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Granular Silicon's Edge: GCL Technology's Q1 Market Strategy and Outcomes

published: 2024-05-11 17:28

On May 10th, GCL Technology (03800.HK) announced its financial results for the first quarter of 2024. The company reported revenue of approximately RMB 5.47 billion and a net profit attributable to the parent of about RMB 33 million.

Since the beginning of the year, the photovoltaic industry has continued the downturn from last year, experiencing a significant setback. Despite vigorous efforts in enhancing the quality and reducing the costs of granular silicon, GCL Technology's performance in the first quarter declined year-over-year for four main reasons: First, due to market constraints, the average selling price of polysilicon and wafers plummeted to new lows; Second, lagging capacity to improve, its Inner Mongolia Hohhot Xin ring company new production capacity is struggling to improve, is expected to the second half of 2024 after full production, will support the company's overall average cost of granular silicon significantly lower, profitability will be significantly enhanced; Third, continuous investment in R&D for high-tech products such as perovskite single-junction and tandem commercial production, CCz, silane, silicon-carbon anode materials, and clean materials in granular silicon production pushed the R&D expenses over RMB 400 million; Fourth, an inverted supply chain led to losses in the wafer business, which exacerbated the sales revenue decline due to a sharp downturn in the wafer market.

"In the face of countercyclical challenges, only innovation can ensure survival, with R&D being a critical component. In Q1, our high-level R&D investment strongly supported breakthroughs in high-tech core businesses like granular silicon, perovskite, CCz, and silane, as well as compensated for losses in the wafer sector, which dragged down overall profitability," said the operations manager of GCL Technology.

Despite a significant drop in raw silicon prices at the beginning of the year, GCL Technology’s granular silicon operated at full capacity and sales, which reduced some profits. In the first quarter, granular silicon production was approximately 65,500 tons, with shipments around 65,200 tons (including about 3,300 tons of internal sales), and the external average sales price (including tax) was about RMB 55/kg. The high quality and low-cost granular silicon demonstrated resilience even at relatively low prices per ton.

As of March this year, the turbidity level of granular silicon was reduced to below 120 NTU. More importantly, the average proportion of products with turbidity levels below 100 NTU reached 75%, with further reductions expected as processes and R&D advance. Currently, with polysilicon prices nearing rock-bottom and the price gap with rod silicon narrowing, the cost advantage of granular silicon is becoming increasingly evident.

GCL Technology stated that in the context of increasingly fierce competition in the photovoltaic supply chain and significant market price pressures, the company’s profitability and profit margins have been negatively impacted. However, this "burden" compels continuous reliance on technology and innovation to elevate product quality and reduce costs, thereby enhancing the endurance and tension of granular silicon in the market.

"Quality + Cost = Market," remains GCL Technology’s consistent development philosophy. After long-term application and empirical testing by several leading downstream enterprises, granular silicon is at the industry's forefront in controlling metal impurities, ranking highly in applications in the downstream N-type market. As of March this year, the average proportion of granular silicon products with total metal impurities of ≤0.5 ppbw for the 5 elements was over 90%, and over 60% for the 18 elements at ≤1 ppbw. With ongoing improvements in R&D and manufacturing processes, the control of metal impurities in granular silicon will continue to advance, consistently enhancing quality.

Entering the second quarter, silicon material enterprises will face the tough situation of widespread losses. At this time, those with superior product quality and lower costs will survive longer. Clearly, companies that struggle to gain advantages in quality and cost may not make it through the third quarter.

Source: Grass Roots PV

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