Rising Full Costs of PV Modules Highlight the Importance of Price Rationalization

The continuous decline in PV module prices and cost-breaking price competitions have brought negative impacts of a vicious cycle to the market, directly causing severe financial pressure on many PV module manufacturers. To secure a position in the highly competitive market, some enterprises may choose to lower production costs, potentially leading to a decline in product quality and reduced investment in technological R&D. In the long term, this is detrimental to the sustainable development and technological progress of the industry.

According to SMM data, the price of TOPCon183 PV modules fell below 0.7 yuan/W since the end of October, with the current average price at 0.68 yuan/W. Prices have remained stagnant, and centralized transaction prices have experienced a price collapse in this year's continuous downward environment, forcing module enterprises to deliver at prices even lower than the winning bid prices.

To mitigate losses, module enterprises have shown strong sentiment to stand firm on quotes since Q4, aiming to help the market return to profitability. The recovery in module prices first appeared in the winning bids of centralized procurement projects. The monthly purchase volume through bidding in October reached a new annual high of 54.8 GW, while the monthly average winning bid price dropped to 0.7 yuan/W. In November, the monthly average winning bid price further declined to 0.66 yuan/W. By the second week of December, the monthly average winning bid price showed a slight rebound, rising to 0.69 yuan/W.

From the perspective of TOPCon183 module procurement prices in large centralized procurement projects, many winning bid prices in September were still below 0.65 yuan/W. However, from October to December, the average winning bid prices for many large projects climbed to 0.68-0.7 yuan/W. This price increase during this period was mainly driven by mainstream enterprises, particularly integrated enterprises, actively standing firm on quotes. This was also supported by a shift in attitude towards "cut-throat competition" and a growing awareness among module enterprises of the unsustainability of low-price bidding that results in cost-price inversion, leading to a partial recovery in market confidence.

However, the current recovery in module prices is only reflected in the bid prices of centralized procurement projects, and consistency in standing firm on quotes has not yet been achieved. Overall, module prices appear stable on the surface but are actually declining. As year-end approaches, shipment pressure, destocking pressure, and payment collection pressure are intensifying, with many order execution prices falling in the range of 0.6-0.65 yuan/W. The price gap between centralized and distributed markets is also widening. Distributed spot prices are more negatively impacted by low-price clearance sales of overstocked goods, low-quality and low-price sales through unconventional channels, resulting in more chaotic transaction price centers. Centralized procurement bid prices, being a forward-looking price, may see further declines in the actual transaction prices signed at the delivery period. The gap between winning bid prices and actual execution prices remains difficult to bridge, becoming a factor affecting the future upward expectations of module prices.

On December 20, SMM officially launched the TOPCon183 Module Cost Index, aiming to help buyers and sellers analyze the gap between current prices and costs and assess price rationality.

According to SMM data, the gross loss of integrated enterprises (self-produced wafers, cells, and modules) has recovered compared to November, mainly due to the decline in polysilicon prices, non-silicon costs of wafers, and non-silicon costs of modules. The tax-inclusive full cost of integrated enterprises is approximately 0.71 yuan/W. Compared to the price of 0.68 yuan/W, the gross profit margin is about -4.2%, with a loss of 0.03 yuan per watt.

Semi-integrated enterprises (self-produced cells and modules) currently face the highest gross losses among enterprise types. Their tax-inclusive full cost is approximately 0.713 yuan/W. The tight supply of N-type wafers has driven up silicon costs, while rising silver paste costs have further exacerbated the losses for this type of enterprise. The gross profit margin for semi-integrated enterprises is about -4.6%, with a loss of 0.033 yuan per watt.

Under the current environment of cost-price inversion across all major material segments of the PV industry chain, specialized enterprises (self-produced modules) have shown a relative advantage in gross profit compared to integrated enterprises. This is because upstream raw material producers have borne the losses across various segments, allowing specialized module manufacturers to benefit from low-cost external purchases, resulting in smaller gross losses. The tax-inclusive full cost for specialized enterprises is approximately 0.68 yuan/W. However, specialized module manufacturers are generally smaller in scale, with their primary sales market being the distributed market, where actual selling prices may be much lower than 0.68 yuan/W. Considering this, specialized enterprises are also incurring losses, with per-watt losses potentially ranging from 0.03 to 0.08 yuan.

In summary, both integrated and specialized module enterprises are currently under pressure from losses caused by low module selling prices. The phenomenon of module prices remaining below costs leads to disorderly market development, reducing market vitality. It also negatively impacts the upstream and downstream segments of the supply chain, compressing raw material prices and expanding the scope of losses. The recovery of module prices and profitability has become crucial.

Regarding future trends, the current rise in winning bid prices is mainly attributed to the strong sentiment to stand firm on quotes among top-tier module enterprises. However, whether actual execution prices for modules can continue to rise still depends on whether the supply-demand fundamentals of modules can provide support. As the year-end transitions into Q1 of the following year, constrained by demand in the off-season, weak module order volumes and prices, and upstream raw material supply gaps, module plants are expected to maintain low operating rates, focusing on digesting existing inventory, which may mark the low point for module prices. After the winter, supported by both demand and costs in Q2 of the following year, module prices are expected to recover along with the overall industry chain price trend. However, the extent of the increase will depend on inventory and demand levels.