Interview with JA Solar: Getting rid of the interference, PV industry is moving towards constructive integration

published: 2013-07-11 15:11 | editor: | category: Interviews
JA Solar’s financial structure is relatively complete among all the large first-tier Chinese manufacturers, which can be rare in the PV storm throughout the globe. Recently, JA Solar’s vice president, Bill Chen, has accepted EnergyTrend’s interview and talked about the company and the industry’s future development. 
 
 
The chance of Europe’s anti-dumping and countervailing policy threat being removed is high
 
Although JA Solar doesn’t have too much willingness to expand the capacity in 2013 and 2014, they will make slight adjustments to the module production capacity based on market demand. Before Europe makes final decision on the anti-dumping and countervailing policy, they are likely to adopt third-party country expansion as a backup plan. From the current point of view, JA thinks there’s a possibility that the anti-dumping and countervailing policy may not be established, thus their plans to produce in a third-party country is not likely to be adopted. Mr. Chen also believes that tariff of 47.8% is just an unrealistic political slogan. The PV price in Europe is the corresponding price that were established from Chinese suppliers’ cost structures within the past two years, which has become the key factor to restrict module price. If adding half of module’s original price as a tax, it can be a losing business to the investors hence many people oppose  it. However, investors’ draw back will cause the market to die out and that the European Committee will turn out to shoot themselves in the foot. Meanwhile, because no one is going to invest, the proportion of PV in the overall renewable energy will not be able to reach the goal of 20% in 2020 and their own reputation in the green energy field will be damaged as well. 
 
Focusing on financial control and gross margin improvement rather than market share
 
According to EnergyTrend’s observation, the relationship between financial condition and shipment quantity is very close under the current market condition. The larger the shipment quantity, the larger the risk has to be taken to loss. As a module manufacturer the gross margin has to be at least 12% to cover the operating expense. Yet, current module price has dropped down to the bottom and will not have too much growth for gross margin. Therefore, JA Solar will increase the gross margin through developing  projects. Although it is in the initial stage to develop projects, the downstream vertically integrated process will be maintained. While most of the projects in other countries (outside China) are handled by the local companies, it could be a primary challenge for Chinese manufacturers to compete with the local companies in other countries in the future.
 
 
Source: JA Solar
 
Confronting the market issues, high-efficiency and financing remain the key points
 
JA Solar believes that PV industry will continuously integrate within the next two years due to the increasing amount of installation in the world. By eliminating less competitive manufacturers, what’s left in the industry will be those with outstanding competitiveness hence it can improve the future development in the industry. JA Solar will choose Japan, the representation of Asia & Pacific market, to be the major profit market. Next, they will choose USA and Canada to be the key markets to develop PV due to the complete energy policy established in these two countries. Although the anti-dumping and countervailing policy is becoming clearer, JA will not expand the market size towards the traditional European market and will only maintain its market position as one of the major suppliers. Furthermore, 60%-70% of the mainstream business in Europe and USA are roof-top. Japan’s projects are mainly focused on residential system as well hence JA Solar is likely to lead the market through high-efficiency products. When talking about using what kind of role to enter the emerging markets, Mr. Chen replied “The risk is lower entering as a supplier. But because developers can only get subsidy until after grid-connected, thus the contractors usually don’t have too much budget at the beginning of a project.  Project developers need to work with module manufacturers to develop projects which will be a pressure to module manufacturers.”
 
Choosing the product type based on the trend
 
In terms of products, JA Solar will choose the product type depends on the market trend. There are two core points toward the changes in the future industry: the first one is the advanced technology. If the product’s conversion efficiency each year can raise by 3%-5%, the cost saving will be considerable. The second one is scale operation. The continuous integration in the industry can leave all the resources to the few manufacturers with better performances and achieve economic of scale. Even though the module cost is not likely to be compressed, there could be significant changes towards material supply chain due to the industrial concentration. For now, the material manufacturers within the supply chain still have the lead in the profit. Once PV industrial concentration reaches a certain degree, they can communicate better with the suppliers regarding price negotiation, lead time, etc. Thus, large manufacturers that are being integrated can lower the cost more efficiently. In terms of branding, JA Solar will strengthen the brand image not only on its modules but also on its PV cells although the branding advantages in the PV industry are yet unclear. Brand strengthening will be a long road that must be determined to work on.
 
EnergyTrend’s point of view
 
JA Solar’s financial structure is rather complete compared with that of other large first-tier Chinese manufacturers. During the interview, JA Solar focuses all of the following - financial control, product and market planning on long term development. The development period for PV industry is shorter while the fluctuating circulation is far more severe. Therefore, how to “survive” and “continuously develop” will be the most important two cores. Under the current situation, the industry is profit-oriented rather than market share-oriented. Meanwhile, technology upgrade and quality improvement are the most solid basis for growth. Judging from the development in PV industry, regardless of the companies in Europe, USA, or China, they are likely to close down once expanding too quickly.  Flexible but not aggressive transformationhas become the key to their continuous development. After the industry integration for 12-18 months, it’s believed that JA Solar will remain one of the leading manufacturers in the market.
announcements add announcements     mail print
Share