Review on the Management of Longji Green Energy’s 2023 Annual Board of Directors – 上海后花园论坛,上海419论坛,爱上海龙凤419

() The operating comments of the Board of Directors in 2023 are as follows:

　　I. Discussion and analysis of business conditions

In 2023, on the one hand, the photovoltaic market grew at a high speed, on the other hand, there was a staged imbalance between supply and demand in the industry, the price of the industrial chain continued to decline, new technology iterations and overseas trade barriers became prominent. Facing the complex external business environment, the company insisted on scientific and technological leadership, steady operation, focused on high-quality sustainable development, controlled the progress of capacity building, focused on BC technology upgrading iterations, formed a rich full-scale product matrix based on the technical advantages of HPBC, and completed the research and development of efficient HPBC second-generation products with mass production conditions. The company vigorously promoted digital transformation, and Jiaxing Longji was awarded as the only "lighthouse factory" in the photovoltaic industry, representing that the company’s intelligent and digital manufacturing capabilities are at the leading level in the world. The company takes customers as the center, deepens the marketing reform in an all-round way, explores the deep integration of the company’s products and multi-scenario customer needs, and highlights the sustainable differentiated competitive advantage. In 2023, the company’s silicon wafer and component shipments continued to grow at a high speed, achieving 125.42GW of silicon wafer shipments (including 53.79GW for external sales), up 47.45% year-on-year, and maintaining the first global shipment of monocrystalline silicon wafers for nine consecutive years; Battery sales are 5.90GW；; Components shipped 67.52GW (including 66.44GW for external sales), up 44.40% year-on-year. The company’s operating ability and brand strength are widely recognized by the photovoltaic industry, financial institutions and third-party institutions, and it has repeatedly won the highest rating of financing recognized by PVModueTech.

In 2023, the company achieved an operating income of 129.498 billion yuan, a year-on-year increase of 0.39%; The net profit attributable to shareholders of listed companies was 10.751 billion yuan, a year-on-year decrease of 27.41%, of which the net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was 10.834 billion yuan, a year-on-year decrease of 24.84%; The comprehensive gross profit margin is 18.26%, and the weighted average return on equity is 16.20%. Affected by product price decline and technical iteration, in 2023, the company made provision for depreciation of inventory and fixed assets of 6.757 billion yuan, including 5.171 billion yuan for depreciation of inventory (including about 1.35 billion yuan for new inventory due to the long-term detention of some products in Hong Kong due to the influence of American policies). The key tasks completed during the reporting period are as follows:

(a) continue to introduce market-leading differentiated products, deeply trusted by customers.

During the reporting period, the company implemented the product leading strategy, focused on building long-term sustainable development capabilities and technological advantages, and accelerated the iteration of leading technology development and product upgrading. After the arduous debugging and tackling key problems in the first half of the year, the HPBC technology independently developed achieved breakthroughs in improving efficiency and reducing costs in mass production in the fourth quarter. The highest conversion efficiency of Hi-MOX6 module is 23.3%, and the design without grid lines on the front increases the light absorption by 2.27%. The relative power generation gain in weak light is as high as 2.01%, and the temperature coefficient is optimized to -0.29%/℃. The low attenuation characteristics guarantee that the power generation efficiency will still be 88.9% after 25 years. This product has been widely recognized by customers all over the world for its excellent product performance and perfect appearance, and has been stably shipped in a scale of over 2GW per month.

Focusing on customers’ pain points and needs, the company has launched a "scene+functionality" product matrix, such as high-efficiency anti-fouling components, double-sided and double-glass heat and humidity resistant components, all-black high-end components and BIPV dome 4.0, to create maximum value for customers with technological innovation and scene satisfaction. With the innovative frame structure design and the advantages of HPBC high-efficiency battery technology, Hi-MOX6 anti-fouling module ranks first in the latest measured data released by pvmagazine, the world’s authoritative photovoltaic industry media organization. Hi-MOX6 double-glass damp-heat resistant module in professional DH1000 rigorous test, the module attenuation is only 1/5 of the industry standard in high temperature and high humidity environment, and the equivalent power is 1% higher than TOPCon; With obvious advantages such as high efficiency, high reliability and low BOS cost, the company’s Hi-MO6 and Hi-MO7 modules won the "Quality over China" photovoltaic module power generation simulation prize in 2023 with absolute advantage, which was the seventh consecutive year to obtain this authoritative recognition. The launch of HPBC’s new products has won the trust of the market and the recognition of customers, once again leading the industry trend.

(2) Keep ahead in technical strength, and bravely take the lead in battery research and development "double champion"

The company’s newly developed "Tairui" silicon wafer has broken the dilemma of no performance breakthrough in the field of monocrystalline silicon wafer in the industry in recent ten years, and adopted a brand-new TRCz crystal pulling process, which greatly improved the uniformity of silicon wafer resistivity, and at the same time achieved better gettering effect and higher mechanical strength, which supported the improvement of battery end efficiency in the mainstream technology route of the whole platform, consolidated the company’s leading technological advantage in the field of silicon wafer with substantial innovation breakthrough, and met the customer demand of high-efficiency batteries for high-quality silicon wafers. This technology will be introduced into mass production in the second quarter of 2024. The company insists on the excellent pursuit of the performance of silicon wafer products, leading the technological transformation of single crystal, large size and thin slice of silicon wafer in the industry. The cost of silicon wafer continues to be in the leading position in the industry, and the performance of N-type silicon wafer client is improved by innovative oxygen reduction technology.

In terms of battery technology, the company has invested heavily in forward-looking technology research and development, and the industry records created on different technical routes have been constantly refreshed by itself. On the most concerned crystalline silicon technology route and crystalline silicon perovskite stack technology route, the company has created a world record double champion with back contact crystalline silicon heterojunction solar cell (HBC) of 27.09% and crystalline silicon-perovskite stack cell efficiency of 33.9%, with outstanding industry-leading R&D strength and forward-looking technical reserve advantages. At present, the company has successfully developed the second generation products of HPBC. With its outstanding high conversion efficiency, low attenuation rate, and better low light performance and temperature coefficient, the power of components can be more than 5% higher than that of TOPCon components of the same specification, and the power generation of the power station can be improved by 6.5% ~ 8%. The new products are planned to be launched in the second half of 2024, which will bring strong impetus to the company’s continuous high-quality development through the industry cycle.

During the reporting period, the company adapted to the industrial cycle and market changes, rationally invested in capacity building, and concentrated resources to accelerate the upgrading and mass production of HPBC and TOPCon. The production capacity of high-efficiency HPBC batteries with an annual output of 29GW in Xixian and 4GW in Taizhou has all been put into production, and the projects with an annual output of 46GW in Erdos, 30GW in batteries and 10GW in Wuhu have been put into production one after another. The company actively expanded overseas production capacity layout, and projects such as Malaysia’s 2.8GW module and Vietnam’s 3.35GW battery were gradually put into production on schedule, and the construction of Malaysia’s 6.6GW silicon rod project was promoted in an orderly manner. By the end of 2023, the company’s own silicon wafer production capacity reached 170GW, battery production capacity reached 80GW, and component production capacity reached 120GW. In addition, the company actively responds to overseas market trade policies, works closely with the upstream and downstream of the industrial chain to promote the construction of a green and traceable supply chain system, and strengthens the stability of the supply chain in overseas high-value markets. With the official commissioning of the company’s 5GW component joint venture factory in Ohio, USA in the first quarter of 2024, the company’s shipping capacity in the US market will be improved.

(D) Lighthouse Factory leads the digital transformation and promotes the upgrading of advanced manufacturing capabilities.

As a pioneer of intelligent manufacturing in photovoltaic industry, the company constantly tries to integrate digital transformation into product manufacturing, and realizes industrial innovation of photovoltaic manufacturing by means of digital and intelligent means, leading the high-quality development of the industry. During the reporting period, the company’s Jiaxing base was built into the only "lighthouse factory" in the global photovoltaic industry. Focusing on intelligent flexible production, full-process AI quality inspection and intelligent management of order delivery cycle, it developed and implemented a number of industry-first digital technologies to promote intelligent manufacturing, achieving a 28% reduction in unit manufacturing cost, a 43% reduction in product yield loss, a 84% reduction in production delivery cycle and a 20% reduction in unit energy consumption within one year, making it a representative of the highest level of intelligent manufacturing and digitalization in the global photovoltaic industry. Focusing on "quick response, on-time delivery and efficient operation", the company actively builds a global supply chain ecology, makes every effort to build an end-to-end efficient delivery system, and builds an industry integrated supply chain efficient operation information system to ensure agile response and efficient delivery of the supply chain and continuously improve the level of smart supply chain.

(5) Actively expand hydrogen energy business, with the technical level and production capacity second to none.

During the reporting period, Longji’s hydrogen energy business, a holding subsidiary of the company, reached a new level, and its technology research and development capabilities continued to improve. Many products have achieved industry leadership, domestic demonstration projects have been applied on a large scale, and overseas orders have been broken. During the reporting period, Longji Hydrogen Energy released a new series of ALKHi1 products, and the direct current consumption of hydrogen production decreased to 4.0kwh/N cubic meters, which was at the leading level in the industry. The first alkaline electrolyzer with a single cell of 3000N m3 /h in the industry was introduced, which is the largest in the industry and can effectively reduce the initial investment cost. The green power+green hydrogen system solution was released to help China’s first 10,000-ton green hydrogen demonstration project, and its business was expanded in many fields such as petroleum refining, synthetic ammonia and hydrogen metallurgy. In 2023, Longji’s hydrogen energy turnover exceeded 100 million yuan, making it the largest manufacturer of alkaline electrolyzers in China. By the end of the reporting period, it had built a capacity of 2.5GW, ranking first in the industry.

(VI) Strictly control financial risks and adhere to steady operation and sustainable development.

In the face of fierce competition in industries such as accelerated technology iteration, soaring production capacity and falling prices, the company insists on steady operation, the investment principle of "no leading and no expanding production" and rational and sustainable price strategy to control business risks. In the environment of drastic fluctuations in the industrial chain, we should build a collaborative procurement model, innovate material procurement and logistics models, and make precise policies to promote supply chain cost reduction. The company accelerates the adjustment of customer-oriented organizational formation, strengthens the core values such as strategic guidance, value creation, professional services and risk management and control of functional systems, and optimizes the cross-organizational synergy for production, marketing and research. By the end of 2023, the company’s asset-liability ratio was 56.87%, its interest-bearing ratio was 11.62%, and its cash reserves were sufficient. During the fluctuation period of the industry with downward prices, it maintained a stable financial position and excellent anti-risk ability.

Ii. the industry in which the company is located during the reporting period.

Under the background of energy transformation brought about by the global consensus on carbon neutrality, with the rapid decline of photovoltaic technology innovation and the cost of power consumption, the industry has ushered in leap-forward development. Renewable energy represented by photovoltaic is pushing the global energy system to low-carbon, clean and efficient transformation, and photovoltaic has become the main support of the global carbon neutrality goal. During the reporting period, with the continuous release of upstream polysilicon production capacity, the supply side is no longer an important factor restricting the development of the industry. The fall in raw material prices has promoted the rapid growth of terminal installed demand. Driven by policy guidance and market demand, the photovoltaic manufacturing end and application end have exploded. At the same time, the large-scale rapid development of new energy needs to speed up the adaptation of new energy power regulation mechanism and new power grid system. The rapid technical iteration of supply and demand imbalance has pushed the industry into a white-hot competition stage. Under the independent energy strategy of various countries and the trend of global multipolarization, trade friction has become the normal state of photovoltaic industry development, and the competitive environment of photovoltaic industry has become increasingly complex.

(A) the explosive growth of new installed capacity, industry development opportunities and challenges coexist.

According to the statistics of third-party organizations, in 2023, the installed capacity of global photovoltaics exceeded 400GW, a substantial increase of over 70% compared with 2022. In 2023, China’s newly installed photovoltaic capacity was 216.88GW, up by 148.1% compared with 2022. Both the newly installed photovoltaic capacity and the growth rate reached record highs, leading the global market growth with the global proportion of newly installed photovoltaic capacity exceeding 50%, ranking first in the world for the 11th consecutive year. In 2023, the newly installed capacity in the European Union, the United States and other markets increased steadily, and emerging markets such as the Middle East and Africa showed high growth potential (data sources: CPIA, BNEF, IEA). At the same time, with the rapid and large-scale development of renewable energy, problems such as insufficient investment in new power grid construction, land supply and financing cost at high interest rates have become prominent, which has brought challenges to the sustained and rapid growth of photovoltaic industry.

(B) the staged supply and demand structure is unbalanced, and the prices of industrial chains are falling rapidly.

In recent years, with the strong support of local governments and capital markets, photovoltaic new construction and expansion investment projects have been greatly accelerated, the upstream and downstream production capacity has been greatly expanded, and a large number of cross-border people have poured in, resulting in a sharp increase in production capacity in all links in the short term, and the contradiction between supply and demand in stages is prominent. In this context, the price of photovoltaic products dropped sharply in 2023, especially since the fourth quarter of 2023, the bidding price of components hit record lows, and the price of components fell below the 1 yuan per watt. According to InfoLink data, in 2023, the price of silicon materials (polycrystalline compact materials) will drop by about 70%, the price of silicon wafers and battery chips (PERC182) will drop by about 60%, and the price of components (PERC182) will drop by about 50%. The disorderly low-price competition will greatly damage the profitability of enterprises.

Technological innovation and cost reduction and efficiency improvement are the core driving forces for the sustained and rapid development of photovoltaic industry. As PERC batteries gradually approach their theoretical efficiency limits, photovoltaic enterprises are scrambling to lay out the next generation of battery technologies. The battery efficiency of BC, TOPCon, HJT, perovskite stack and other technical routes continues to be rapidly refreshed, and remarkable achievements have been made in industrialization in cost reduction and efficiency improvement. In 2023, the commercialization maturity of new technologies of TOPCon, BC and HJT was accelerated, and the industrialization process was accelerated.

(D) The overseas trade situation is complicated and changeable, and the localization of photovoltaic manufacturing is accelerated.

In recent years, global trade protectionism has increased. In order to achieve the goal of clean energy transformation and energy independence in China, major photovoltaic markets such as the United States, the European Union and India have actively promoted the localization of new energy supply chains through trade barriers and local manufacturing capacity support measures. The United States has successively imposed tariffs of 201 and 301, conducted anti-circumvention investigations on photovoltaic products in four Southeast Asian countries, promulgated the Uygur Forced Labor Prevention Act and other trade protection measures, and introduced the Inflation Reduction Act to provide subsidies, investment tax credits and other incentive policies to actively build a local photovoltaic industry chain; The European Union has successively promulgated the Clean Zero Industry Act and the Key Raw Materials Act to promote the scale of its local photovoltaic manufacturing. India has implemented a number of local capacity support package measures, including basic tariff (BCD), approved model and manufacturer list (ALMM) and capacity-linked stimulus plan; Turkey, Brazil and other countries also set up anti-dumping, tariffs and other trade barriers against China. Faced with the complicated and changeable overseas trade situation, China photovoltaic enterprises have continuously expanded their overseas local production capacity layout, expanded their investment layout area from Southeast Asia to the United States, the Middle East and other countries and regions, gradually improved their overseas supporting industrial chains, and further accelerated the localization of global photovoltaic manufacturing.

Iii. Business of the Company during the reporting period

(1) Main business

The company is committed to becoming the most valuable solar energy technology company in the world, with the mission of "making good use of the sun’s rays to create a green energy world", adhering to the brand positioning of "steady and reliable, leading by science and technology", focusing on scientific and technological innovation, and building five business segments, namely monocrystalline silicon wafer, battery module, industrial and commercial distributed solution, green energy solution and hydrogen energy equipment, to form "green electricity"+"green hydrogen" products and solutions supporting global zero-carbon development. At present, the production bases of the company’s main products, single crystal silicon rods and silicon wafers, are mainly concentrated in Shaanxi (Xi ‘an), Ningxia (Yinchuan and Zhongning), Yunnan (Lijiang, Baoshan, Qujing, Chuxiong and Tengchong) and Malaysia (Kuching); Single crystal battery production bases are mainly concentrated in Shaanxi (Xi ‘an), Ningxia (Yinchuan), Jiangsu (Taizhou), Inner Mongolia (Ordos), Malaysia (Kuching) and Vietnam (Beijiang); Component production bases are mainly concentrated in Anhui (Chuzhou and Wuhu), Zhejiang (Quzhou and Jiaxing), Jiangsu (Taizhou), Shaanxi (Xi ‘an and Xianyang), Vietnam (Beijiang) and Malaysia (Selangor); Photovoltaic hydrogen production is currently located in Jiangsu (Wuxi), and the company provides multi-scenario system solutions for photovoltaic power plants at home and abroad.

(II) Main products and uses

Iv. analysis of core competitiveness during the reporting period

(A) constantly refreshing technological achievements, leading the industry in R&D strength.

The company adheres to the concept of "innovation for development", focuses on future industrial technology, and continues to lead efficient technological iteration and industrial transformation. The company has a national enterprise technology center and eight provincial enterprise technology centers, and has set up a technology research and development team of more than 5,000 people. Around clean energy technologies such as photovoltaic and hydrogen energy, it has formed an efficient research and development system and sufficient technical reserves of "mass production generation, research and development generation and reserve generation". By the end of 2023, the company had obtained 2,879 patents of all kinds. In 2023, the R&D investment was 7.721 billion yuan, accounting for 5.96% of the operating income.

The company is the only photovoltaic manufacturing enterprise selected among the first batch of single champion demonstration enterprises in the manufacturing industry of the Ministry of Industry and Information Technology. With long-term accumulated technical advantages such as Czochralski single crystal growth, equipment development and automation application, and slicing line cutting, the company leads the industry in cost and quality of monocrystalline silicon wafers. The company’s newly developed "Tairui" silicon wafer has achieved a major innovation breakthrough in the field of silicon wafer in the past decade. It adopts a brand-new TRCz crystal pulling process, which has obvious advantages such as uniform resistivity, good gettering effect and full platform support, and will open a new path for the whole industry to reduce costs and increase efficiency.

Focusing on customer demand and focusing on the technical direction of the next generation industry, the company continued to promote the industrialization of high-efficiency battery technology, broke through a series of industrial problems such as high manufacturing cost and complex technology of BC batteries, and successfully developed the second generation of HPBC products. Compared with TOPCon modules of the same specification, the power is more than 5% higher, and combined with BC technical advantages such as lower attenuation rate, better weak light performance and temperature coefficient, the power generation of power stations in the whole life cycle can be increased by 6.5%-8% under equal land area, which will In addition, authorized by Hamelin Solar Energy Research Institute (ISFH), the back contact crystalline silicon heterojunction solar cell (HBC) independently developed by the company achieved a conversion efficiency of 27.09% by all-laser patterning and mass production process, which set a new world record for the efficiency of single crystalline silicon solar cells. Certified by the National Renewable Energy Laboratory (NREL), the company’s crystalline silicon-perovskite laminated battery efficiency has set a world record of 33.9%.

The company has formed an efficient collaborative innovation ecology with world-renowned universities, authoritative R&D institutions and teams, and upstream and downstream of the industrial chain. Through school-enterprise cooperation, the company has developed new technologies such as passivation of surface interface and doping contact growth, and manufactured crystalline silicon heterojunction solar cells with high flexibility and high power-to-weight ratio for the first time in the world. Relevant research results have been included in the international authoritative scientific magazine Nature.

(2) High-standard quality control, and the brand advantage is world-renowned.

Based on the characteristics of photovoltaic products working in outdoor complex environment for a long time, the company has established a quality management system of the whole value chain, and took the lead in proposing product life cycle standards higher than industry standards. Strict reliability standards have been established from component design and material selection to mass production monitoring and after-sales guarantee. Through internal reliability testing and authoritative third-party certification, products are guaranteed to be safe, efficient and reliable. Relying on the technological advantages of the whole industrial chain from front-end silicon materials to downstream components and power stations, as well as in-depth insight into customer needs, the company continues to introduce a large number of advanced research and development achievements into mass production and always maintains the leading position in the product industry.

The silicon wafer standard that the company has taken the lead in formulating has been included in the SEMI standard and released to the world, and the silicon wafer products have been "IQC exempted from inspection" by customers; The module products have passed the authentication of authoritative organizations such as TV, UL, CQC, JET-PVm, SII, etc. With the remarkable advantages of high efficiency, high reliability and low BOS cost, they have won the "Quality over China" award of TV Rheinland for seven consecutive years, and been rated as "the highest achiever" in the annual PV module index (PVMI) released by the American Renewable Energy Testing Center (RETC) for five consecutive years, and obtained the module efficiency. According to the operation ranking of photovoltaic power plants in Brazil published by ePowerBay, an authoritative data platform in the industry, among the top ten local power generation projects in 2023, more than half of the power plant projects provided by the company with high-performance products accounted for. With high-quality product quality and brand influence, the company’s products have been recognized and trusted by many customers at home and abroad, and its business covers more than 150 countries and regions around the world. The shipment of monocrystalline silicon wafers has been ranked first in the world for nine consecutive years, and the shipment of monocrystalline components has been in the forefront of the world for many years.

The company’s core management team focuses on deepening the photovoltaic industry, has deep industrial insight and pragmatic and efficient execution ability, formulates business strategies based on long-term sustainable development goals, and leads the company through industry cycle fluctuations. The company adheres to the principle of "not leading and not expanding production", constantly improves the global integrated industrial chain layout, and relies on the vertical integration scale advantages of silicon wafers, batteries, components and power stations to establish a strong global market supply capability and industrial synergy capability, which has a high risk resistance in the fierce industrial fluctuations.

The best product warranty is that "the life of the enterprise is longer than the life of the product". In the process of rapid growth, the company has always adhered to a sound business philosophy, refused any speculation, constantly improved the efficiency of asset use, effectively used operating leverage, adjusted the structure of interest-bearing liabilities, and reasonably controlled business risks. Over the years, the company’s asset-liability ratio has always remained at a reasonable level, and the interest-bearing liabilities have been controlled at a low level, showing a good financial situation and anti-risk level, providing a reliable financial guarantee for the effective implementation of strategic objectives. From the end of 2021 to the end of 2023, the company’s asset-liability ratio was 51.31%, 55.39% and 56.87%, respectively. With its good manufacturing capacity and financial health level, the company won the highest financing rating recognized by PVModueTech authority for many years, and its financial health index continued to lead the industry.

(D) In-depth practice of ESG concept, leading the ability of sustainable development

The company is committed to becoming an advocate, practitioner and leader of sustainable development in the global clean energy field, and has formulated the sustainable development concept of LIGHT(Lead leading, Innovative innovation, Green, Harmonious and Trustworthy), persisted in leading the technological progress in photovoltaic industry and hydrogen energy field with scientific and technological innovation, and relied on efficient and economical "green electricity+green hydrogen" products and solutions to help the global energy transformation and realize low-carbon goals.

The company practices the low-carbon production modes of "making clean energy with clean energy" and "SoarforSoar", continuously and deeply promotes the emission reduction of operational carbon, and works closely with the upstream and downstream of the industrial chain to promote the construction of green supply chain system and the emission reduction of value chain. In 2023, the proportion of green electricity used by the company reached 31.10%. At present, the company’s full range of silicon wafer products have obtained the French carbon footprint certification under CRE4 and PPE2 standards, the mainstream component products have obtained the French carbon footprint certification and the International Environmental Product Statement (EPD) certification, and some high-efficiency component products have obtained the carbon footprint certification under PPE2 standards issued by Cerisois, the French national solar carbon footprint certification institution, and the Korean carbon footprint certification.

The company has long been committed to sustainable development with positive actions. In 2023, it was ranked among the top companies in the CATI ranking of the Center for Public Environmental Research (IPE) for the third time in a row with its excellent ESG practice and performance, and won the Fortune China 2022-2023ESG Influential Enterprise, Forbes 2023 ESG Inspiration Case, 2023 China Industry peak carbon dioxide emissions "Leader" and Pumbaa Green Gold ESG50-. With the company’s capabilities and contributions in intelligent manufacturing, industrial upgrading, energy saving and consumption reduction, and green and low-carbon development, the company won the commendation award of the 7th China Industrial Awards.

V. Discussion and analysis of the company’s future development

(A) the industry pattern and trends

1. Competition pattern

(1) The industry has entered the stage of accelerated integration, and the industrial competition pattern has been reshaped.

Under the background of phased imbalance between supply and demand, affected by the rapid decline of industrial chain prices and the tightening of market financing policies, some investment projects in the industry have been postponed or suspended under the dual pressure of cash flow and profit, and the subsequent capacity expansion will slow down and gradually become cautious and rational. In 2024, the industry will enter the stage of accelerated integration, and the global operation ability, product innovation ability and efficient operation ability of enterprises will become the focus of competition, technology iteration will continue to accelerate, the competitive pattern of enterprises will accelerate differentiation, and leading enterprises will be strong and strong.

(2) Homogeneity of industry operation, high technology and new format will be the key to break the situation.

After years of coordinated development of upstream and downstream of the whole industrial chain, the system of equipment and materials in the photovoltaic industry is becoming more and more perfect. In the past two years, a large number of new production capacity has adopted the same technical route, and the products and services provided by various manufacturers tend to be homogeneous, and the product prices are fiercely competitive.

With the breakthrough of new battery technology and the introduction of all kinds of new photovoltaic scene products and services, the focus of photovoltaic competition will once again return to the differentiation centered on customer needs. On the basis of efficient, economical and reliable product functions, technologies and products that can meet customers’ diversified application scenarios will become the key to breaking the game in the future competition.

(3) The industry has entered a new generation of technology iteration period, and BC technology will lead the technological change of the industry.

At present, the photovoltaic industry has entered a new generation of technology iteration period. BC battery can make maximum use of incident light, and has obvious advantages such as high conversion efficiency limit, low attenuation, outstanding weak light power generation performance and strong technical compatibility. In the homogeneous competitive environment, BC battery technology will become the absolute mainstream of crystalline silicon batteries in the next five years, driving the industry to upgrade to the next generation of more efficient technology-based industrial forms.

2. Development trend

(1) "Electrification of energy consumption and cleanness of power production" is an inevitable trend of global energy transformation.

In order to achieve the temperature control goal of the Paris Agreement, at the 28th United Nations Climate Conference (COP28) in December, 2023, nearly 200 parties reached the "UAE Consensus", and for the first time in history, they unanimously agreed to "gradually get rid of fossil fuels". Globally, the energy sector produces about three-quarters of greenhouse gas emissions. Energy electrification and clean electricity are the key driving factors to control carbon emissions and achieve carbon neutrality. In the net zero emission scenario of the International Energy Agency (IEA), the share of electricity in the final energy consumption will increase to nearly 30% by 2030. With the rapid development of renewable energy with photovoltaic and wind power as the leading forces, the proportion of global renewable energy power generation will increase from 30% in 2022 to about 60% in 2030, and by 2050, renewable energy power generation will account for nearly 90% of the global power supply.

(2) Photovoltaic, as an important power of renewable energy, will continue to grow for a long time.

At present, photovoltaic has become the most economical power source in most countries and regions. According to the data of China Photovoltaic Industry Association (CPIA), the global GW-class photovoltaic market has increased from 26 in 2022 to 32 in 2023, and it is predicted that the GW-class photovoltaic market will further increase to 39 and 53 in 2024 and 2025.

China’s "14th Five-Year Plan for Modern Energy System" proposes that the proportion of non-fossil energy consumption will increase to about 20% by 2025 and to about 25% by 2030. With the support of peak carbon dioxide emissions’s carbon-neutral top-level design guidelines and a series of related documents to promote the high-quality development of new energy, the development of China’s new energy base will be accelerated, and strengthening the construction of distribution network will provide more access space for distributed development. At the same time, the significant drop in component prices will further open up market demand. According to the data of National Energy Administration, from January to March, 2024, the installed capacity of photovoltaics increased by 45.74GW, a year-on-year increase of 36%. It is estimated that the newly installed capacity in China may reach a new high in 2024, and China will still maintain the absolute dominant position in the global photovoltaic market for a long time.

From the perspective of the world’s major photovoltaic markets, the EU adopted the latest RenewabesEnergyDirective in 2023, which increased the proportion of renewable energy in terminal energy consumption to 42.5% in 2030, and strived to reach the goal of 45%. Under this background, Germany, Spain, France, Italy and other countries updated their national climate and energy plans, greatly improved their photovoltaic installation targets, and highlighted their determination to accelerate energy transformation. According to the neutral scenario forecast of the European Solar Energy Association, the newly installed photovoltaic capacity of the 27 EU countries will increase by 11% in 2024. The United States has benefited from the support of the Inflation Reduction Act (IRA) and other policies, the decline in photovoltaic costs and the rising demand for clean electricity, and the demand for photovoltaic installed capacity has continued to grow. According to the us energy information administration (EIA) forecast, it is estimated that in 2024, the installed capacity of photovoltaic in the United States will increase by more than 30% year-on-year. By the end of 2025, photovoltaic power generation will become the main source of growth in the US power industry. The Middle East and Africa are rich in light resources, and the accelerated energy transformation and green hydrogen strategy in Saudi Arabia, South Africa, United Arab Emirates and other countries will drive the photovoltaic market in the Middle East and Africa to maintain a high growth rate and become an important potential market for global photovoltaics.

Although some local power grid carrying capacity, transmission infrastructure and other constraints will temporarily slow down the growth rate of the global photovoltaic market, the global photovoltaic market will maintain a long-term growth trend driven by the significant decline in the cost of electricity since the fourth quarter of 2023. According to the neutral forecast of Bloomberg New Energy Finance (BNEF), the new installed capacity of global PV is expected to increase by 29% in 2024.

(3) The maturity of new technologies and application scenarios will further expand photovoltaic demand.

To achieve the goal of global carbon neutrality, it is necessary to build a new power system with new energy as the main body, and support the peak shaving of new energy power through large-scale and economical energy storage. With the maturity of energy storage technology and the breakthrough of green hydrogen and hydrogen-based technology, it will help the consumption of renewable energy, realize the peak shaving of power grid and the demand of inter-seasonal and inter-regional energy storage, promote the multi-scene application of photovoltaic in more industries, and further realize the deep decarbonization in non-power fields. In the future, "green electricity+green hydrogen" will become one of the best choices for deep decarbonization in chemical industry, transportation, architecture, metallurgy and other fields. The maturity of multi-scenario development models such as photovoltaic+transportation and photovoltaic+architecture will continue to promote the cross-border integration and development of photovoltaic, enhance the potential of diversified and innovative application scenarios in the photovoltaic market, and further expand the development space of photovoltaic.

(II) Company development strategy

1. Strategic positioning

Based on the long-term sustainable development goal, BC technology will lead the technological change in the industry and accelerate the industrial iteration of BC technology; Adhere to the customer first, strengthen products, do fine services, increase the intensity of scene development, and enhance business value; Adhere to global localization and serve global customers.

2. Main measures

(1) Vigorously invest in efficient technology research and development and industrialization of innovation achievements, accelerate the production capacity layout of the new generation BC technology, and promote BC technology to lead industrial technology iteration.

(2) Based on advanced manufacturing and guided by Jiaxing base "Lighthouse Factory", accelerate the digital transformation of the company and improve the level of scientific and technological manufacturing.

(3) Differentiated products and solutions that broaden, advance and penetrate customers and channels to meet customers’ pain points serve global customers.

(4) Improve overseas business planning and organizational construction, support global and efficient operation, and achieve sustainable growth.

(3) Business plan

1, capacity construction planning

In the next three years, the company expects the annual production capacity of monocrystalline silicon wafers to reach 200GW, of which the production capacity of "Tairui" wafers accounts for over 80%; The annual production capacity of BC battery will reach 100GW；; The annual production capacity of single crystal module will reach 150GW.

2. Business objectives for 2024

In 2024, the company will strive to achieve the silicon wafer shipment target of about 135GW, and the battery plus component shipment target of 90-100GW.

(4) Possible risks

1, international trade policy risks

Photovoltaic, as an important support of global energy transformation, has been strongly supported and encouraged by all countries in the world. At present, China occupies a leading position in all aspects of the photovoltaic supply chain, and photovoltaic enterprises in China have formed international leading industrial scale, technological advantages and cost advantages. However, for a long time, in order to support the development of domestic photovoltaic industry, trade protection measures and tariff barriers against Chinese photovoltaic enterprises have been constantly appearing in some countries. The complexity and changefulness of overseas trade policies will bring greater uncertainty risks to the company’s photovoltaic product export and overseas capacity operation.

The company will follow up the evolution of overseas trade policies in a timely manner, study and formulate effective paths, continuously optimize the global production capacity layout, and enhance the shipping capacity and risk resistance of overseas markets.

2. Risk of market competition

Over the past two decades, the development of photovoltaic industry has experienced three rounds of large-scale reshuffle, and the rapid iteration of supply-demand imbalance superposition technology since 2023 has brought a new round of reshuffle to the industry. With the intensification of market competition, enterprises in the industry have faced fierce price wars, and short-term profitability and cash flow are under pressure. The expenditure on production line transformation caused by technical iteration will also have an impact on the company’s short-term profits. In this industry background, customers also put forward higher requirements for photovoltaic products and services, which require enterprises to further enhance their comprehensive competitiveness in many aspects, including business model innovation, technology research and development, financing capacity, operation management, marketing and so on. In the fierce market competition, if the company can’t continuously consolidate and enhance its market position, it may face the risk of losing its competitive advantage and reducing its profitability.

As an integrated leading enterprise in the photovoltaic field, the company has strong technical advantages, scale advantages, cost advantages and brand advantages. The company will adhere to scientific and technological innovation and product leadership, improve organizational operation efficiency around reducing costs and increasing efficiency and risk management and control, and focus on customer value to build differentiated product and service advantages.

3. Supply chain management risk

At present, the photovoltaic industry is facing complicated situations such as staged imbalance between supply and demand, intensified competition, sharp fluctuations in industrial chain prices, and changeable international trade environment. At the same time, under the background of turbulent world structure and constant geographical conflicts, frequent external emergencies such as the Red Sea shipping crisis will also have a greater impact on the cost and delivery of export logistics. Photovoltaic, as a highly globalized industry, will face greater challenges and risks in supply chain cost control, rapid response, on-time delivery and supply continuity in the future.

The company will strengthen the insight into supply and demand, and build a forward-looking, agile and efficient supply chain system by strengthening the internal coordination of "supply, production, marketing and research", deepening the strategic cooperation in the industrial chain and innovating the logistics model, and continuously promoting the capacity guarantee of supply chain cost reduction and delivery.

4. Risk of global operation

With the rapid growth of overseas markets and the promotion of the company’s globalization strategy, the company has laid out production bases in Malaysia, Vietnam, the United States and other places, established marketing channels covering most photovoltaic markets in the world, and continued to expand its global operations. Influenced by geopolitical game, legal system and cultural differences, there may be greater compliance risks in investment policy, trade policy, tax management, labor and employment, intellectual property rights and other aspects in the global operation of enterprises, and the infrastructure facilities, supply chain system and business environment of overseas bases will also have an impact on the operational efficiency of enterprises. In addition, if the exchange rate fluctuates greatly in the future, it may make it more difficult for the company to expand its overseas business and generate exchange loss risks.

The company will strengthen overseas policy research, improve overseas operation compliance system, actively explore overseas cooperation mode, build localization team, enhance global operation capability, and prudently and reasonably use foreign exchange tools to reduce exchange rate risk.