According to CPIA statistics, the national new PV installed capacity in 2018 and 2019 decreased by 17% and 32% year-on-year respectively. However, the market share of PERC increased from 15% in 2017 to 33.5% in 2018, and exceeded 65% in 2019. Considering the decision-making cycle of capacity expansion, the expansion of PERC capacity has not been excessively affected by the 531 policy. The core reason is that the rapid maturity of monocrystalline silicon wafer in the RCZ and diamond wire cutting process since 2017 has led to a rapid decrease in cost, making monocrystalline silicon wafer much more cost-effective than polycrystalline silicon wafer. At the same time, in the process of upgrading from BSF to PERC, the efficiency improvement of monocrystalline PERC is significantly higher than that of monocrystalline BSF, thus accelerating the replacement of PERC for BSF.

Sinolink Securities' main points are as follows:

Cost-effectiveness is the core for the success of photovoltaic industry product iteration.

In the past decade, the technology and product iteration of the photovoltaic industry have been rapid, from single crystal to polycrystalline in the wafer link, from BSF to PERC and then to TOPCon in the cell link, from mono glass to dual glass in the auxiliary material link, etc. The successful iteration of technology has a common point, that is, when new products are launched into the market, production companies and downstream customers share higher profits than existing products, that is, new products need to have higher cost-effectiveness.

In various links of the industry chain, the battery link is often the most core part of photovoltaic technology iteration: From the perspective of cell and component manufacturers, due to the fast iteration speed of battery technology, the construction and planning of capacity are often in a long-term surplus state of exceeding market demand. This requires high-intensity R&D investment to maintain a leading position in product cost-effectiveness and gain profits. From the perspective of the terminal, the gain of component-side power brought by the improvement of battery efficiency is most intuitive and easier to determine the cost-effectiveness, so the photovoltaic cell link is a relatively typical cost-effectiveness-driven technology iterative link.

Review the iteration from TOPCon to PERC, the long-term high premium level attracts the industry to expand the scale of production.

At the end of 2021, Jinko Solar took the lead in large-scale expansion of N-type TOPCon production capacity in the industry, which opened the prelude to the industry's shift to TOPCon cell technology. With the acceleration of TOPCon expansion, various resources in the industry chain are inclined to TOPCon, and the scale effect will basically equalize the module-end manufacturing cost of TOPCon and PERC. However, TOPCon still enjoys reasonable premium downstream compared with PERC, so compared with PERC, TOPCon has better profitability, leading to a rapid expansion of TOPCon. According to CPIA statistics, the market share of TOPCon will rise from less than 3% in 2021-2023 to more than 23%, and is expected to exceed 60% in 2024.

In the stage of comprehensive overcapacity, "destructive" innovation is the only way to break the homogenization and excessive competition in the battery and component links.

At present, as the main industry chain is facing comprehensive overcapacity, many links are in cash loss state for a long time, even TOPCon cell pieces are also in negative gross profit margin state. According to the statistics of Sinolink, by 2024H1, the total planned capacity of TOPCon cells will exceed 1100GW and the accumulated installed capacity will exceed 650GW. Under the background of serious product homogenization, products with significant cost-effectiveness advantages are almost the only way to break the "inner circle". In 2024, the industrialization progress of HJT and xBC processes has made rapid breakthroughs, and they are expected to lead the next cycle of battery technology iteration.

Investment advice and valuation

At present, there are mainly two directions for investment opportunities brought by new technology iteration: one is to cooperate with equipment manufacturers related to new technology introduction and cost reduction, with a focus on Autowell technology co., ltd. and Suzhou Maxwell Technologies; The second direction is to make layout of leading component and cell manufacturers in battery technology route with rapid industrialization progress, with a focus on Tongwei Co.,Ltd, Longi Green Energy Technology, and JinkoSolar.

Risk warning: New technology penetration is below expectations, research and development progress is below expectations, downward risk of industry chain prices, and enterprise profit turnover is below expectations.