Reflecting on 2023, the industry's foremost concern revolves around overcapacity. Over the past couple of years, the industry chain's capacity has expanded rapidly, resulting in varying degrees of surplus capacity in each segment. The fundamental reason behind the continual dip in the industry chain's prices this year lies in the shift in the supply and demand pattern. This, in turn, exerts pressure on the profitability of enterprises, accelerating the industry's survival-of-the-fittest dynamic.
In alignment with the solar PV industry's development trend, TrendForce has curated an overview of the global PV industry chain. What does the current supply and demand pattern look like? How have production capacity and output changed in each link of the industry chain? What is the overseas strategy of domestic enterprises? The following analysis will delve into these questions for you.
Key Theme: Surplus Production Capacity and the Ongoing Chess Game in the Industry Chain, Awaiting the Breakthrough
Comprehensive Outlook on the Supply and Demand Dynamics in the Photovoltaic Industry Chain for 2024
Looking at the overall supply and demand scenario, 2024 emerges as a pivotal year for the industry chain to navigate its strategic moves. Over the past two years, the industry chain witnessed a period of rapid expansion, but unfortunately, customer demand failed to match the swift surge in production capacity. Consequently, various segments now grapple with varying degrees of excess production capacity.
Anticipating 2024, factors such as the consumption of production capacity in the domestic market and the uncertainty surrounding new power reform policies may contribute to a slowdown in the growth rate of domestic PV new installed capacity. While the market expresses concerns about the consumption of new energy, the robust implementation of energy policies plays a pivotal role in boosting renewable energy penetration rates. Coupled with the new power reform policy, China's commitment to restructuring and transforming the energy and power system is evident, providing essential support to installed capacity.
In the overseas market, the turning point for an improvement in overseas demand remains unclear, with lingering inventory pressures in certain regions, creating substantial uncertainty in the international market for 2024. Additionally, variables persist in traditional photovoltaic installed power demand. However, Belt and Road countries like Saudi Arabia and South Africa exhibit a robust demand for photovoltaic installations. TrendForce anticipates that global module demand in 2024 will fall within the range of 570-620GW, demonstrating a growth rate of approximately 25%. This indicates a downward trend compared to the remarkable growth rate of 58.9% witnessed in 2023.
Changes of Supply and Demand in the Industrial Chain from 2022 to 2027 Unit: GW
Expansion Slows Down, and High-Quality N-Type Products May Gain a Competitive Edge:
Industry Chain Capacity and Output Trends:
In 2023, the entire PV industry chain experiences a downward price trend, signaling the onset of a reshuffling stage for the industry. The adjustment of industrial structure and layout is an extended and evolving process, encompassing economic and industrial patterns. According to analysts at TrendForce, comprehending the current shifts in the production capacity of each industry chain segment requires an introduction to the concept of the capacity cycle time.
The capacity cycle time represents the primary cycle in economic fluctuations (spanning 6-11 years), mainly triggered by cyclical adjustments in equipment investment and employment practices. This cycle is divided into four phases (illustrated in the chart below). Presently, the PV industry finds itself in the second phase: the capacity clearing process, expected to extend for 2 to 3 years. As the economy recovers and company profits rebound, the PV industry is poised to transition into a recovery period of capacity expansion post-2026. Below outlines the trend of capacity and output changes in each segment of the industrial chain.
TrendForce anticipates a deceleration in the expansion of polysilicon capacity in 2024. The supply experienced shortages from 2021 to 2022, transitioning from a rapid expansion by both new and established players to a more measured increase in production capacity. Throughout these phases, polysilicon prices underwent significant fluctuations, soaring from 55,000 yuan/tonne in 2020 to a peak of 330,000 yuan/tonne. Currently, polysilicon prices have plummeted to nearly the lowest point in history, reaching 55,000 yuan/tonne. Examining industry data on output, capacity utilization rates, and output growth, the polysilicon sector indicates a declining trend. According to TrendForce data, polysilicon output in 2024 is estimated to be around 2.03 million tonnes. Assuming a polysilicon consumption of 2.3g/w for a single W module, this output can support a module output of approximately 882GW. However, the projected demand for modules in 2024 falls within the range of 570-620GW, indicating that the excess supply situation remains less than optimistic.
Overall, 2023 and 2024 are poised to be two years marked by a more severe oversupply of polysilicon. Furthermore, over the next 2 to 3 years, as older capacities are phased out and some polysilicon enterprises reduce their operational rates to focus on producing higher-quality polysilicon, the oversupply situation is expected to alleviate. In an environment of excess polysilicon production capacity, the core competitiveness of enterprises lies in production costs and the proportion of high-quality polysilicon. Consequently, during the capacity adjustment cycle, it is anticipated that higher-cost capacities will be more readily cleared.
Trends of the Global Output and Production Capacity of Polysilicon from 2022 to 2027 Unit: 10k tons
With the rapid expansion of capacity, wafer production capacity has gradually become excessive. In terms of output, driven by the high premium and increased demand for N-type cells, wafer enterprises are transitioning to N-type production at a faster pace. Over the next 2 to 3 years, we anticipate the phase-out of older wafer production capacities. Furthermore, as the supply of high-purity quartz sand intensifies, the growth rate of wafer output is expected to decelerate. Examining the competitive landscape, leading enterprises hold significant advantages in cost control and securing the supply of essential auxiliary materials. In summary, the market's competitive pattern is expected to diversify in the future, but the dominance of leading manufacturers will likely remain stable.
Trends of the Global Output and Production Capacity of Wafer from 2022 to 2027 Unit: GW
In the coming 2-3 years, there will be a structural adjustment in cell production capacity, with N-type cell technology advancing rapidly. Simultaneously, cells will undergo a structural capacity adjustment cycle: the iteration of N-type cell technology will accelerate, while P-type cell production capacity faces the risk of clearance or shutdown. TrendForce predicts that in the second half of 2024, as P-type production capacity is cleared, the oversupply of cells will be alleviated. Additionally, influenced by various factors, including project cancellations due to tightened financing policies, production delays, increased capacity, and unexpected commissioning issues, the actual output of N-type cells may be constrained. In conclusion, it is anticipated that in the latter half of 2024, high-efficiency N-type cells are likely to experience a stage of supply shortage.
Trends of the Global Output and Production Capacity of Cell from 2022 to 2027 Unit: GW
Regarding production capacity, the Top10 module enterprises are projected to reach approximately 743GW by the end of 2024, effectively meeting customer installation demands. Consequently, surplus production capacity has become an unavoidable trend, with a rapid evolution from old to new capacities, signifying an imminent industry reshuffling. Additionally, owing to the swift rise in N-type technology products and their improved cost-effectiveness, the customer market is displaying a robust demand for N-type module products.
As estimated by TrendForve, the market share of N-type modules is expected to surge significantly by 2024, reaching around 69%, marking a year-on-year increase of over 40%. In terms of market competition, the future challenges for the PV industry chain revolve around comprehensive competition and the decision-making authority of enterprises. Integration is an inevitable trajectory for the industrial chain's upgrading, and moving forward, integrated leading companies will enjoy enhanced competitiveness in terms of channels, brands, scale, and cost.
Trends of the Global Output and Production Capacity of Module from 2022 to 2027 Unit: GW
Keywords: Green Trade Barriers;
Speeding up globalization and securing a prominent position in international competition - Unfolding trends in the overseas capacity expansion of domestic enterprises.
The reshaping of the global energy landscape is gaining momentum. Considering the evolution of geopolitical conflicts, the emergence of green trade barriers, and other influencing factors, the structure of the global photovoltaic industry chain and supply chain is undergoing transformation, moving towards regionalization, localization, and low-carbonization. In the coming years, Chinese enterprises may encounter a series of trade barriers affecting their exports. Currently, China dominates the production capacity of every link in the industrial chain. With domestic production capacity far exceeding demand and overseas installed capacity experiencing rapid growth, domestic enterprises are hastening their pace of overseas production capacity expansion. In essence, the expansion of overseas module production capacity should not be underestimated.
Trends of the Global Production Capacity of Module from 2022 to 2027 Unit: GW
Regarding capacity expansion, China's photovoltaic industry chain extends its overseas production capacity layout from the cell module link to the polysilicon and wafer links. Specifically, the polysilicon and wafer segments are positioned to meet the module demands of domestic enterprises exporting to future markets like Europe and the United States. However, the prospect of bringing production capacity online remains uncertain due to challenges such as high electricity prices, elevated labor costs, and the intricate and volatile policies in overseas markets.
Moreover, the absence of an established industrial chain for overseas production capacity means that early expansion primarily focuses on modules, resulting in relatively high costs. Consequently, the abilities of enterprises in market development and cost control will vary, leading to divergence in their outcomes. China's leading integrated manufacturers, with their significant advantages in cost, brand, and new technology, still hold sway in production capacity.
As a result, it is anticipated that in the short term, China will continue to dominate the production capacity of the photovoltaic industry chain. However, in the long term, the global expansion of domestic enterprises remains an inevitable trend.
From a regional perspective, the fundamental rationale behind the global arrangement of industrial chains is cost reduction and efficiency improvement. Domestic enterprises are not merely expanding their capacities in Southeast Asia and the United States; bolstered by the Belt and Road policy and streamlined transportation, the Middle East can seize opportunities in emerging solar installation markets like Europe, Central Asia, and North Africa. Consequently, this region could emerge as a compelling new option for PV enterprises looking to establish overseas factories.
Energy transformation stands as a crucial pillar for steering sustainable development, upholding industrial and national security. It has evolved into the primary arena where nations strategize their layouts for development. Faced with the adjustments in the PV industry chain, China's photovoltaic enterprises, leveraging their long-accumulated advantages across technology, scale, talent, and equipment, play a pivotal role in propelling the global PV industry toward high-quality development.