The year 2024 has undoubtedly been a challenging one for the solar photovoltaic (PV) industryThe sector, which has seen significant growth in recent years, is grappling with various issues, including intensifying price wars, supply-demand imbalances, and increasing competition from both domestic and international playersAmid these pressures, many companies are facing substantial financial lossesThe situation has led to an alarming number of firms, especially small and medium-sized enterprises, struggling to remain afloatThe mounting challenges have prompted industry associations and leading companies to come together, seeking ways to curb excessive competition and avoid further price erosionHowever, whether these efforts will be enough to stabilize the industry remains uncertain.

One company that has been particularly affected by these difficulties is Aiko Solar (AiXu Co., Ltd.). A leader in the solar industry, Aiko has been pushed to the brink due to falling prices, increasing debt, and a declining market share

Despite being a key player in the development of both P-type and N-type photovoltaic cells, Aiko Solar has faced significant setbacks in 2024. With mounting losses and a substantial rise in liabilities, the company’s future hangs in the balance.

The Price War and Its Aftermath

The onset of the price war in early 2024 was triggered by the simultaneous ramping up of production capacities across the solar industrySeveral companies, including some of the largest producers, began releasing excess supply into the market, which quickly shifted the balance between supply and demandAs a result, prices for photovoltaic products, especially P-type PERC solar cells, plummeted, leading to steep losses for manufacturers like Aiko Solar.

In response to the intensifying competition, Aiko Solar, which primarily focuses on P-type PERC cells, found itself at a disadvantageThe company’s major competitors have increasingly shifted towards N-type cells, which are believed to offer superior efficiency and better long-term performance

Although Aiko Solar had started making significant investments in N-type technology, including a 60 billion yuan non-public offering to finance the expansion of its production capacity, the timing could not have been worseAs the industry grappled with oversupply, Aiko Solar had to reduce its fundraising target and delay its plans.

By the third quarter of 2024, Aiko Solar’s revenue had dropped significantly, showing a 35.3% year-on-year declineThe company’s financial health worsened further, with its gross margin falling sharplyIn the last quarter of 2023, Aiko Solar’s gross margin was just 0.43%, and by the second and third quarters of 2024, it had fallen into negative territory, at -14.24% and -19.35%, respectivelyThe result was substantial losses, amounting to 28.31 billion yuan in the first three quarters of 2024, with a net loss of 36.13 billion yuan after excluding non-recurring items.

Increasing Debt and Inventory Struggles

As Aiko Solar expanded its production capacity over the years, the company had to raise significant funds through equity offerings

Between 2019 and 2022, Aiko Solar raised 95.18 billion yuan, but despite this influx of capital, the company’s debt levels remained highBy the end of 2022, after a 16.5 billion yuan capital increase, Aiko Solar’s debt-to-asset ratio stood at a concerning 63.35%. The situation has only worsened since then, with the company’s debt ratio climbing to 82.9% by September 2024.

The company’s liabilities, both short-term and long-term, have increased substantiallyShort-term borrowings, for instance, rose from 8.55 billion yuan in Q3 2023 to 41.11 billion yuan in Q3 2024, marking an increase of over 30 billion yuan within a yearSimilarly, long-term borrowings grew from 75.45 billion yuan to 81.47 billion yuan over the same periodThe company’s interest expenses skyrocketed, reaching 4.58 billion yuan in the third quarter of 2024, a 25.48% increase from the previous year.

Meanwhile, Aiko Solar’s inventory has also surged, adding further pressure to the company’s financials

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By Q3 2024, the company’s inventory had climbed to 35.98 billion yuan, up by 4.63 billion yuan compared to the previous yearThe company has already made provisions for a 14.35 billion yuan inventory impairment loss in 2024. These unsold products, sitting in warehouses, reflect a mismatch between supply and demand in an industry struggling with overproduction.

In addition to these financial challenges, Aiko Solar faces the risk of further depreciation of its fixed assetsAs the company expanded its production capacity, it invested heavily in plant and equipmentBy Q3 2024, Aiko’s fixed assets were valued at 178.9 billion yuan, with an additional 54.77 billion yuan in construction projectsHowever, the slowdown in the solar market, coupled with the increasing competition, has raised doubts about whether these assets will retain their value.

The Industry’s Struggle to Adapt

The situation at Aiko Solar is not unique

Many companies in the photovoltaic sector are facing similar challengesA number of solar firms have announced plans to halt production or shut down outdated production linesCompanies like ST Aikon and others listed on China’s over-the-counter market have had to suspend operations temporarily, citing excess capacity and weak demandThese moves reflect the broader struggle within the industry, as companies try to navigate through turbulent market conditions.

Recognizing the severity of the problem, various stakeholders in the industry have begun seeking solutions to curb the destructive price warsIn October 2024, the China Photovoltaic Industry Association, the Zhongguancun Energy Storage Industry Technology Alliance, and several leading solar companies held meetings to explore ways to break the cycle of oversupply and reduce competition-driven price cutsOne of the key proposals has been to establish pricing guidelines to ensure that solar products are not sold at unsustainable low prices, thereby helping companies avoid financial collapse.

While these efforts are a step in the right direction, it remains to be seen whether they will be enough to stabilize the industry

With technological advancements in N-type cells and the continued push for more efficient solar solutions, the future of companies like Aiko Solar will depend on their ability to innovate and adapt to market demandsHowever, the company’s late entry into N-type technology, combined with its negative margin sales and increasing debt levels, puts it in a precarious position.

Conclusion

The year 2024 has brought significant challenges to the photovoltaic industry, and Aiko Solar’s struggles exemplify the broader difficulties many companies are facingWhile the company’s investments in N-type technology and efforts to expand production capacity were made with the future in mind, the timing has proven to be unfortunateWith mounting losses, increasing debt, and inventory concerns, Aiko Solar’s survival will depend on its ability to turn things around quickly