What is your view on the global market development in 2011 in terms of MW new installed power? Do you see the market grow compared to record year 2010?
It is true that in the first half of 2011, we saw a slower than expected demand in the global market. This can be attributed to the lack of clarity around solar subsidies in some regions and, in some cases, a reduction in subsidies’ schemes. Worldwide market leaders such as Germany, Italy and Belgium were affected most by feed-in tariff regulation changes. Emerging PV markets, including France and the UK, have also been impacted by subsidy modifications.
Additionally, the debt crisis recently faced by major nations negatively impacted the confidence of investing banks and other active PV project investors. Despite this challenging macroeconomic environment, JinkoSolar managed to overcome market difficulties and fulfill its internal targets. We surprised both investors and analysts by beating our targets in both Q1 and Q2, with sequential growth in revenues and profits and increased market share in all primary markets.
For the second half of 2011, we are seeing a recovery in demand across major European PV markets such as Germany and Italy, motivated by three facts: First, due to lower installed capacity in Germany, there were no further FiT reductions in July, as previously expected. Secondly, after the hard reduction on modules’ average selling price (ASP) during the first half of the year, we have seen increases on return of investment. Thirdly, there is now an urgency to finalize the maximum quantities of projects before FiT reductions – month after month in Italy, and before the large decrease expected in Germany by the end of 2011.
Other markets, such as the U.S., China and India, will support the growth of PV demand. Our internal estimation is that, after analyzing trends, the market will grow globally slightly from last year; we expect something between 18 and 21 GW.
Are we facing a more serious oversupply in the solar industry? What is your expert vision?
Yes, we are facing a situation of oversupply. Answering to the strong PV demand last year, many PV manufacturers have expanded their production capacities – something we view as extremely aggressive behavior. However, this year, we are seeing that capacities are not being fully utilized, leading to European and North American companies putting a hold on expansion plans and subsequently reducing workforces. We’ve witnessed an acute price competition and a struggle to increase or even maintain profits. We predict additional consolidations are looming on the horizon.
What will your company be able to achieve in 2011 and 2012 in terms of production capacity? What are your unique selling points? How will Jinko Solar distinguish from its competitors?
Our current capacity is more than 1 GW from the growth of silicon ingots, the slicing of silicon wafers, the production of solar cells and the assembly of solar modules. Our plan for the end of the year is to reach 1.5 GW capacity and, depending on market conditions next year, we are hoping to reach between 2 GW and 2.5 GW.
At JinkoSolar, we continue to thrive in this challenging environment. To gain market share in this highly competitive industry, our strategy is to offer customers higher quality products in addition to local and efficient service. Our strong competitive advantage and high quality modules are the result of our vertically integrated production model and in-house manufacturing capabilities.
The rapid success of JinkoSolar is the consequence of this competitive advantage – the winning combination of our exceptional, vertically integrated manufacturing as well as our brilliant management team, responsible for the execution and implementation of our sales and marketing strategies.
Additionally, our understanding of the market helps us to adapt our supply chain to changes in trends, and to be flexible with our partners’ needs.
Since our listing on the New York Stock Exchange in May 2010, we have proven to be a reliable organization for partners, customers and investors around the world, and will continue to do so in all our future transactions.
What module price development do you expect for this and next year?
Due to the lower than expected demand and increased production from major manufacturers, the lowering price trend since Q4 of 2010 has aggressively impacted the market and deteriorated profits for most solar producers. Most of our peers barely reached over 15 percent gross margins and, in worst-case scenarios, even encountered net losses.
Fortunately, JinkoSolar was up 25 percent in Q2. This gives us a strong advantage, as we have room for further price reduction while continuing to offer our partners and customers the support required to keep growing their businesses.
What is your company strategy? Are you planning to include further downstream activities, like developing and financing pv power plants yourself?
Our focus and our healthy cash flow are mainly dedicated to the CAPEX for our production expansions. Our customers are the ones who dedicate their attention and effort to more downstream efforts, like developing solar PV projects. We do not consider competing with our customer to be a strategic move.
Having said that, it is also true that we don't rule out the possibility of analyzing different opportunities to invest and enter downstream jointly with our partners in the future as JinkoSolar keeps growing and market changes. We’ve already moved one step further in downstream, from supplying only silicon ingots and wafers to serving as a vertically integrated producer of cells and modules.
What will the solar industry look like in 5 years from now? Do you expect a wave of consolidations to hit the industry soon, or will even more new players enter the arena?
As previously mentioned, we have seen an aggressive price competition, which significantly impacts profit margins. Several consolidations have also occurred. For the next two to three years, we’ll be seeing more consolidations until we experience strong and exponential growth in demand from markets including China, the U.S. and India, and especially when grid parity is reached in countries such as Italy and Japan.
What are the major threats to the solar industry at the moment?
The solar industry is seeing the same major challenges experienced both in 2008 and 2010, including a lack of stability in the financial markets that prevents investors and banks from financing projects. In certain countries, the challenges stem from a lack of reliable and sustainable regulations, as well as a reduction in renewable energy support from governments -- especially to the solar sector.
How is the Chinese market doing? Do you expect countries such as China and India to become the world's major markets within 5 years?
The Chinese PV market has been slow to emerge; large demand has not been seen, despite support on a project-by-project basis in certain provinces.
Positively, there has been recent progress and a clear decision from the government to support PV developments and reach a goal of 50 GW worth of installations by 2020. A number of residential and ground-mounted systems were installed in 2010 and 2011, and we’ve secured our first large utility-scale projects as well. One of which – located in Qinghai province – totals more than 800 MW in one location. There is a high probability of reaching 1 GW in installed capacity in the Chinese PV market this year, and we can expect 2 to 2.5 GW in 2012.
Why do you think that crystalline technology will remain the dominant PV technology in the coming decade?
I believe that crystalline technology, proven for more than 40 years, will remain the dominant PV technology because it has already established recognition and support from banks and independent technical institutions. Additionally, cost for this technology has decreased enormously in last few years, thanks to the expansion of the market, technology improvements in both equipment and processes, and the huge cost reduction in silicon. Finally, crystalline efficiency has steadily increased over the years, a trend that will continue as high-performing manufacturers reach levels of more than 18 percent. As for JinkoSolar, we recently announced the introduction of our Quantum technology, which contains cells with 18.3 percent efficiency. Conversely, the highest performing thin film technologies currently reach a maximum of around 12 percent.
With these factors in mind, we are confident that crystalline silicon technology will remain dominant for the next 5 to 10 years.
How will the solar energy market look like in 5 years' time and where will your company be at that time?
From my more than 10 years of experience in solar industry, I know that tensions between supply and demand exist, cycling on a six–month or one-year basis. Overall, despite the shortage of modules in some periods and the oversupply in other periods, the trend has always been positive, showing a more than 35 percent growth rate on average.
I expect this trend to continue as new countries begin to adopt more support for solar energy.
Since JinkoSolar’s founding in 2006, we have grown rapidly and aggressively, capturing market share and positioning ourselves as one of the top companies in this industry in terms of volume of shipments.
We have grown in the last four quarters from 99 MW to 254 MW, a 156 percent increase. Similarly, our revenues have grown from 132 mm USD to 350 mm USD, a 165 percent increase. Additionally, we are increasing our marketing efforts worldwide to ensure that JinkoSolar becomes more and more recognized not only in Europe and China, but also in the U.S. and the rest of the world.
Arturo Herrero will be a speaker at Solarplaza's upcoming The Solar Future: Italy conference, which will be held on the 6th and 7th of October in Milan, Italy . To learn more about this conference and register as attendee, please go to www.thesolarfuture.it (english) or www.ilfuturosolare.it (italian)