Looking back at the history, what impact will the price reduction of silicon materials have on the profitability of the manufacturing end? The core is to see whether the reason for the price reduction is shrinking demand or increasing supply. We believe that in 2022, silicon materials have entered a new round of accelerated production expansion cycle, and the price reduction of silicon materials is more certain, which will further stimulate the release of industry demand, and the industrial chain profits are about to be redistributed. Batteries, modules, and inverters are expected to benefit.
Through the changes in the industrial chain after several price cuts of silicon materials in the past 20 years, we can see that in the case of shrinking demand, even if the price of silicon materials falls, because the price cuts of silicon wafers, batteries, and components are greater than that of silicon materials, so the industry chain Link profits will still be compressed. This phenomenon has led to a decline in the growth rate of industry demand due to the financial crisis in 2008, the shrinking of global demand caused by European and American anti-dumping and countervailing in 2011, the decline in industry demand caused by the subsidy reduction of the photovoltaic industry in 2018, and the "power limit" factor in the fourth quarter of 2021. It has happened when the demand is restricted, and the price reduction of silicon materials brought about by the shrinking demand cannot improve the profitability of other links. However, after each round of demand interruptions leads to pressure on prices and profits, the industry will often usher in a new round of demand explosion. At this time, even if the price of silicon materials is still on the downward channel, the profitability of the manufacturing end will be restored.
