The answer to the future is not in the success of the past – this line of words is written on the blackboard of the 2022 EMBA Spring Class of CEIBS. $LONGi Green Energy(SH601012)$ $Liancheng CNC(BJ835368)$ $Shuangliang Energy Saving(SH600481)$
It is increasingly evident to us today that one of the hallmarks of this era is the ever-increasing amount of unpredictable, rapid change that inevitably accompanies all business. We are increasingly unable to rely solely on past successes to grasp an increasingly uncertain future. As the management guru Peter Drucker profoundly revealed, “Today’s inevitable becomes tomorrow’s absurd. In a turbulent and uncertain era, the most likely events are those unique events that constantly change the structure, and the unique Events cannot be planned.”
In 2022, LONGi Green Energy has gone through 22 years. He is sought after and envied by people because of his past success, and envied and slandered by people because of his past glory. However, neither excessive praise nor malicious derogation will prevent LONGi from continuing to move forward and change with the times. Just as Zhang Ruimin said: “There is no successful enterprise, only the enterprise of the times”. LONGi is deeply aware that the business logic of each era is different, because the characteristics of the era are different, the environment is different, and if an enterprise wants to survive and develop, it must keep pace with the times and build genes suitable for the development of the times . The times change, which inherently requires the genes of enterprises to change, otherwise it will not adapt to the environment of the times, which will lead to the enterprises either undergoing genetic mutation or being eliminated by the times – LONGi chose the former path.
1. Glory of the past
1.1 Predict that single crystal will win, and continue to work together with Liancheng
Around 2000, Li Zhenguo founded Xi’an Xinmeng (the predecessor of LONGi), which gradually transitioned from the research and development of semiconductor-grade monocrystalline silicon materials to the solar energy industry. In 2006, with the addition of Zhong Baoshen, Li Zhenguo personally led the team to conduct meticulous research on many technical routes in the industry. According to first principles, after in-depth research and analysis of photovoltaic technology, LONGi believes that the essence of photovoltaic development lies in ” minimizing the cost of electricity as much as possible “. In addition, according to LONGi’s research, even if the polysilicon ingot process is zero-cost, from the perspective of kWh cost, the single-crystal technology route is still advantageous. Therefore, in the following ten years, although the polycrystalline route has always been the mainstream, LONGi has been working hard in the monocrystalline field together with its core partner Liancheng CNC. In 2013, with the support of LONGi, Liancheng CNC acquired Kex of the United States and obtained all intellectual property rights of single crystal furnace technology, which made LONGi even more powerful in the field of equipment. In May 2016, with the main help of Liancheng CNC, LONGi reduced the non-silicon cost of monocrystalline silicon rods to 3 cents, demonstrating the correctness of the inference 10 years ago – even if the cost of polycrystalline silicon is reduced to 0, LONGi also have a competitive advantage over them.
In December 2017, the US solar power market research and consulting company SPV concluded in its solar power market report that the shipments of “monocrystalline silicon” solar panels exceeded that of “polysilicon” for the first time.
In 2019, LONGi cooperated with Liancheng CNC to develop and manufacture the first-generation 1600mm inner diameter single crystal furnace, which combined with a series of factors such as large heat field, large charging volume, wider process window and high pulling speed, further improving the directness of the furnace. The production efficiency and output of Rafa single crystal growth not only greatly expands the advantages of polycrystalline in the competition between single and polycrystalline, but also excels in the field of single crystal, further consolidating its dominant position.
1.2 accurately judge the direction of the diamond line
Compared with mortar cutting, diamond wire cutting has the advantages of high cutting efficiency, low cutting loss, low environmental pollution, and conducive to thinning, which can significantly reduce single-chip silicon consumption and non-silicon cost. In 2009, LONGi judged that diamond wire is the future, and started to invest in research and development since this year. The reason is very simple, cutting 1 ton of silicon rods requires 300 kilograms of steel wire and various materials for cutting with mortar, and only 40 kilograms for diamond wire. From the perspective of future logic, it is a better direction. In 2012, LONGi gradually introduced diamond wire cutting technology and actively supported upstream suppliers such as Liancheng CNC and Meichang. Since 2015, LONGi announced that it will promote diamond wire technology in batches at the cost of an annual loss of 40 million. According to LONGi’s internal data, for every 10um decrease in diamond wire diameter, the cost of a single piece of silicon decreases by about 0.15 yuan, and the production capacity increases by about 4%. It can be seen that there is huge room for cost reduction. LONGi expects to achieve a low-cost breakthrough in two years. However, with the support of core suppliers such as Liancheng CNC, the cost of diamond wire cutting has dropped in less than half a year. This historic breakthrough not only filled the processing gap of LONGi Green Energy, but also saved about 12 billion yuan annually for the entire photovoltaic industry. Today, that number exceeds 40 billion annually. In April 2012, LONGi was successfully listed on the main board of the Shanghai Stock Exchange. In 2013, it became the world’s largest photovoltaic company in terms of shipments of monocrystalline silicon wafers. To this day, LONGi is still known as the most valuable photovoltaic company due to its excellent performance in all aspects.
2. Facing the present, moving forward
2.1 Vertically integrated layout to expand development space
However, in the era of polycrystalline dominance, LONGi’s monocrystalline silicon wafer sales were once neglected or hindered. LONGi realized that instead of begging others to buy it, it is better to find a way. In November 2014, LONGi invested 46.0955 million yuan to acquire an 85% stake in Zhejiang Leye Photovoltaic Technology Co., Ltd. and became its controlling shareholder. And began to extend to the downstream battery and module links of the industrial chain, directly facing the terminal power station customers, and promoting monocrystalline products. In 2015, the country launched the “Top Runner Program”, which put forward higher requirements for the conversion rate of polycrystalline components. At that time, only 20% of polycrystalline products could meet the standard, while 80% of monocrystalline products met the requirements. The new policy had a clear preference for monocrystalline products.
Taking advantage of this opportunity, LONGi began to deploy downstream on a large scale, and at the same time it has quietly transformed from being the “world’s leading monocrystalline silicon wafer manufacturer” to “the world’s leading solar equipment company”.
Since 2017, LONGi has continued to accelerate the pace of capacity building for batteries and modules, and the scale of integration has continued to increase. By the end of 2021, the company’s wafer/battery/module production capacity will reach 105/37/60GW respectively, and the company plans to reach 150/60/85GW in the three links by the end of 2022. Based on the all-round leadership in the three links of silicon wafers, cells and modules, LONGi has risen rapidly among the integrated module companies and has been firmly in the leading position in the industry.
2.2 Facing the terminal needs and refusing to seek the end one by one
As the dust of the single-poly crystal showdown has settled, and the rapid spread of water-cooled heat shields, large-size single crystal furnaces and diamond wire cutting technologies in the industry, more and more players have begun to flock to the lucrative silicon wafer side. As the middle ring of the second silicon wafer company, on the one hand, it has to compete with the boss LONGi, and on the other hand, it has to suppress the later entrants. Therefore, relying on its own accumulation in the field of semiconductor crystal pulling, the so-called G12 large silicon wafer was launched in order to form a differentiation- – That is, the mainstream 300mm ingot in the semiconductor field and the 210mm side length silicon wafers that are squared and sliced from this, and the 210 alliance was quickly established in the industry, so that G12 silicon wafers quickly expanded their market share. After fully releasing the dividends of M6 silicon wafers, LONGi launched the M10 large silicon wafer, the optimal size of silicon wafers calculated according to the demand of the component side. Although it came out half a year later than G12, its sales quickly surpassed that of G12. Twice, the market share has tripled or quadrupled. LONGi is not very concerned about the so-called silicon wafer size battle. Because in LONGi’s view, for end applications, silicon wafers are only a means, not an end. In contrast, LONGi pays more attention to the development of super large modules. In LONGi’s view, using ultra-thin glass to make super large modules will bring great risks to the industry, so LONGi is against it:
“Just like the large floor-to-ceiling windows at home, if a very thin glass is not thickened, I believe that no one dares, and the safety is too poor. So we think about 210 and 182, we think it actually affects every industry in this industry. It does not have much impact on other companies. But we believe that whether you use 210, 182, or even 216, super large modules will bring great risks to the asset safety of the industry or customers, because your glass is so thin, Then when it is so big, it encounters hail, and that strong wind. You are 25 years old, and you mainly think about preventing natural disasters that occur once in 50 years, because it is destroyed in one moment and then gone, so we think this is the same as building a house. The earthquake resistance level is the same, it is fine when there is no earthquake, but if there is an earthquake, it is basically over, so we don’t need to talk about it. So we think it is not worth (taking the risk) that does not bring value.”
Facing the reporter’s question, Zhong Baoshen said so.
2.3 Self-hematopoiesis, financial stability, and calm response to changes
In 2021, the cost of raw materials for photovoltaic products will increase by 62.33% year-on-year, of which the price of silicon material will increase by more than 160%. In addition to the increase in the prices of bulk commodities such as aluminum and copper, the operating rate of the industry will decrease, and the profits of the industrial chain will be transferred upstream. . The disclosure of the semi-annual report of the photovoltaic industry has ended. The industry profit of LONGi is inferior to the single-quarter profit of Tongwei, a silicon material company. The net profit attributable to the parent in the first half of the year was only 6.48 billion yuan.
However, if we are a little careful, we will find that since the listing, LONGi has accumulated a net operating cash flow of 35.159 billion yuan, a net investment cash flow of 26.363 billion yuan, and a cumulative net financing cash flow of 18.374 billion yuan. Judging from this data, LONGi’s dependence on external financing has decreased, and its net operating cash flow can already support huge investment needs and daily production and operation. Going a step further, we will find that LONGi has been fully capable of self-hematopoiesis since 2019, and its free cash flow continues to expand, which can be said to have strong stamina. Looking at the whole industry, this is the only one @bald head compound interest life .
Compared with LONGi’s powerful self-hematopoietic ability, it can be said that the gap is huge.
If a company cannot control its own cash flow, it is just as people cannot control their own body and emotions. The external situation is smooth sailing, once the situation changes and the pressure mounts, a company that lacks self-hematopoietic ability is like a patient who cannot control his body and emotions. Once it loses control, the consequences will be unimaginable. And financial stability makes risk measurable. “Everyone can trust LONGi”. In the face of many variables and uncertainties, LONGi’s confidence comes from its own strength and risk control ability. Only when the tide goes out will it be known who is swimming naked.
3. Facing an Uncertain Future: Planning Scenarios, Dynamic Competition
In 2021, Dr. Lv Jun, President of LONGi Product Management Center, delivered a keynote speech titled “Technical Development of Crystalline Silicon Solar Cell Modules Driven by Dual Carbon Targets”, reiterating that LONGi focuses on crystalline silicon cell technology innovation and brings photovoltaic development back to the main track initiative. On the premise that the silicon wafer side, which has been fully developed for many years, has no disruptive technologies for cost reduction and efficiency increase, LONGi believes that the main channel of cost reduction and efficiency increase has gradually transitioned to the battery and module links, especially the photovoltaic cells of photovoltaic cells. conversion link. However, only at the technical level, battery technology is divided into Perc, TopCon, HJT, IBC, perovskite and other technical routes. Each route has its own characteristics and advantages that cannot be ignored.
At the same time, LONGi is facing unprecedented complex international and domestic environment and challenges. First, Hanwha’s patent challenge slowed the pace of some LONGi products entering Europe and the United States in large numbers (although Hanwha has repeatedly lost lawsuits). Then, the U.S. Anti-Circumvention Act and the IRA Act restricted the PV supply chain links outside the U.S. control and pushed for localization. India’s 40% tariff on extraterritorial products and the EU’s anti-coercion bill have added fuel to the fire. The epidemic and the Russian-Ukrainian war have made the international trade and supply system full of more variables.
Facing a highly uncertain future, LONGi chose not to predict the future this time, but to analyze the possible future environment by planning the uncertain future into limited typical scenarios, which is different from the previous coping strategies. Develop responses for the future based on the current environment and keep the response as a continuous and incremental dynamic process.
For example, in terms of battery technology, LONGi has laid out multiple technical routes at the same time, and has hybridized and continuously verified the characteristics and advantages of each technical route according to the requirements of the first principle – reducing the cost of electricity Different application scenarios – centralized or distributed – flexibly match different technical outputs to achieve the ultimate goal of optimal premium. When asked about the specific technical route, such as TopCon or HJT, LONGi believes:
Now they are all changing, this change, and in terms of life cycle, it is difficult to say, who can be in the mainstream, so let alone the life cycle, if it can’t dominate the mainstream, in fact, there is no The life cycle, that is, if you invest in it now, it will fail, and it will fail in the future. Ha ha. That’s it.
Whether it is Europe, where energy is scarce under the Russian-Ukrainian war, or the United States, where manufacturing is returning to the country, or India, where photovoltaic manufacturing is far from climatic, the final market will vote with its feet to choose the most advanced technology and the most cost-effective photovoltaics product. When an enterprise has certain competitiveness, such as technology leadership, product leadership, cost leadership, and relatively stable financial conditions, the impact of market changes will be limited.
At the same time, since 2016, LONGi has deployed overseas and established a marketing network covering all regions of the world. It has established overseas subsidiaries and offices in North America, Australia, Europe, Japan, the Middle East and other countries and regions, and has established a global presence in Malaysia. A production base for the entire industry chain has been established.
In 2022, the scale of LONGi’s overseas wafer production bases is expected to increase by 5.5 times from the original basis, and by 2023, it is expected to increase by 10 times, so that Liancheng CNC, LONGi’s largest supplier, faces the pressure of massive orders, and the production site encounters difficulties. To the great challenge, we had to change all the plazas and parking lots of the entire company into temporary shipping warehouses.
At the same time, it is also actively preparing to set up factories overseas with strategic partners. Facing the complex international trade situation, LONGi’s determination and confidence to make breakthroughs can be seen.
Analyze the environment and identify trends; build scenarios based on trends; set visions based on scenarios; formulate strategies based on visions; put strategies into action. LONGi has always realized that for the future, the only constant is change. Therefore, his strategic orientation is more and more inclined to pursue “flexibility”, adapt to the ever-changing environment, never stop changing, never stop evolving, and in the face of setbacks, can he be flexible and constantly tap the advantages of change.
This strategic orientation presents several major characteristics at the same time:
1) Uncertainty: That is, this strategy is not pre-designed, but responds to current market conditions and adjusts at any time.
2) Short-term inefficiency: Because of repeated attempts and constant exploration for a certain event, until the correct development direction and plan are found, the strategy of the enterprise will be completely changed, and the breakthrough and rapid development will be achieved. In the stage of continuous trial and verification, it will appear inefficient in a short time, but it is very helpful for the long-term development of the enterprise.
3) Forward-looking: One step ahead to foresee change, seize the moment to lead and promote change.
4) Continuity: It is feasible and persistent, not a one-time big action.
5) Diversity: The combination of change actions of different scales and risks, and the diversity dividend is obtained through various combinations.
Therefore, when we look at LONGi’s move to establish a future energy space laboratory, on the one hand, we must see that LONGi will focus on building aerospace projects such as space power stations, and on the other hand, we must see that LONGi will transform and industrialize advanced scientific and technological achievements. Use the space environment to verify the reliability of products to create high-efficiency leading technology products – especially high-efficiency batteries.
At the same time, it is also necessary to further understand LONGi’s patience and determination in the layout of battery routes.
Regarding the construction of LONGi hydrogen energy, we can see more clearly that LONGi will further expand the application scenarios of photovoltaics, in order to continue to lead the reform, win a broader development space, and obtain the concept of various dividends.
Harvard Business Review commented on LONGi in a specially curated article:
No success is accidental, nor is it taken for granted. Today, LONGi Green Energy has become the world’s largest manufacturer of monocrystalline silicon wafers and modules due to correct strategic decisions, persistent technological innovation, firm execution capabilities, and culturally-led organizational cohesion.
However, LONGi has done far more than that, because LONGi believes that the future is not entirely in the success of the past. From the prediction of the future in the past, to the planning of today’s scenarios and the establishment of dynamic strategies, LONGi has implemented its own “genetic mutation” with practical actions to embrace the highly uncertain future.
main reference:
1. Blue Twins “LONGi Green Energy 2022 Shareholders’ Meeting Exchange Minutes”
2. Harvard Business Review HBR-China “LONGi Green Energy: No Success Is Accidental”
3. Guan Hejiu, “Li Zhenguo’s Road to Single Crystal, 40 Gold Condensed LONGi for 22 Years”
4. Haozer’s “Longi’s Looking Up at the Starry Sky and Down-to-earth”
5. A sketch of a horse “Longi Extraordinary General Meeting on April 1, 2022: Mr. Zhong answers 17 questions from attendees”
@Blue Twins @bald head compound interest life @beiguoqishi @Allianz @Joshua_S @ Jason_K023 @青神骨@rising interest 1st season @ trillion Longji new journey @瑮guoba @204tian
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