-Inverter manufacturers’ financial performance from the second quarter onward may suffer as a result
PVTIME – Newly installed photovoltaic capacity in China this year has been negatively impacted by the price increases across the photovoltaic supply chain.
According to data released by the National Energy Administration, as of the end of May, the installed capacity of power generation nationwide was 2.24 billion kilowatts, a year-on-year increase of 9.5%. The newly installed capacity of solar power is 9.91GW, second only to the newly installed capacity of thermal power at 14.84GW.
Compared with the expected annual installed capacity of at least 50GW, the current pace of progress is well behind. However, some industry analysts expect that an installation rush in the fourth quarter will still come even though the prices of silicon materials and silicon wafers are still high, and the price volatility of photovoltaic glass, inverters, and other photovoltaic downstream auxiliary products remains. Last year, China’s newly installed photovoltaic capacity at the end of May was only 6.5GW but a strong fourth-quarter push of 29.5GW brought its annual installations to 48.2GW.
Previously, inverter manufactures avoided the cost pressure caused by the price increase of silicon materials and saw great financial benefits brought about by the prosperous development of the industry. Sungrow, the inverter manufacturer with the highest inverter market share, achieved an operating income of 19.286 billion yuan last year, a year-on-year increase of 48.31%, and realized a net profit of 1.954 billion yuan, a year-on-year increase of 118.96%.
Sungrow was not the only inverter manufacturer that saw massive profits in 2020. Other leading enterprises such as GoodWe achieved revenue of 1.589 billion yuan in 2020, an increase of 58.07%, and a net profit of 253 million yuan, an increase of 145.91%; Solis’ 2020 revenue and net profit were 2.084 billion and 318 million yuan, respectively, an increase of 82.98% and 151.3% year-on-year.
In the first quarter of this year, benefiting from factors such as the expansion of production and sales, Sungrow, GoodWe, and Solis continued to perform well as net profits increased by 142.45%, 86.40%, and 81.29%, respectively.
However, in April, GoodWe issued price increase notices which may well interrupt this performance growth trend for its financials. GoodWe cited core component chips and GBT power devices scarcity and the rising prices of bulk raw materials such as copper and aluminum as reasons for the price increase. It also predicted that the prices of these core inverter components will continue to rise for a long period of time in the future.
Although the price increase has its basis, companies that choose to do so face the risk of losing market share in a competitive market as price is an important factor in the decision-making process between brands for the buyer. Ultimately, the financial performance of inverter manufacturers from the second quarter onwards will depend on newly installed capacity and whether it’ll pick up steam.
Liao Wei, a veteran in the photovoltaic industry, said that the continuous upstream price increases this year has greatly impacted downstream power station companies and caused a large number of photovoltaic power stations to halt construction or delay grid connection. This has directly affected the demand for inverters, so the performance of inverter companies in the second quarter will be greatly impacted.