Impact Analysis of Coronavirus on Solar Industry

February 05, 2020

 ONE
Overview of Impacts of
Coronavirus
 Disease background of novel coronavirus
• In December 2019, a novel coronavirus
(2019-nCoV) was first identified amid an
outbreak of respiratory illness cases in
Wuhan, the capital of Hubei province. In
response to coronavirus outbreak,
China has imposed a lockdown on
cities across Hubei as well as Wenzhou
city in Zhejiang province. The
government also extended the Chinese Hubei lockdown
New Year holiday until Feb. 3. On Feb.
*Hubei will resume work on Feb. 14.
4, China locked down more cities,
including Hangzhou city of Zhejiang, Linyi, Zhengzhou, Wenzhou, and
Hangzhou cities are locked down.
Zhengzhou city of Henan, and Linyi city
of Shandong.
• Provinces including Anhui, Fujian,
*Wenzhou of Zhejiang due to resume
Guangdong, Guizhou, Hebei, work on Feb. 17.
Heilongjiang, Henan, Hunan, Jiangsu, Provinces that postpone
Jiangxi, Liaoning, Shandong, Yunnan, opening until Feb. 10.
and Zhejiang, as well as Chongqing,
Shanghai, Inner Mongolia, Xi’an city of
Shannxi province also postpone
opening until Feb. 10.
• This feature report covers the impacts *Because the coronavirus outbreak changes dramatically everyday, the latest update on city lockdown was Feb. 4.
and analysis of coronavirus epidemic on Information on cities that are locked down on Feb. 5 will be updated when available.
the solar industry. 01
 Impacted capacities in lockdowns
EVA manufacturer
• There aren’t much solar manufacturing capacity in Wuhan, First Applied Material
the first city that has been locked down since the outbreak of
coronavirus. Wenzhou, which was locked down following Flat Glass Group (Jiaxing)
Wuhan, has little capacity, too. However, DR Laser
Technology, which dominates more than 80% of market, is in Jinko (Haining)
Wuhan. So it’s expected that some cell manufacturers’
capacity expansion plan will be slightly affected in Q1. Astronergy
(Hangzhou,
ØDR Laser Technology (Wuhan) Haining cities)
ØCSG Holding- multi-Si wafer lines (Yichang)
ØTrina’s affiliated module facility (Xiantao) Aiko (Yiwu)
ØCSG Holding- wafer lines (Yichang) DMEGC
• China imposed a lockdown on Feb. 4 on Hangzhou, where (Hengdianzhen)
large module manufacturers Astronergy (Hangzhou, Haining Risen
cities) and EVA manufacturer First Applied Material located. (Ninghai)
There are a lot of solar manufacturing capacities in Zhejiang
province, including vertically integrated company Jinko Longi
(Haining), Longi (Quzhou), Risen (Ninghai), cell maker Aiko (Quzhou)
(Yiwu), DMEGC (Hengdianzhen), as well as many small-sized
module makers and PV glass manufacturer giant Flat Glass
Group (Jiaxing). If the coronavirus epidemic worsens, the
volume of manufacturing capacity being impacted will
increase.
• There aren’t much solar manufacturing capacity in Zhengzhou
and Linyi, which have been locked down since Feb. 4. 02
 Summary of impacts of coronavirus on the solar industry: Demand
PV plants in China postponed opening
• On Jan. 30, the General Department of the National Energy Administration issued an urgent
notice requesting the electricity sector to make timely adjustments to their plans for project 2019 - 2020 Module Demand Forecast, Unit: GW
construction and re-establish a reasonable timeframe. Rushing construction to meet their
deadlines is strictly forbidden. China India USA Japan EU ME Africa Others

• The Chinese government hasn’t decided whether to postpone the respective FIT deadlines 40

on March 31 and June 30 or for how long. However, since producers are going to postpone
opening, they don’t stand a chance of meeting the March 31 deadline. Installation of top-
30
Runner and ultra-high voltage projects may also be delayed. For these reasons, PV
InfoLink predicts that the timing of China’s module demand will delay from Q1 to Q2–Q3.
The coronavirus outbreak exerts no impact on demand in overseas PV markets, for now. 20

• Numerous manufacturers are concerned about the coronavirus epidemic causing delays in
inventory draw for projects in overseas markets. However, Q1 is the traditional low season
10
in markets outside of the U.S., Japan, and India, so the epidemic has not caused any
14.4 13.5
significant slowdown in inventory draw, but it has led to widespread factory closures and 9.8
delivery hiccups—and, in turn, a small undersupply. Many distributors and retailers have 4.8
0
been short of modules since early February. Given this module shortage, PV InfoLink 2020Q1 2020Q2 2020Q3 2020Q4
predicts, the timing of demand from overseas markets may be delayed to Q2, Q3 because
Demand from tendered projects in Q1 is delayed due to
of shortage of modules. India market, which has high demand for multi-Si products, will the postponement of opening in China. Meanwhile, the
experience a significant shortage. timing of overseas demand will be delayed because of
logistics problem and the shortage of modules.
• Although it’s hard to get the actual volume of shortage, and module prices are not likely to
be raised after being shipped, the situation now may result in a price increase in modules
among retailers; the initial prices agreed by sellers are not likely to change.
• Overall, demand in 2020 will remain at 134.3 GW as predicted earlier.
03
 Summary of impacts of coronavirus on the solar industry: Supply
Company operation suspension and logistics hiccups have a direct impact on utilization rates across the PV supply chain:
• In the supply chain, utilization rates of polysilicon and mono-Si wafer makers are relatively higher than those of cells and modules, which are
clustered in Jiangsu and Zhejiang provinces. By government decree, many cell and modules factories based in Jiangsu and Anhui will remain
closed until Feb. 10.
• Moreover, numerous highways nationwide are blocked, making delivery hiccups the biggest issue for the domestic PV industry—especially for
module makers, which face a chronic shortage of materials such as junction boxes, PV glass, and aluminum frames. They may still run short of
these materials even if they resume operation. Once stocks of Chinese and overseas module makers ran out in mid-February, their utilization
rates will be affected due to the lack of materials.
Workers will have to impose self-quarantine when they resume work:
• The coronavirus epidemic will delay the date workers return to their jobs, and they need to impose 7-14 days of self-quarantine, meaning that
they may not start work until the end of February after quarantine. This will leave PV manufacturers raising their utilization rates at a snail’s
pace. To what extent the epidemic affects the logistics system and utilization rates of the manufacturers will become clear after they reopen on
Feb. 10. Having said that, it’s expected that most Tier-1 module makers’ utilization rates will maintain at 40-80% until the end of February.
Financial issues:
• As the Chinese government has required to postpone openings until Feb. 10, some producers cannot receive payments until then. Smaller
producers and producers with insufficient capital will be hit harder as a result.
• On Feb. 2 and 3, the local governments of Suzhou and Shanghai introduced some policy measures to support local businesses affected by the
coronavirus epidemic. In Suzhou, small and micro companies enjoy never-decreasing credit balances and reduced financing costs; small and
medium firms pay lower rents and taxes. In Shanghai, the authorities offer unemployment insurance refunds to firms with minimum or no layoffs
or minimum redundancies, put off adjusting the basic social insurance rate, and allow the extension of deadline for making social insurance
payments. With the governments of both cities having set an example of giving local economics a leg-up amid the coronavirus outbreak, other
regional governments may follow suit. For details about the policy measures, see Appendix 1.

04
 TWO
Overview of Supply Chain
 Impact of coronavirus outbreak: Polysilicon segment
• Over 90% of Chinese polysilicon manufacturers are based in the northwestern and southwestern parts Utilization rate of operating polysilicon
of the country, where the novel coronavirus is less prevalent. In other regions, polysilicon makers’ producers in China
manufacturing costs lost competitive edges against the market price and some of them, which focused
on polysilicon for multi-Si wafers, are unable to improve the quality of polysilicon to mono-grade.
Manufacturer Jan. Feb.
Because of these reasons, several polysilicon makers closed during 2018–2019, except for Sino-Si,
which is operating with a low utilization rate. GCL Silicon 70% 75%

• Most polysilicon makers had signed orders for January before Chinese New Year. Operating with low Yongxiang 100% 100%
utilization rates, manufacturers of polysilicon for multi-Si wafers’ demand for raw materials will remain
stable. Supply of polysilicon for mono-Si wafer, in contrast, is running a bit short because mono-Si TBEA 100% 100%
wafer production capacity continues to rise, and end uses have stable demand.
East Hope 72% 80%
• Since polysilicon factories are the upstream sector of chemical, they wouldn’t reduce utilization rates
unless they undergo equipment maintenance on a large scale. While the production volume of Daqo New Energy 100% 100%
polysilicon for multi-Si wafers showed no marked change in January, the coronavirus outbreak during
Chinese New Year has forced working individuals across China to put off returning to work, and this Sino-Si 15% 0%
will certainly cause a shortage of polysilicon powder in February. Some polysilicon makers based in
cities where roads for delivery are blocked amid the coronavirus outbreak are also left undersupplied Asia Silicon 90% 90%
with powder and they may lower their utilization rates accordingly.
Youser 60% 70%
• Polysilicon powder shortage, coupled with potential increases in delivery costs, makes it highly likely
for polysilicon prices for mono-Si and multi-Si wafers to increase. Polysilicon prices for mono-Si and DL Silicon 100% 100%
multi-Si wafers both look set to climb by RMB 1/kg. Yet, their change depends on how long the
coronavirus epidemic is going to last and will certainly produce some impact on the polysilicon Ordos 100% 100%
segment.
Jingyang 100% 100%
• On the supply side, twelve polysilicon makers in China are going to operate without any hitch
throughout February. The only polysilicon maker due to maintain equipment is OCI’s South Korea- State Power Investment
55% 60%
based plant, which had reduced its utilization rate last month—a move that will cause it to churn out Corp.
less polysilicon in February. It has cut its monthly production volume by 70% from 4,300 to 1,300
tonnes. 05
 Impact of coronavirus outbreak: Wafer segment Utilization rate of operating wafer makers in
Multi-Si wafer China
Multi-Si wafer:
• Most Chinese multi-Si wafer manufacturers are based in Jiangsu province, such as GCL and Rietech. Many of these Vertically integrated Jan. Feb.
manufacturers have postponed opening until Feb. 10. The initial estimation shows that the production volume decreased
slightly in January; the production in February will suffer more from the coronavirus. Several small-sized manufacturers, Jinko 50% 45%
who have moved cast mono furnaces to northwestern regions where electricity cost is lower, are under little impact. For Canadian Solar 100% 100%
instance, Ht-Stech and JYT, which have more capacity for slicing than for cast mono and ingot pulling, won’t be affected
much even if they postpone the opening. JA Solar 35% 0%

• Since Q4 2019, multi-Si wafer segment has been experiencing flagging demand. Consequently, wafer prices have been Trina 60% 60%
falling and then stabilized when the Chinese New Year fell upon. Some multi-Si wafer producers closed the production
ahead of schedule before the Chinese New Year. With overall utilization rates being reduced continuously, supply of multi- Multi-Si wafer: Tier 1 Jan. Feb.
Si wafer will decrease further in the face of coronavirus epidemic. PV InfoLink projects that prices will stay stable or even GCL 40% 37%
rise slightly.
Konca 50% 40%
Mono-Si wafer
Rietech 65% 40%
• Longi and Zhonghuan Solar’s capacity for ingot pulling and slicing is based in regions that are not seriously affected by
coronavirus. The two mono-Si wafer manufacturer giants have produced 630 million and 420 million pieces in January and Ht-Stech 25% 25%
February, respectively, which reflect little impact. JA Solar produced 120 million pieces in January, down by 20 million Jingying 85% 30%
pieces, and it expects to produce 90 million pieces in January, decreased by 50 million. Solargiga’s ingot pulling and
slicing lines are both operating at full capacity, but its production volume will be uncertain because the local government Mono-Si wafer:
has ordered to suspend all operation. JYT’s production in January was not impacted much, having produced 30 million Vertically integrated Jan. Feb.
pieces, and it expects to produce 20 million pieces in February, down by 10 million. Wuxi Shangji Automation’s ingot Jinko 100% 100%
pulling lines are operating at full capacity, having produced 35 million pieces every month; however, it has outsourced
Canadian Solar 100% 100%
slicing process to Konca, so its production volume will be unclear later after being ordered to suspend production by the
local government.
Mono-Si wafer: Tier 1 Jan. Feb.
• Impacted by coronavirus, mono-Si wafer manufacturers are expected to reduce utilization rates. The logistics hiccups and Longi 100% 95%
the short supply of mono-Si wafer that has occurred before the Chinese New Year will worsen the shortage.
Zhonghuan Solar 100% 100%
• Demand for mono-Si wafer will persist through the end of Q1. Tier-1 mono-Si wafer manufacturers’ listing prices for
February also remain the same as in January. The coronavirus epidemic will cause further changes in the market. It’s GCL 100% 75%
expected that mono-Si wafer prices will remain stable for a short term and start falling steadily again due to oversupply Konca 100% 75%
once the epidemic is contained. The timing of price rebound will fall in the high season of Q3. As overseas demand is
mainly fulfilled by Chinese suppliers, they also have difficulty in getting mono-Si wafers now. 06
 Impact of coronavirus outbreak: Cell segment
• There are many manufacturers in the cell segment, with most of which Manufacturer Status of manufacturing lines
situating in Jiangsu, Zhejiang, and Anhui provinces. There are also some large
cell manufacturers in Chengdu and Tianjin. Although quite a few Capacity remains the same as it was during the CNY
Tongwei holiday. Mono-Si lines will start operating on Feb. 3. It’s
manufacturers are affected by the postponement of opening, the overall facility in Hefei will start operating on Feb. 10.
utilization rate of mono-Si cell manufacturers is high. Vertically integrated
Capacity remains the same as it was during the CNY
companies also remain the same utilization rates during the Chinese New Aiko
holiday. Mono-Si lines maintain high utilization rates.
Year holiday, so the production volumes remained high.
Capacity remains the same as it was during the CNY
• Most multi-Si cell lines have been closed during the Chinese New Year holiday, Runergy
holiday. Mono-Si lines maintain high utilization rate.
and they will follow the government’s order to postpone the opening. Therefore,
Production suspected. It plans to resume some lines on
the overall production volume is low. Lu’an
Feb. 3 for now.
• Some countries have banned on Chinese ship entry to their ports. There are Mono-Si lines operating at full capacity; multi-Si lines
also many cargos held by Vietnamese customs now, forcing local Shunfeng
postpone opening until Feb. 10.
manufacturers to reduce utilization rates because they cannot receive
Capacity remains the same as it was during the CNY
materials. DMEGC
holiday. It’s operating normally.
• Compared to module segment, cell segment saw less shortage of material. At Production suspended. It plans to resume operation on
present, individual manufacturers are experiencing shortage of screen for Sumin
Feb. 10.
printing and packaging materials. With highways in China being blocked, the
Maintain small volume of capacity. It plans to resume
delivery of wafers is expected to become a problem later. Nice Sim Solar
operation on Feb. 10.
• The production volume of cell was slightly lowered during the Chinese New
Year holiday, and quite a few manufacturers won’t increase production until M-cells Production suspended
after Feb. 10. At present, mono- and multi-Si cell prices will stay stable for a
Production suspended. It plans to resume operation on
short term because of uncertain logistics and the supply and demand across Red Solar
Feb. 10.
the supply chain. The situation will only become clear after resuming work.
As many manufacturers postpone opening, data here is based on the
• As many cell manufacturers are based in Zhejiang province, exports and information we collected so far. Figures released by manufacturers will
imports will be impacted due to logistics hiccups after work resumes. The prevail.
actual impact will be watched closely. 07
 Impact of coronavirus outbreak: Module segment
• Jiangsu and Zhejiang provinces have large volume of module capacity, and Manufacturer Status of manufacturing lines
these manufacturing lines have been impacted by the postponement of opening.
Operation continues during the CNY holiday. Its utilization rate
Quite a few top-tier module makers’ facilities in Zhejiang are now closed or only Jinko
was reduced to 80% due to logistics issue.
operating at low utilization rates. The overall utilization rate will remain low in Its facilities in Southern China have either closed or reduced
February because employees need to comply with self-quarantine orders, even JA Solar
utilization rates, sitting at 50% now.
they resume work on Feb. 10. We project that the global production of modules Trina
Operating at 50% of utilization rate. It suffers shortage of
in February will be only 7.5-8 GW, and if the logistics problem continues, the materials.
production volume might be even lower. This level is significantly lower than the Coronavirus delays the opening in Zhejiang and some regional
Longi governments ordered to suspend operation. As a result, the
average monthly production of 10-10.9 GW over the past months. overall utilization rate is not high.
• As module material suppliers are mostly small-sized manufacturers, the impact Canadian Solar Production suspended. It will resume production on Feb. 10.
of logistics and manufacturing on module segment is much bigger than other
South Korea and Malaysia-based facilities are operating at full
segments. Junction box and aluminum frame saw serious shortage now, so Hanwha Q Cells capacity. Qidong-based facility maintains high utilization rate,
module makers are unable to reach the expected utilization rates even they but that may be impacted by logistics later.
have enough cells and labor. It had higher utilization rate, but that has been reduced to 80%
Risen
being impacted by logistics.
• On the demand side, China’s land and sea transport links are either cut back to
the minimum or shut down. Therefore, some module manufacturers have Suntech Utilization rate is low because of postponement of opening.
difficulty delivering goods to overseas buyers. Distribution and retailers also saw Astronergy Operating at 50% utilization rate due to a lack of labor.
noticeable shortage. As a result, retail prices of modules in overseas markets
might increase slightly, although normally it’s difficult to adjust the prices after Eging Production suspended.
modules being shipped.
Znshine Solar Production suspended. It will resume production on Feb. 10.
• The situation of foreign shipments and Chinese ships’ entry to foreign ports is
unclear. It’s also uncertain whether coronavirus will cause overseas customers’ GCL Its facility in Jurong and Funing started operation on Feb. 3.
concerns over inventory draw. However, Q1 is the traditionally low season in
Solargiga Ordered by the local government to suspend production.
markets outside of the U.S., Japan, and India, so the industry has already
expected the inventory draw to be weak. For now, coronavirus won’t cause As many manufacturers postpone opening, data here is based on the information we
significant impact on demand; the major issues to be solved at this point is collected so far. Figures released by manufacturers will prevail.
shortage of supply and suspended production. 08
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