that this project involves significant investment. It is difficult to fully self-invest in heavy asset projects like the Middle East Saudi project, and the risks are also high. If the local area wants to develop this industry, it means that he is also willing to invest money, greatly increasing the probability of the project's success.

Li Dongsheng emphasized that in the future, TCL's overseas expansion will not only involve consumer products and end products, but also industrial products and B2B products. The transformation and upgrading of industries will also be realized overseas in the future.

Clearly, the Saudi project is just the beginning of TCL China Star's overseas localization manufacturing of crystalline chips, and it will further assist in promoting its globalization strategy. This is crucial for TCL China Star to reach the industry's peak after successfully navigating this cycle