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The Performance Doubled, But the Stock Price Plummeted

Nov 01, 2019

Longi's financing thirst, the possibility of PERC technology being replaced by HJT technology and the increasingly fierce dispute over the size of silicon wafer route are three medium-term worries for the future development of longi's shares, and the possible price war in the silicon wafer segment next year is the black swan event for longi.

1. Financing dependency

Founded in 2000, Longi is principally engaged in the development, production and sales of monocrystalline silicon rods, wafers, batteries and components, as well as investment development, construction and operation of photovoltaic ground power plants and distributed power plants.

The crystalline silicon technology route of photovoltaics has always competed with monocrystalline silicon and polycrystalline silicon.

At present, in terms of monocrystalline silicon wafers, Longi has the largest market share, and in terms of monocrystalline components, it is the third-largest in the world.

However, behind this scenery data, the hidden worries of Longi's cash flow have been lingering, and its ills relying heavily on financing for development are also worthy of attention.

2. Battery technology route PERC and HJT dispute

The essence of the rapid development of the photovoltaic industry chain in recent years is that technology drives cost reduction and efficiency improvement. Only by welcoming affordable Internet access can we get rid of the industry's restrictions on subsidies. The promotion of current PERC battery technology has driven the improvement of conversion efficiency of photovoltaic modules and promoted the operation of affordable Internet access in a larger area. Longi shares are the promoters of single-crystal PERC technology and extend the advantages to the component field. But this seems to have encountered a bottleneck.

PERC battery technology, the maximum conversion efficiency of the laboratory is 22.5%, and the current highest efficiency in China has reached 22.2%, which obviously can no longer support a wider range of affordable Internet access.

The highest conversion technology of HIT technology theory is 25.1%, which greatly increases the range of PV parity online. Industry predict that after the PERC battery, HJT will become the direction of high-efficiency batteries.

3. Silicon wafer size route dispute

Single dispute polycrystalline silicon technology of the market before the competition in the silicon chip market, they have basically settled. However, the size dispute has started again.

As the most important link in the photovoltaic industry chain, a silicon wafer determines the whole downstream technology follow-up and docking. As mentioned above, the current photovoltaic technology is still unable to support affordable Internet access in a larger area, so making silicon chips larger is also a breakthrough direction for new technologies.

According to the calculation, 210 saves 12% BOS cost (system cost excluding components) and corresponding LCOE(Levelized energy cost) by 4.1% compared with 166 in power plant construction.

The competition between 166 and 210 will be long-term competition. If Longi follows up, it needs to eliminate many of the current production capacity and a large amount of investment. According to the current volume of Longi, this investment is huge, and the secondary market can't bear it. If Longi doesn't follow up, once 12 inch becomes the mainstream of the industry, Longi can only be eliminated.

4. Silicon wafer price war risk

Industry analyzed that the battle for silicon size will bring about the price war of silicon wafers next year. Further speculation, the first probability of launching a price war is Longi shares.

Of course, it's just speculation. But the photovoltaic industry is always a game of chasing cost. Whoever has a low cost will be the king. No matter how excellent you were before, as long as your cost is lower than that of your competitors, you will be eliminated by the market soon. This is the same rule.

Every technological innovation in the photovoltaic industry will bring a new starting point for enterprises. Enterprises that do not follow up in time will be discarded and eliminated.