According to its 2012 annual report, GCL-Poly Energy Holdings lost $450 million in 2012. Chairman Zhu Gong Shan cited the primary reason for the large losses was crashing polysilicon and wafer prices. He said prices fell 56% and 54% for polysilicon and wafers respectively in 2012 relative to 2011. Meanwhile, GCL’s costs only decreased 6% and 42% for polysilicon and wafers respectively. The company quoted polysilicon costs reaching $19.7/kg and wafer production cost at $0.25/W by the end of the year, compared to average prices of $20.8/kg and $0.25/W. The company also increased production 26% to 37,000 MT, and sold 12,600 MT of polysilicon and 5.6 GW of wafers in 2012. As a result of the losses, GCL has tasked its managers to cut salaries by 30% to 50%.
GCL’s downstream project development business, GCL Solar Energy, sold 140 MW of projects in the U.S. and earned a $16 million profit before tax. GCL signed a cooperation framework agreement with China Merchants New Energy to develop 1 GW of rooftop solar projects in China by the end of 2015. The company also has two 75 MW projects under development in South Africa.
GCL’s performance summarizes the PV industry in 2012. Huge overcapacity, driven by Chinese manufacturers such as GCL, has resulted in losses for most upstream manufacturers. With the overcapacity, manufacturers have the choice to either idle lines and incur underutilization costs, or continue production and sell below cost to prevent inventory buildups; GCL chose the latter selling 5.6 GW of wafers and 12,600 MT of polysilicon in 2012. Meanwhile, the downstream business was profitable with relatively low project volumes. Numerous upstream manufacturers have moved downstream as a result (client registration required), such as MEMC, which is rebranding to its downstream arm, SunEdison. To drive short-term profits, GCL will increase downstream operations and take advantage of the booming Chinese solar market as the government targets 40 GW of installations before the end of 2015. Interestingly, the company targets distributed generation, which the State Grid is working to promote (client registration required). Upstream, the company aims to manufacture quasi-mono crystalline silicon (qc-Si) wafers – which are 1% absolute more efficient than the company’s multicrystalline silicon wafer – in an effort to gain back some margins with the higher efficiency product. However, little can be done for polycrystalline silicon with the exception of convincing the government to penalize imported polysilicon (client registration required).
GCL has announced a non-binding agreement to cooperate with Yingli on research and development, and along the supply chain. This could be an early indicator of what may take place as the industry consolidates. GCL-Yingli would be the most vertically integrated player in the industry ranging from polysilicon through project development and would have the greatest potential to profit throughout the value chain as the industry returns to equilibrium after 2015 (client registration required). This is merely speculation; mergers between operations-heavy companies are often messy and fraught with peril, but this early relationship could ease the transition if the two companies decide to take the risk over the next three years.