Price Cuts In Upstream Supply Chain

Price cuts in polysilicon and silicon wafers last week should be a positive turnaround for weak downstream demand, although still insignificant to spur downstream demand as the average module price is still at Rmb1.95/W. Near-term demand weakness might persist given the upcoming holiday seasons. The recent acceleration of the second batch of wind and solar power base projects in the Gobi
Desert supports our long-term positive view on the sector. Maintain OVERWEIGHT.

WHAT’S NEW

• Price cuts seen in the solar supply chain:

a) Silicon wafers: On 30 November, LONGi Solar took the lead in announcing a price
reduction of Rmb0.41-0.67 per piece of silicon wafer product, representing a 7.2-9.8%
decline. Tianjin Zhonghuan Semiconductor followed suit on the third day and
announced a price cut of Rmb0.52-0.72 per piece, representing a 6.0-12.5% decline.
According to PV Infolink, the price of multi-silicon wafer dropped 13.3% wow to
Rmb1.95 per piece in the first week of Dec 21, while 166mm/182mm/210mm monosilicon
wafer prices declined by 4.8%/5.6%/6.0% wow per piece to
Rmb5.00/Rmb5.85/Rmb8.55 respectively.

b) Polysilicon: Polysilicon’s average transaction price fell 3.6% wow to Rmb260/kg,
according to data released by China Silicon Industry on 8 December. Similarly, PV
Infolink showed that average polysilicon price fell 4.1% wow to Rmb258/kg. The price
reduction brings the consecutive price hikes since Aug 21 to a halt.
c) Solar modules: Solar modules’ (182mm/210mm) average transaction price fell 1.5%
wow and 5.8% mom to Rmb1.95/W in the first week of Dec 21, according to PV
Infolink.

Solar glass demand remains relatively weak. Average solar glass prices for
3.2mm/2.0mm products remained unchanged wow at Rmb26/Rmb20 per sqm; however,
product prices were down by another Rmb2/Rmb1.5 when compared with the previous
month. According to updates from Xinyi Solar, current inventory is at normal levels and
demand is still relatively weak; the situation looks unchanged since our company update
last month.

The second batch of large-scale solar base projects encourages the use of double-facial
modules.
According to reports, the National Energy Administration (NEA) recently
put out a notice on “Organizing The Second Batch Of National Large-scale Wind And
Solar Base Projects Focusing On Deserts, Gobi and Desert Areas”, requiring all
provinces to submit their lists for the second batch of wind and solar power base projects
by 15 Dec 21. The notice proposes that the scale of a single project should not be less
than 1GW, and in principle, a single project should not involve more than two companies
if jointly developed. Moreover, when conditions permit, developers should use double-facial
solar modules, and the solar support structure must not be less than 1.5 meters. It
also encourages the use of wind turbines and solar modules with higher power
generation efficiency.