JinkoSolar to accelerate capacity expansion in 2022, plotting course for 60GW module capacity

Reporting its Q4 and FY 2021 results today, ‘Solar Module Super League’ member JinkoSolar announced that it expected to finish this year with around 50GW of wafer, 40GW of cell and 60GW of solar module capacity in what constitutes a significant upgrade compared to previous plans.

JinkoSolar finished 2021 with solar wafer, cell and module capacities of 32.5GW, 24GW and 45GW respectively, but had previously guided 2022 capacities to rise to 40GW, 40GW and 50GW respectively.

The SMSL member is therefore now not only expected to add 17.5GW of wafer, 16GW of cell and 20GW of module capacity this year, but with regards wafer and module capacity, these figures are up 10GW each compared to forecasts provided at the company’s previous quarterly results.

Capex is expected to rise in tandem with the increased capacity plan, increasing from US$1.3 billion in 2021 to US$1.8 – 1.9 billion this year.

Late last week JinkoSolar unit Jiangxi Jinko confirmed it had struck agreements to develop a 30GW silicon pull rod facility, a 24GW module assembly project and 100,000MT of aluminium frame capacity in China, the first phases of which are to begin construction this year.

Furthermore, on a conference call with analysts held after the results disclosure, JinkoSolar stated that its capacity expansions would focus solely on its n-type product range – JinkoSolar released its TOPCon Tiger Neo module range last year – after witnessing “stronger than expected” demand for the product since its release.

Speaking to analysts, JinkoSolar chief executive Xiande Li said the company was optimistic on global solar demand both this year and beyond, suggesting the company expected global demand for solar products to fall in the 240 – 250GW range this year.

This figure is towards the very top of forecasts published by industry analysts, with BloombergNEF’s installation range being 204 – 252GW, with an indicative mid-scenario of 228GW.

JinkoSolar’s confidence, Li said, owed at least some part to a major increase in demand witnessed from Europe in recent weeks, driven by an energy crisis impacting the continent that has been exacerbated by Russia’s invasion of Ukraine and a subsequent continent-wide push to reduce its reliance on Russian gas. Li said JinkoSolar expected demand from Europe to surpass 30GW in the short-term.

This has triggered the manufacturer to increase its production capacity for modules in particular, with Li noting much of the capacity expansion planned for this year would be realized in the second half of this year in response to demand patterns.

In its guidance for 2022, JinkoSolar said it expected to ship between 35 – 40GW of solar products (modules, cells and wafers) this year, with Q1 shipments standing in the 7.5 – 8GW range. Li told analysts that of that figure, “more or less 50%” is already booked.

Strong Q4 performance hit by supply chain turbulence

JinkoSolar’s increased confidence was also somewhat attributable to a strong end to the year. The manufacturer beat its shipments and revenue guidance, shipping 9GW of modules as well as around 670MW of solar cells and wafers against a forecasted range of 7.3 – 8.8GW, and recording quarterly revenue of RMB16.4 billion (US$2.57 billion) against a forecasted range of US$1.8 – 2.2 billion.

Shipments in particular almost doubled sequentially, rising 94% compared to its shipments figure for Q3 2021, while revenues too rose by more than 90%. The SMSL member recorded gross profit of US$414.9 million for the quarter – more than double its gross profit figure in Q3 2021 – while its gross margin for the quarter also recovered to 16.1%, above the 15% recorded in Q3 2021 and just ahead of the 15 – 16% range previously forecast.

In total, Jinko shipped 22.2GW of modules and around 3GW of solar wafers and cells in 2021, an increase of 18.4% year-on-year, with total revenues of US$6.4 billion, up 16%. Its gross profit for the year rose 8% to just over US$1 billion.

However the manufacturer’s gross margin fell year-on-year, from 17.6% to 16.3%, on the back of supply chain volatility, further illustrating the margin pressure faced by major module manufacturers in 2021.

Last week rival SMSL member Canadian Solar reported a Q4 2021 gross margin for its manufacturing arm of 21.3%, but the division’s full year gross margin came in at around 15.6%, around four percentage points lower than the 19.6% margin recorded in 2020, while its operating margin fell by 6.5 percentage points to just 1.7%.

JinkoSolar’s operating expenses rose by more than 80% sequentially in Q4 2021 to US$338.7 million, which the manufacturer largely attributed to soaring shipping costs. But speaking to analysts, Li largely spoke of higher polysilicon costs borne by solar manufacturers in today’s market, expressing his expectation for material prices to normalise in the second half of this year.

JinkoSolar did not provide any gross margin forecast for Q1 2022, breaking from its usual reporting protocols – something the company said was consistent with companies listed on Asian exchanges, Jinko having completed its STAR Market listing earlier this year – but Li did provide some colour to analysts, suggesting that margins were expected to be flat-to-down quarter-on-quarter with polysilicon prices in the first three months of the year above previous forecasts.