China’s Top 4 Silicon Material Companies: How Are They Reviving Their Glory Amidst Challenges?

After a highly profitable run in 2021 and 2022, how are the leading players in China’s silicon material industry, namely Tongwei, GCL-Poly, Xinte, and Daqo, navigating the downturn of 2023? Following the peak price of 310 yuan/kg in 2022, the current price has plummeted to 75 yuan/kg, causing net profits in the silicon material sector to shrink by nearly 95%. Clearly, the sector’s profitability is feeling the impact. However, how have the industry leaders fared in this scenario?

Tongwei, Daqo, and Xinte have released their semi-annual reports. Daqo Energy’s report on August 3rd showed a 42.93% year-on-year decrease in revenue to 9.325 billion yuan and a 53.53% drop in net profits to 4.426 billion yuan. On August 22nd, Tongwei reported a 22.75% increase in revenue to 74.068 billion yuan and an 8.56% rise in net profits to 13.27 billion yuan. Xinte Energy’s report on August 15th indicated a 19.51% revenue growth to 17.587 billion yuan, while net profits fell by 15.28% to 4.759 billion yuan. Among the three companies, Daqo experienced significant declines in both revenue and net profits, while Xinte’s revenue grew but net profits declined. Tongwei, on the other hand, maintained growth in both revenue and net profits, with net profits surpassing 10 billion yuan, reaching a new record high.

Despite a somewhat slowing growth rate in their performance, these companies still managed to maintain relatively high profitability in the first half of 2023. Notably, Tongwei’s net profit exceeded that of other prominent companies such as Longi Green Energy. However, there is a hint of fatigue in the growth trajectory of the silicon material industry during the first half of 2023.

The first half of the year witnessed both high and declining silicon material prices, raising concerns about the sector’s future. The imbalance in prices is not sustainable. Thus, how long can the sector’s glory continue? To seek profit growth, the companies must consider the core components of total profit: (Price – Cost) * Volume. Here, the industry leaders have an advantage, particularly in terms of cost.

Tongwei, as a global leader in high-purity crystalline silicon, managed to optimize its core consumption indicators, leading to consolidated quality and cost advantages with production costs now below 40,000 yuan/ton. Similarly, Xinte achieved improvements in various areas, and Daqo managed to significantly reduce silicon material costs over a year’s time.

Another significant factor in the companies’ successes is sales volume. With the gradual increase in downstream N-type technology capacity, the price differential for N/P-type silicon materials widened. Tongwei, specifically, rapidly increased its supply of N-type materials, leading to a 447% increase in sales. For the first half of 2023, Tongwei’s sales volume reached 177,700 tons, a 64% increase compared to the previous year, establishing a domestic market share of around 30%.

Furthermore, the report highlights the diversification of profit spaces and enhanced risk resistance in Tongwei’s strategy. In the second half of 2022, Tongwei’s push into the component business contributed to a global top ten ranking in shipments, and they currently possess a 55GW component capacity. GCL-Poly and Xinte also offer supportive endeavors for their respective enterprises.

The report raises a critical question: How long can this renewed surge in quantity and profit persist? Favorably, silicon material prices are once again on the rise, indicating another wave of profitability. With the rise in prices, the sector leaders have been preparing to support downstream photovoltaic installations. Tongwei’s development plan for 2024-2026 underscores its commitment to high-purity crystalline silicon and solar cell advancement. Moreover, GCL-Poly’s actions signal a focus on particle silicon business and capacity enhancements.

In conclusion, while uncertainties related to supply-demand dynamics remain, the outlook is positive as prices rise, costs decrease, and sales volumes increase. The overarching challenge is to sustain this upswing and ride the wave of this revitalization within the silicon material industry.