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19 December 2019

Shift to Monocrystalline will see LONGi gobble market share

Through a Chinese heavy supply chain, LONGi is one of the major players in the solar manufacturing industry operating with a vertically integrated supply chain. With a high level of self-sufficiency from silicon ingot, through wafer and PV cell, to a complete solar modules, this allows manufacturers to control both the cost and quality of their products. As one of the top four solar manufacturers in China, and indeed worldwide, LONGi’s market advantage depends heavily on the low-cost of materials and labor within the Chinese supply chain compared to those used by foreign competitors like Canadian Solar or First Solar.

This series of articles aims to identify and examine leading players in the market and provide key, impartial insight into how their positions are likely to develop as demand for solar panels increases. Following our inaugural profiles on market leaders Jinko Solar and JA Solar, we remain in China with our third profile on key competitor LONGi Solar.

Founded in 2000, LONGi is one of the oldest manufacturers among key competitors. The company’s initial focus was on the production of monocrystalline silicon wafers – an area where it is currently still the world leader in terms of production capacity. By 2007, LONGi subsidiary Ningxia had scaled production capacity to 1000 tons – the equivalent of the 1 GW mark today, although thicker slices of silicon ingots meant that shipments were probably below this capacity.

For another 7 years, LONGi continued in this way, expanding production capacity of silicon ingots to 2.5 GW in 2014. Acknowledging the industry-wide shift to vertically integrated business structures LONGi entered into both cell and module manufacture.

LONGi achieved this by acquiring Lerri Solar, which at the time was among the largest solar manufacturers in the world. This acquisition saw LONGi as one of the fastest growing panel makers, developing in-house cell production to fill the gap in its supply chain. Since this acquisition, LONGi has also started to address downstream business including distributed power station and has grown power system solutions.

To a certain extent, LONGi has maintained its profile in the market as a global leader in monocrystalline silicon products, with a mantra to “always adhere to the Mono Technology, bearing in mind the responsibility to improve human production and life, and provide the society with clean energy for sustainable development.” In 2018, production capacity for ingots and wafers was 28 GW, with the company responsible for 38% of global monocrystalline silicon wafer capacity. LONGi hopes to extend its lead in this market, with intentions to grow production capacity further through 65 GW by the end of 2021, up to 95 GW by 2023.

This week, plans were announced for a 30 GW monocrystalline ingot and wafer hub in Qujing, China, expected to cost around $355 million. LONGi has also in the past signaled interest of sharing other production plants with domestic competitors such as Trina Solar and Tongwei, through its polysilicon subsidiary Sichuan Yongxiang.

The majority of mono wafer sales are both in-house for the production for ‘Mono modules’, and to other China-based cell/module producers. Following a $540 million deal this year, this now includes supply to Vietnam-based manufacturer Vina Solar.

Last year, LONGi’s own mono modules accounted for the largest chunk of the company’s $3.1 billion revenues, with $1.9 billion coming from 7.07 GW of module shipments. This revenue also consisted of income from sales of electricity from the company’s own solar plants.

LONGi’s headquarters is situated in Shanghai, China, near to market leaders Jinko Solar. With over 21,000 employees as of 2017, other manufacturing facilities are in operation in both India and Malaysia. A 2016 acquisition of US manufacturer SunEdison suggested a potential state-side move, although the closure of the company’s polysilicon facility in Texas has shown a continued lack of trust in expensive labor markets outside of Asia.

In 2018, 66% of LONGi’s revenue came from domestic projects, consistent with other manufacturers in the region and with the industry as a whole – with 53% of global PV installations occurring in China in 2017. Significant contributions also came from the rest of the Asia-Pacific region (19%), America (9%) and Europe (5%), with minor contributions from Africa.

With module shipments of 7.1 GW in 2018, we previously estimated that LONGi’s current market share of 6.99% would rise to 8.40% by 2020, due to ambitious scaling of module production capacity. This will see LONGi draw level with 3rd placed Trina Solar. There is a significant potential upside to this – LONGi potentially has a stranglehold on the industry, with many manufacturing competitors depending on LONGi to meet their shortfalls in wafer and ingot production.

LONGi boasts the world record for P-type PERC efficiency in cells (24.06%) and modules (20.83%), leading the industry standards for several classes of monocrystalline technology. This cell efficiency is significantly higher than achieved in cells produced by Jinko Solar (21.7%) and JA Solar (21.3%). This is likely due to the extended pedigree of LONGi in focusing on upstream monocrystalline technology, as the company opted to go vertically integrated later than others in the market. This is probably partially responsible for LONGi’s recent growth, with the industry generally shifting focus away from polycrystalline technology.

LONGi currently reinvests 7% of its annual revenue into research and development, although there is little sign of research into new technologies such as thin film, ribbon sheet, nano technology or gallium arsenide. Having broken the record for mono-cell efficiency six times in the last two years, LONGi will hope to capitalize on its extensive background in monocrystalline technology, as the market shifts to favor its greater efficiency over polycrystalline cells. In 2018 alone, LONGi has filed over 526 patents, suggesting further routes to increase cell performance.

The share of monocrystalline products sold in the market is expected to grow from 46% in 2018 to 67% in 2023. With this shift in technology, LONGi will to some extent focus on economies of scale to drive down costs as seen by its intentions of scaling out production capacity. Following the launch of its M6 wafers and Hi-MO4 bifacial modules, the company has tried to focus on creating standardized products to reduce costs both up and downstream. Large focus has been placed on reducing the thickness and weight of panels to reduce both manufacturing and installation costs, as well as developing a more efficient crystal pulling and slicing process to further facilitate mass production.

LONGi’s newest modules have incorporated a combination of Passive Emitter and Rear Cell (PERC) technology, using a laser grooving process to increase efficiency, as well as bifacial technology to increase light capture and temperature behavior through daylight hours. This technology claims that it can boost cell efficiency by up to 22%, with less than 2% first year degradation – stats which exceed those claimed by its competitors. LONGi claims that a power production gain of 20% has been seen in a 600 W project in Chennai, India, due to a ground surface with a high albedo.

Half-cut cell technology has also been adopted by LONGi, separating cells into two parts using an infrared laser, halving the working current. The company claims that this can increase module power output by 2% by reducing thermal losses, while concurrently reducing the risk of hotspots within the cell.

LONGi splits its module products into the Hi-MO3 and Hi-MO4 series, both with bifacial and monofacial options. While both may be used on large-flat rooftops, bifacial modules provide a more optimum solution for solar farms, with monofacial preferable for residential application. The Hi-MO4 series offers up to 14% more power output than its predecessor, with 60 and 72 options. While there is a greater module efficiency of up to 19.8% in the monofacial options, a power output of up to 440 W is available per bifacial panel. All product options use PERC and half-cut cell technology in framed modules. As of November, orders for the Hi-MO4 exceeded 2 GW.

Unlike the other top 4 manufacturers, LONGi never entered the US stock exchange and therefore had no need to go private as part of the wave of manufacturers to do so between 2017 and 2018. Since the company listed on the Shanghai Stock Exchange in April 2020, LONGi has experienced a reasonably steady growth, although has not been immune to volatilities around tax credits and tariffs in the US and Chinese markets: Stocks plummeted by 50% in late 2018, before bouncing back to an all-time high in September this year.

LONGi has remained attuned to other volatilities in its domestic marketplace, with the rate of installations in China only set to reach between 25 and 30 GW this year, down from record levels of 53 GW in 2017. This is primarily due to the Chinese government cutting subsidies and making domestic projects less of a profitable business. While installations are expected to bounce back hard into the 2020s, in the meantime LONGi has turned its focus elsewhere, increasing module sales to overseas market by 252% in the first half of this year.

Rather than becoming a one-stop-shop for solar, the position that LONGi primarily wants to hold in the marketplace is its lead in monocrystalline technology. As the share of mono products in the marketplace rises, LONGi will be aware that competitors will try to ramp up their production of monocrystalline cells for their own in-house modules. Judging by the company’s stated production capacity targets, LONGi’s intention remains to be exporting wafer’s to other manufacturers while growing its own module business. To do this successfully, LONGi will have to ensure that the performance and cost of its technology remains superior, making it more attractive than for other manufacturers to try to go-it-alone. This will entail a heavy amount of R&D to keep pushing the boundaries of monocrystalline efficiencies and production costs, while further developing economies of scale.

Simultaneously, LONGi will want to improve the bankability of its solar modules. Since 2014, the company has risen from the high-risk CCC rated status, to the top-performing category of AA across the sector, matching market leaders Jinko. Having held this status since 2017, the company is on a trajectory to reach the unoccupied AAA status. LONGi will aim to achieve this by further cutting the costs of non-silicon components in modules, which it managed to slash by 31.75% in the past year alone. This R&D is also likely to focus on improving the integration of LONGi modules with floating and tracking technology from third party developers.

 

With the world’s largest monocrystalline capacity, LONGi is in good stead to gobble up some market share as the industry shifts away from polycrystalline technology. While other manufacturers will aim to ramp up their in-house capacity, LONGi will want to ensure those rivals remain late to the party, leaving them no choice but to keep buying LONGi’s monocrystalline wafers. By this logic, it would almost make sense for LONGi to regress back to its origins and solely focus on wafer and ingot production. However, with greater margins in the module business, especially as demand booms into the 2020s, LONGi will have to battle on two fronts, cutting costs of both wafers through economies of scale as well as increasing module performance and sales through heavy R&D.