SMM: Current Solar Cell Market Faces Significant Inventory Risk; De-stocking Cycle May Begin in H2 2025 [Photovoltaic Industry Conference]

At the 2024 NETZERO Photovoltaic Industry Conference - Solar Cell and Module Technology Innovation and Application Economic Forum - BC Cell and Module Technology and Application Session hosted by SMM, SMM Senior Photovoltaic Analyst Mao Tingting shared insights on "Development Status and Future Trends of Different Technology Types of Solar Cells." She stated that the cell market's inventory accumulation extends from Q4 2023 to mid-2025, with a prominent supply-demand mismatch in the industry chain and a slowdown in module expansion, marking a survival battle among cell enterprises. During this period, the risk of cell inventory accumulation is significant. The de-stocking cycle is expected in H2 2025-2026, with the high inventory of 2024 requiring extended time to digest. A new wave of cell technology revolution is anticipated post-2026, with expansion bringing new increments in 2027.

Current Status of the Solar Cell Market - Multi-technology Coexistence

Currently, in the solar cell market, multiple technology routes such as Topcon, HJT, and BC coexist, while the PERC cell market is gradually phasing out, with most enterprises having completely ceased PERC cell production.

Current Status of Chinese Enterprises' Solar Cell Capacity: P-type Declines, N-type Exceeds 80%

According to the SMM survey, the current cumulative effective capacity of solar cells has exceeded 1,080 GW.

Solar Cell Market Capacity Structure - Specialized Cell Plants vs. Integrated Module Plants' Own Cell Plants

Specialized cell plants are concentrated on Topcon cells, while top-tier integrated module plants pursue multiple cell technology routes. In H2 2024, specialized cell expansion may enter the BC route.

Large Module Plants' Own PERC Cells Achieve Self-sufficiency: In 2024, PERC demand declines, specialized cell plants gradually cease PERC production lines, and large module plants' PERC cells are almost self-sufficient, with PERC upgrade progress reaching 85%.

Topcon Cell Market Structure Established, Expansion Paused: The Topcon cell market has many new players, leading to a fragmented market. The current competitive landscape is set, with expansion paused. Leading integrated module plants have a cell self-supply rate of over 90%, while specialized cell plants face "many monks, little porridge."

HJT Cell Modules Mainly Integrated Layout: Few manufacturers focus solely on HJT cells, with most HJT players emphasizing integrated cell and module production, though new players are planning to enter HJT.

BC Cell Modules Fully Integrated, New Players May Enter: Currently, only LONGi and AIKO have integrated mass production of BC cell modules, while other manufacturers are still in the R&D or pilot stage. In August 2024, a new specialized cell plant began BC cell production, with potential for future expansion.

2024 Monthly Production Analysis of Chinese Enterprises' Solar Cells

In 2024, the production of Chinese enterprises' solar cells is expected to be 658.48 GW, with an estimated increase of 11.38% YoY, mainly from H1. However, in H2, cell demand is weak, inventory is high, and production is expected to decline by over 11% from H1.

SMM Survey: High Operating Rate in H1 2024, Weak Growth Momentum in H2

In H1 2024, the operating rate of solar cells was high, with April's monthly production being the peak for the year, slightly below the peak monthly production of 2023. In H2 2024, solar cell demand declines, manufacturers' inventories remain high, operating rates decrease, and the accelerated phase-out of PERC cells further lowers the operating rate. Solar cell production is expected to decline month by month in H2.

Increased Demand for N-type Modules Drives Optimization of P/N Production Schedule by Solar Module Enterprises

According to SMM's survey of the proportion of N-type module procurement demand over the past year, since February 2024, the proportion of N-type module procurement demand has steadily increased, with the recent monthly average approaching over 90%. The monthly production of N-type modules is gradually eroding the share of P-type, and in the production schedule of top-tier enterprises, N-type production holds an unshakable low position.

In H1 2024, the centralized procurement bidding capacity for domestic modules was approximately 131.4 GW, with N-type module bidding reaching 93.6 GW, accounting for 71.2%, up 24.7% from H2 2023. The penetration rate of N-type modules continues to rise, now occupying an absolute mainstream position in the market, while the market share of P-type modules has significantly declined. Since June, there has been almost no procurement demand for P-type modules in projects with specified module models.

Thanks to the technical advantages, improved economics, and increased market demand for N-type modules, the proportion of N-type production by module enterprises is steadily rising. In July, the N-type module production schedule proportion for top-tier enterprises was around 80%-90%, with the overall N-type module production schedule proportion at about 84%. By the end of 2024, the market share of N-type production is expected to exceed 92%, with an estimated market share of about 80% for the entire year.

Analysis of Solar Cell Supply Side - Rapid Increase in N-type Solar Cell Proportion

In 2023, PERC cells accounted for over 70%, Topcon cells for 23.62%, HJT cells for less than 2%, and N-type BC cells for just over 1%. In 2024, the proportion of PERC cells is expected to drop to 12%, with Topcon increasing to over 82%, and HJT and BC combined exceeding 6%.

Specifically, in H1 2023, N-type expansion progressed slowly, with the market still dominated by P-type: Topcon cell capacity release was slow, and PERC cell demand accounted for over 85%.

During the P/N transition period, there was a significant structural supply-demand mismatch: In H2 2023, the structural supply-demand mismatch for cells was evident, with N-type demand growth outpacing supply expansion speed, significantly reducing profitability.

In 2024, Topcon cells will be mainstream, with BC and HJT supply both seeing growth:

PERC cell production kept falling in 2024, with most companies having ceased PERC cell production; Topcon cells have accounted for 60%-100% of company production schedules;

BC and HJT will maintain stable production, with their proportions gradually increasing.

Price Review: Historical Price Review of China's TOPCon Cells (September 2023 - August 2024)

September 2023 - December 2023: In September, supply growth outpaced demand growth, starting an inventory accumulation cycle for cells. In Q4, the downstream of the photovoltaic industry chain faced insufficient demand and high inventory levels, while new cell capacity was gradually released. In October, the oversupply issue became severe, and cell prices continuously fell throughout Q4, with intense competition pushing prices close to cost lines or even losses.

January 2024 - March 2024: In Q1 2024, the proportion of N-type modules rose rapidly, boosting the trend of cell inventory reduction. During this period, N-type wafer prices continuously declined, the dual distribution ratio of Topcon cells in integrated module factories increased, and the spot prices of Topcon cells remained firm.

April 2024 - May 2024:

Cell prices rapidly declined, mainly driven by cost reductions. Severe inventory accumulation of upstream wafers and polysilicon, significant price cuts in N-type wafers, and Topcon cell prices fell with costs, with profits first expanding then compressing. In May, with weakening demand, inventory accumulation accelerated, competition intensified, and low prices frequently appeared.

June 2024 - August 2024: The decline in Topcon cell prices narrowed, companies entered a cash flow loss stage, cell inventory remained high, and specialized cell manufacturers faced significant shipment pressure, but prices stabilized due to cost support.

Monthly Production Schedule Details of China's TOPCon Cells (August & September 2024)

According to the SMM survey, the operating rate of China's TOPCon companies was around 71.63% in August, which may decrease to 64.97% in September.

By size:

•182.2*183.75: August production was 21.7GW, September production schedule is 19.72GW, down 9.12% MoM, mainly due to a decline in module production schedules, cell orders decreased, and specialized cell manufacturers reduced production.

•182.2*210: August production was 7.16GW, September production schedule is 7.94GW, up 10.92% MoM. Leading module manufacturers gradually increased the introduction of this size cell, with a noticeable rise in demand for 210RN cells, and on the supply side, capacity and production are continuously increasing.

•210*210: August production was 5.88GW, September production schedule is 6.10GW, up 10.92% MoM. This is mainly due to the high power of the 210 large format, low cost per watt, and the cost-effectiveness of modules, leading to more end-user projects choosing the 210 format, boosting demand for 210N cells.

The price gap between HJT cells and Topcon cells is narrowing, with potential for increased market share in the future

The price gap between HJT and Topcon cells is 0.1-0.17 yuan/W, with 210 series HJT cells priced at 0.39-0.45 yuan/W and Topcon cells at 0.27-0.28 yuan/W, with the gap gradually narrowing.

Monthly Bidding Volume of China's N-type Modules: From January to August 2024, the cumulative bidding volume of HJT modules was about 5.78GW, accounting for 4.5% of the cumulative bidding volume of N-type modules; the average bidding price of HJT from January to August was 0.93 yuan/W, higher than Topcon modules by 0.072 yuan/W.

SMM Commentary:

•The main producers and sellers of HJT modules are: Huasheng, Risen, Guosheng, CNBM, Quanwei, Mingyang, and Aiko. HJT products are currently mainly for export, with the domestic application market gradually opening up.

•The overall monthly supply of HJT cells in the Chinese market is 1.2-1.5GW, with an operating rate of only about 30%, and market capacity expansion is slowing.

•The cost reduction and efficiency improvement path for HJT cells is clear, with the decline in polysilicon and wafer prices, the popularization of 0BB, the maturity of silver-coated copper applications, and improvements in packaging technology, the future market share is expected to increase.

Enhancing power generation throughout the life cycle is the core driver of product development

With the continuous reduction in equipment and material procurement costs leading to a continuous decline in photovoltaic power station investment costs, enhancing power generation has become the main engine for diluting LCOE, prompting continuous innovation in cell and module technology.

Development Path of Crystalline Silicon Photovoltaic Cell Technology

From 2023 to 2024, photovoltaic cell technology will rapidly transition from P-type to N-type, and the industrialisation of tandem cells will accelerate in the future.

Future N-type technology will flourish, with multiple technologies developing in parallel over the next three years

Regarding future trends in the photovoltaic cell market, SMM expects that in terms of capacity, future cell capacity growth will mainly come from HJT and BC cells, with fewer new Topcon capacities due to the rapid expansion of Topcon in 2023.

In terms of operating rate, the cell operating rate will remain below 80%, with fierce market competition and a 2-3 year period for capacity structure optimization; in terms of technology iteration, the mass production efficiency of N-type Topcon, HJT, and BC is continuously improving, with multiple technology routes developing in parallel over the next three years.

Future Outlook for the Photovoltaic Cell Market Supply and Demand

SMM believes that the expansion of Topcon cells will be temporarily delayed, and future photovoltaic cell expansion will come from XBC and HJT.

In terms of capacity expansion: SMM expects that from 2024 to 2027, the overall expansion speed of photovoltaic cells will slow down, with PERC capacity gradually being phased out by the market. Future capacity increases will mainly come from HJT and XBC, with a total cell capacity of 1,400 GW reaching its peak over five years.

XBC, as the "elite" in N-type crystalline silicon cell efficiency, saw a significant increase in market expectations in Q4 2023, affecting many cell manufacturers' capacity planning. Originally planned Topcon and HJT cell capacity layouts are now gradually planning investments in XBC cells.