June Module Production Dropped by 11.9% as Operating Rates in Southeast Asia Bases Adjusted Significantly [SMM In-depth Analysis]

According to the SMM survey, from May to June, some PV module companies chose to reduce or even halt production due to falling prices, inventory pressure, and price competition. Although there was a growth trend in domestic and overseas market demand during April and May, the growth rate was relatively slow. Module manufacturers faced unstable orders, poor visibility, and increasing inventories, coupled with frequent changes in overseas policies, leading them to adjust production schedules to minimize losses.

According to SMM data, China's PV module output in May was about 52.8 GW, a MoM decrease of 2.3 GW (4.2%) and a YoY increase of 25.6%. Among them, N-type module output was about 42.23 GW, a MoM increase of 4.3%, accounting for about 80% of the total output. From January to May 2024, the cumulative output of PV modules was about 231.1 GW, a YoY increase of 50.1 GW (78.3%).

In May, prices in the PV industry chain accelerated their sharp decline. With limited demand, price competition intensified, causing many companies to fall into losses. The profit margins of integrated PV module companies were severely compressed across all production links. Currently, integrated module companies face greater risks of loss due to their cost-reduction strategies in the module segment. Additionally, from March to April, module supply significantly exceeded end demand, leading to another phase of inventory accumulation and increased pressure on companies to reduce inventories. Therefore, major module companies gradually lowered their original production schedules in May to control inventories and losses. Some small companies faced intensified competition, reduced orders, and demand, maintaining low operating rates and even halting production.

Chinese module companies' production bases in Southeast Asia usually maintain operating rates above 80%. In May, the US anti-dumping and anti-subsidy investigation into Southeast Asia caused market turmoil, affecting the production plans of major companies in Southeast Asia. Although the investigation results have not yet been released, module companies began to gradually reduce production in Southeast Asia from May to mitigate risks. In May, Chinese module companies' output in Southeast Asia was about 2.4 GW, a MoM decrease of 33.3%, with an operating rate of about 56%.

Entering June, module companies' profits have not fully recovered. The current average inventory days for modules are about 1-1.5 months, with no upward trend in demand, and inventory accumulation risks still exist. The scope of production cuts has further expanded. Major module companies adjusted their production schedules based on their situations, planning to dynamically adjust production strategies according to market trends. The adjustments in Southeast Asian production bases are particularly significant, with Vietnam having the largest module capacity layout, followed by Thailand and Malaysia. Currently, many companies have chosen to lower operating rates, adopting a wait-and-see attitude towards the later changes in anti-dumping and anti-subsidy policies, with material control or raw material stockpiling still undecided. Some module companies have halted production, with plans to stop production from late June to July. In June, Chinese module companies' output in Southeast Asia will be about 1.3 GW, a MoM decrease of 45.8%, with an operating rate of about 30%.

Overall, June PV module production is expected to drop to 46.5 GW, a MoM decrease of 6.3 GW (11.9%). Among them, N-type module output is about 38.53 GW, a MoM decrease of 8.8%, accounting for about 82.8% of the total output. SMM believes that in the short term, there is no significant improvement in demand, whether domestically or overseas, and the actual output of PV modules in June may continue to decline.