Minutes Of The Communication On LONGi's Second-generation BC Technology Route

The photovoltaic industry has entered a downward cycle since the third quarter of 2022, and the price drop has led to a compression of industry profits. As the industry leader, LONGi lost 5.2 billion yuan in the first half of the year, but has the ability to cross the cycle. The industry's bottom cycle has lasted for two quarters, and marginal changes are expected in the first half of next year, and capacity clearance may become a turning point. LONGi plans to launch the second-generation BC product, which is expected to lead the industry recovery.

The photovoltaic industry faces two major catalysts: capacity clearance and new technological changes. LONGi's second-generation BC products are expected to have a power of 660-670 watts, with costs that are the same as TOPCon or slightly higher than TOPCon by no more than 5%, and ideal yield and efficiency, and are expected to be the first to achieve profitability. LONGi strategically chose BC technology, believing that it is more cost-effective than TOPCon and that TOPCon has a shorter health cycle. 60%-70% of TOPCon's technical foundation comes from PERC technology, and its short health cycle leads to high investment return risks. The expansion of the photovoltaic industry has accelerated the rapid popularization of TOPCon technology, but its profiteering period is short, and it is expected to start losing money in 2024.

Longi believes that BC technology is more cost-effective than Topcon, and Topcon has a shorter health cycle. Although Topcon's technology has made rapid progress, the space for future technological progress may decrease. Longi chose to restrain production capacity and shrink capital expenditures during the rapid development of Topcon to maintain financial health. At present, Topcon's technology has obvious profit advantages, but Longi has maintained a low level of losses by controlling costs and expenses. BC second-generation products are expected to surpass Topcon in 2025, and Longi's strategic choice may be proven correct

LONGi adopted a counter-cyclical expansion strategy at the bottom of the industry, announcing that the BC second-generation production capacity will reach 70GW by the end of next year. LONGi's decision-making process is more scientific, relying on repeated demonstrations by a research institute with hundreds of people. The power of the BC second-generation product is expected to reach 670W, which is 30-40W higher than the current mainstream products. In a market with severe homogeneity, every 5W increase in power will increase the cost-effectiveness by about 0.28 cents. LONGi's global layout and scientific decision-making have made its leading position in the industry more stable.

The new photovoltaic industry technology BC II competes fiercely with TOPCon. The BC II order book exceeds 1.6-1.7GW, and the cost is basically the same as TOPCon, or even slightly lower. The power increase of BC II brings at least 1.13 cents of gross profit advantage, but the yield is the key. The difficulty of choosing new technologies has increased, and the technical difficulty and process complexity have increased, which may lead to diversified applications in the industry, with the probability of choosing BC II or TOPCon being 50% each.

The attempt to apply photovoltaic modules vertically may bring new market opportunities. As the installed capacity of photovoltaics increases and the electricity price at noon decreases, the vertical power generation mode that takes advantage of the high electricity price in the morning and evening has a high cost-effectiveness. If the annual power generation reaches 1,100 hours, this mode will be very beneficial. In terms of technology, TOPCon and IBC each have their own advantages. TOPCon leads in power, while IBC needs to make breakthroughs in cost control. The power of TOPCon modules can be more than 30 watts higher, and the battery efficiency can reach more than 26.5%, while the core of IBC is to improve the yield. At present, the power advantage of TOPCon modules is obvious, while IBC needs to solve the yield problem to reduce costs.

Longi Green Energy Technology Co., Ltd.'s current share price is at the bottom of about 100 billion, and its PB is the same as or even lower than the lowest point of the industry in November 2018, and its valuation is at the bottom. The company is currently in a loss-making state, and it is expected that the loss will gradually narrow next year and gradually resume profitability. In 2026, with the completion of the industry cycle, the company's single-watt profit is expected to recover, and the profitability of silicon materials and silicon wafers will increase. The BC technology route is worth paying attention to, and related equipment manufacturers such as Kiel Laser and Laplace may benefit. The investment and R&D progress of companies such as Longi, Aixu, and Junda on the BT technology route on the manufacturing side are also worth paying attention to.

BC technology adjustment may bring short-term profit improvement opportunities for auxiliary material companies such as adhesive films, solder strips, and silver pastes, especially leading companies are expected to increase their market share through technological progress. LONGi strategically chose to restrain capital expenditures, but now it is counter-cyclical expansion. The second-generation products have high power and proper cost control, and are expected to achieve profits beyond TOPCon, helping the company's performance to get out of the bottom of the cycle and achieve continuous improvement