JinkoSolar Q2 2024 Earnings Call Transcript

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Provided by Quartr
August 30, 2024

There are 9 speakers on the call.

Operator

Hello, ladies and gentlemen, and thank you for standing by for Genco Solar Holding Co. Limited Second Quarter 20 24 Earnings Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded.

Operator

I would now like to turn the meeting over to your host for today's call, Ms. Stella Lang, JinkoSolar's Investor Relations. Please proceed, Stella.

Speaker 1

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's Q2 2024 Earnings Conference Call. The company's results were released earlier today and are available at the company's IR website at www.singpusolar.com as well as on Newswire services. We have also provided a supplemental presentation for today's earnings call, which can also be found on the IR website. On the call today from JinkoSolar are Mr.

Speaker 1

Li Xande, Chairman and CEO of JinkoSolar Holding Company Limited Mr. Janna Miao, CMO of JinkoSolar Company Limited Mr. Tian Li, CFO of JinkoSolar Holding Company Limited and Mr. Charlie Cao, CFO of JinkoSolar Company Limited. Mr.

Speaker 1

Li will discuss JinkoSolar's business operations and company highlights, followed by Mr. Miao, who will talk about the sales and the marketing, and then Mr. Pan Li, who will go through the financials. They will all be available to answer your questions during the Q and A session that follows. Please note that today's discussion will contain forward looking statements made under the Safe Harbor provisions of the U.

Speaker 1

S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in XingoSolar's public filings with the Securities and Exchange Commission.

Speaker 1

XingoSolar does not assume any obligation to update any forward looking statements except as required under the applicable law. It's now my pleasure to introduce Mr. Li Sender, Chairman and CEO of Jinko Solar Holdings. Mr. Li will speak in Mandarin and I will translate his comments into English.

Speaker 1

Please go ahead, Mr. Li. We are pleased to announce that thanks to our leading position in N type top com technology, competitive products as well as global sales and manufacturing network, our module shipments grew by 34.1% year over year to 23.8 gigawatts in the 2nd quarter, ranking 1st in the industry. By the end of the second quarter, we had led the industry as the 1st solar company in the world to reach a total module shipments of 2 60 gigawatts to nearly 200 countries and regions. This again demonstrated the power of our globalization strategy.

Speaker 1

In the Q2, prices in several segments of the industry chain declined slightly on a sequential basis. We flexibly adjusted our production scheduling strategy and the utilization rates for different process and also optimize our supply chain strategy to control costs. Gross margin was 11.1 percent in the 2nd quarter, almost flat sequentially. Adjusted net income was US52.1 million dollars slightly down sequentially. Global demand showed faster growth momentum in the first half of twenty twenty four.

Speaker 1

The newly added installations in China totaled 102 gigawatts in the first half, up 30% year over year. From January to June, total solar module exports increased by around 20% year over year. At the same time, we saw an increase in capacity expansion projects delayed, suspended with even some terminated. As to existing capacity, some manufacturers have cut or suspended production. Coming into the Q3, prices in the industry chain were low and volatile, with prices in most segments falling below cash costs.

Speaker 1

The utilization rates across the industry declined compared to the 2nd quarter to an overall low level. We view this irrationally low prices as unsustainable. Meanwhile, government and industry launched the control policies to promote the healthy and orderly development of the solar industry. Financial institutions became more selective, preferring to favor strong and excellent companies with technological innovation and cost control capabilities as well as brand channels advantages. We believe that all these matters will further accelerate the elimination of outdated capacities as well as industrial integration.

Speaker 1

In the future, we expect companies with robust and sustainable operations to reinforce their industry leadership. The in-depth industrial adjustments are bringing both challenges and opportunities to companies. We will continue to improve our management efficiency, strengthen and expand our globalization advantage, taking on challenges in the industry with our resource advantages and innovative capabilities. Thanks to our global footprint and the competitiveness of our products, by the end of the second quarter, the visibility of our order book for 2024 exceeded 80%. We have maintained our overall leading utilization rates in the industry, especially for end time sales utilization rate nearly 100%.

Speaker 1

We kept refreshing our record for cell efficiencies. At the end of the second quarter, less efficiency of our N type top cone based perovskite tandem solar cell reached 33.24%, a significant leap beyond our previous record of 32.33% last year. The mass produced efficiency of our 182 Topcon sales exceeds 26.1%. We firmly believe that Topcon remains the path with the best economic performance in terms of cost, mass production yield, intellectual property protection and customer acceptance and still has room for further cost reduction and efficiency increase. We intend to keep our leading position by gradually adopting new technologies while consider both efficiency improvements and economic returns.

Speaker 1

We continue to optimize our supply chain to cater to the demands of global clients for low carbon, clean, high efficient and reliable products. In the Q1 of this year, we unveiled new ground panels to produce the 0 carbon factory as certified by TUV Inland for compliance with the relevant criteria and the requirements. So far, we have received positive feedback from our clients. This once again confirmed our commitment to clean manufacturing and product innovation. As recently announced, we have entered into a strategic partnership with Renewable Energy Localization Company, a wholly owned subsidiary of PIF and Vision Industries Company to form a joint venture in Saudi Arabia for the production of 10 gigawatts of high efficiency solar cells and solar modules.

Speaker 1

This is another step in our innovative transformation from global sales to global manufacturing and an important milestone for our globalization strategy. With years of experience overseas, we are dedicated to building localized solar back systems together with our partners to achieve synergy of resources and complementarity of advantages and further grow our competitiveness in a global market. We are accelerating the clearing out of T type capacity to optimize our capacity structure. We expect our annual production capacity for mono wafers, solar cells and solar modules to reach 120, 95 and 130 gigawatts, respectively, by the end of this year. We expect our advanced capacity structure to continue to lead the industry.

Speaker 1

With other advantages in N type top com technology, competitive products as well as global sales and manufacturing network, we reiterate our guidance for module shipments to be between 101 110 gigawatts for the full year 2024 and we will continue to implement our globalization strategy to actively seize market opportunities and mitigate market risks. We expect module shipments to be between 23 to 25 gigawatts for the Q3 of 2024. By the end of this year, we expect mass produced N type cell efficiency to reach 26.5%. Overall, we are holding a healthy cash flow. We will continue to optimize the structure of our assets and liabilities as well as our cash flow levels, strengthening our resistance to risks.

Speaker 2

Thank you, Missi. Total shipments were 25.3 gigawatts in the 2nd quarter with module shipments accounting for approximately 94%. We are pleased that we continue to rank number 1 in the world for the module shipments as we are increasingly recognized by global clients for our high efficient and reliable products and services. In terms of geographic mix, approximately 60% of our module shipment went to overseas market in the Q2 with Asia Pacific and Europe accounting for majority. Sequentially, shipments to the U.

Speaker 2

S. Were relatively stable and shipments to Europe increased by 40%. Thanks to the continuous improvement in Tiger News product strength, Tiger News shipment accounted for 85% of total shipment in the 2nd quarter, a steady increase from nearly 80% in the 1st quarter as these modules are increasingly accepted by clients, particularly in China, Europe and North America. Currently, we lead the industry as the 1st solar company in the world to reach a cumulative anti module shipment of 100 megawatts. They continue to enjoy a premium in global market with premiums in some markets like Europe, U.

Speaker 2

S. And the Middle East especially high. On the strength of our extensive global sales network, we will continue to optimize our shipments and the product portfolio. We were recognized as the top performer across all reliable categories reliability categories in the PV module reliability scorecard published by Kiva TVEL for the 10th consecutive time. And we topped the PVTech 2024 Q2 module tech bankability report with the highest attributable AVE.

Speaker 2

This is a continuous recognition of our commitment to quality, innovation and R and D over the long term as well as clients' long standing trust in our product quality, bankability and reliability. Recently, we became one of the few companies to have won both Tier 1 energy storage provider and the Tier 1 PV module manufactured by Bloomberg. These orders are not only a testament to the power of our outstanding brand, but also an affirmation of our proactive contribution to global energy transformation. As the economics of solar energy become more apparent, we expect demand in the global market to stay around 600 gigawatts in 2024 and the growth steadily in 25. In addition to mainstream markets like China, U.

Speaker 2

S. And Europe, emerging markets such as Middle East and some countries in Asia Pacific are also showing strong growth potential. With our accumulated experience in global sales and the growing industry chain footprint, we are confident we will, over time, seize the opportunities brought by about by the growth in global market demand more rapidly and more high efficiently and optimize overseas supply chain to effectively cope with changes in international trade policies. We will continue to optimize our products and services, constantly enhancing our competitiveness globally through strategic market positioning and outstanding client relationship management. With that, I will turn the call over to Pat.

Speaker 3

Thank you, Junger.

Speaker 4

We are pleased to report sequential growth in module shipments and total revenues in a very challenging Q2. While module prices declined, we reduced cost through supply chain optimization and technology upgrade, improved operating efficiency and optimized asset and liability structure. Gross margin was relatively flat sequentially, and our asset liability ratio was down by 1 percentage point compared to the year beginning. Despite the challenging situation in the industry, we did not stop returning value to our shareholders for their long term support. At the beginning of August, we announced a cash dividend of $1.5 per ADA, which was paid today as planned.

Speaker 4

In addition, as of today, we have repurchased a total of 5,600,000 ADAs in an aggregate amount of over 130,000,000 in the open market and our share repurchase program announced in July 2022 and the extended share repurchase program announced in December last year. Let me go into more details now. Total revenue was about RMB3.3 billion, up 4.4 percentage sequentially and down 21 percentage year over year. The year over year decrease was mainly due to a decrease in average selling price of solar modules. Gross margin was 11.1 percentage compared with 11.9 percentage in the Q1 this year and 15.6 percentage in the Q2 last year.

Speaker 4

The year over year decrease was mainly due to the decrease in average selling prices of modules. Total operating expenses were about $525,000,000 up 24 percentage sequentially and up about 18 percentage year over year. The sequential and year over year increases were mainly due to the write off the net book value of the equipment resulted from the fire accident in Shanxi province, which was partially offset by estimated insurance received from the fire accident in the Q2 this year. Total operating expenses accounted for about 16 percentage of the total revenues in the 2nd quarter compared to 13 percentage in the 1st quarter and about 11% in the Q2 last year. Net loss attributable to the JinkoSolar Holding Company Limited ordinary shareholders were CNY 13,900,000 in the Q2 this year.

Speaker 4

Excluding the impact of the change in fair value of the convertible senior notes, fair value loss related to the investment in solar supply chain companies, share based compensation expenses and net loss resulted from a fire accident in Shanxi. Adjusted net income attributed to the JinkoSolar Holding Company ordinary shareholders was about $52,000,000 Moving to the balance sheet. At the end of the second quarter, our cash and cash equivalents were $1,910,000,000 compared with 2.4 1,000,000,000 in the Q1 this year. AR turnover days were 89 days compared with 100 days in the Q1 this year. Inventory turnover days were 82 days compared with 89 days in the Q1 this year as a result of improving operating efficiency.

Speaker 4

At the end of the second quarter, total debt was CNY3.86 billion compared to CNY3.66 billion in the Q1. Net debt was CNY1. 95,000,000,000 compared with RMB 1,220,000,000 in the Q1 this year. This concludes our prepared remarks. We are now happy to take your questions.

Speaker 4

Operator, please proceed.

Operator

Thank you. Your first question comes from Philip Shen with ROTH Capital Partners.

Speaker 5

Hi, this is Matt Ingram on for Phil. Thank you for taking our questions. Looking into the back half of the year in 2025, how do you see module pricing trending? And then on gross margins, what is it going to take to return to the mid teens margin levels? And do you think this could be achievable in 2025?

Speaker 2

Thanks for the question. This is General. I think in general, the market price will stay at, let's say, a relatively low level for a while for most of the market. It's really because in general, the oversupply situation is quite obvious across the industry. But for sure, the margin wise, it depends on the cost, how fast the cost reduction can catch up with the low price situation right now, right?

Speaker 2

So we at least from what we are seeing right now quarter by quarter or month by month, the cost reduction is happening almost every day. So hopefully with the improvement from the cost control and also the all the actions we are taking or the whole industry is working on, the margin could go back to at least a healthy level as early as possible.

Speaker 5

Okay, great. Thank you. And then kind of on supply and demand, with module prices so low for so long, is that resulting in any demand elasticity? And if so, which countries or regions could we see upside surprise in demand? And then on the supply side, when do you think this oversupply situation across the supply chain gets resolved?

Speaker 5

Does this happen next few quarters, next 12 months or longer?

Speaker 2

It's really difficult to forecast, right, which day the market will turn upside down. But we see everything gradually going to that direction, everyone. From the demand side, no matter it's U. S, Europe or China or other emerging markets, we still foresee healthy growth year over year. Meanwhile, when we see the supply side, for sure, we have seen some newcomers that has dropped their plan to give up what they plan to do previously.

Speaker 2

And also from the policy wise, we see some China government policy initiative, which is trying to control the new expansion of the capacity, which shows a pretty strong signal to, let's say, constrained capacity supply side as well. So and also the current loss making market will shake out some of the weak players across the industry too. So adding all those up together, supply side is we see a steady growth year over year. And the supply side, we see some actions taking. It might take some time, but it's moving on the direction to restrict the supply into more rational levels.

Speaker 2

So adding those 2 together, we hope to give it several quarters, the things will get back to a rational level, I hope.

Speaker 5

Great. Thank you. I'll pass it along.

Speaker 4

Thank you.

Operator

Your next question comes from Alan Lau with Jefferies.

Speaker 6

Thank you for taking my question. This is Alan from Jefferies. So first of all, the results are actually quite impressive, especially during the backdrop of a really challenging market environment. So I got a couple of questions I would like to check with the management. First of all, what is the U.

Speaker 6

S. Shipment amount and also the U. S. Shipment expectation in second half of this year? And what is your view on the policy risk in the U.

Speaker 6

S. Market, especially there were recently filings of critical circumstances?

Speaker 2

So for U. S, it's a very special market. We see the market is firstly, for Jinko, we are gradually getting back our market share gradually after the efforts we have taken in the last 2 years' time. So if you look into the total shipment numbers, we have provided the range of 5% to 10% as the annual shipment range, but if we look into Q4, it's roughly 5% to 6%. So seasonally, it changes because, for example, right now, there's a rush before the tariffs kick in, also as the market demand is kicking up, so season quarter by quarter, there will be some smaller changes.

Speaker 2

But in general, I think it's still falling to the range between 5% to 10% of our total shipment in U. S. And for the long term, we still believe U. S. Is a great market because of the demand, thanks to the AI drivers, the electricity demand is strong.

Speaker 2

And also the RAX is a strong support to the new capacities, both on the manufacturing side and on the utility project development side as well. So in long term, we are still a big fan of U. S. Solar market and we will we believe we will continue to be there to find a let's say a stable supply to serve our clients in U. S.

Speaker 2

Even there are some there might be some turbulence on the trade policy side, but we still have some prepared solution on it.

Speaker 3

Yes. For the second, the urgent I think you are talking about the urgent circumstances for the ADT. Yes. No, it's really a little bit of risk, but we have proactively managed the situations and based on the regulations and we think we know the risk to Jinko is relatively low.

Speaker 6

Is it because of the relatively stable volume from Jinko? Like there was no spike in volume. So you think it's actually compliant with the rules, right?

Speaker 3

It's relatively complicated, but we are the mandatory respondent to the case AECD. So and if you are going to be qualified for the situations, you must be in the volume shipments after the filing date of case and the resistance before and there should be a significant increase of shipments. So we proactively manage the volume. So that is what I'm saying. But there's still some kind of risk, but we think the risk is low for Jinko.

Speaker 6

Thank you. It's very clear. So and also would like to know what is the progress in our Middle East because there was a huge announcement on the capacity tanking war in Saudi Arabia. So we would like to know what is the estimated timeline of that capacity and what type of policy you expect would be benefited?

Speaker 3

It's really a very strategic move for our international manufacturing. And it's not only a purely facilities in Saudi Arabia and we are working with the PIF and the Vision Industries. And the Saudi Arabia, we have very big basin for the energy transition by 2030. And we work together to localize productions. Our advanced capacity is 10 gigawatts, so on the module capacities.

Speaker 3

And Saudi, I think the government has a policy department, which is the goal is to help to promote local productions in Saudi Arabia. So we wait back after our operational in 2026 and the modules in Saudi Arabia locally will be have, I think, have a premium compared to the modules out of Saudi Arabia. And on top of that, the government has strong support policies to the joint ventures in Saudi as well.

Speaker 6

So will there be any localization requirement on tendering so that you can ensure all of your modules will be sold and also even some of your competitors will have to buy your modules because of that localization requirement?

Speaker 3

I would like to be more confident. We will have the very unique competitiveness and in Saudi and for the Saudi market. And Saudi, if you look at the total market size, it's roughly 50%, 60% of the total Middle East. And Middle East, we are very optimistic in the next 3 to 5 years. And I think you want to explore the detailed policies.

Speaker 3

There are some policies existing, but it's going to be developed, I think, by the government as well. And the current policy is 20% local content with some kind of additional penalty. But the big issue is in Saudi Arabia, there is no any qualified module producers. So most of the developers at this stage, they get the waiver letter. By my understanding, they just there is no available local producers.

Speaker 3

But we I think we are in a good position to penetrate the market and have to launch our joint venture.

Speaker 6

So you'll be technically the only qualified producers by Genesis, so that might bring you premium there, right?

Speaker 3

I would not say that. I think we will be the 1st mover. So we take that around and we will be the 1st mover.

Speaker 6

And then accounting question on the financials, because I saw in the adjusted calculations of adjusted earnings, actually it's around RMB 380 1,000,000. So is it like RMB665 and then you take 58% of shareholding on the loss of that. So you and you saw that you get RMB280 1,000,000? So you're talking about EPS

Speaker 3

or where the average

Speaker 6

Just the net income. So it's shown as RMB378 1,000,000. So there's a net loss due to the Shanxi Fire accident of RMB380 1,000,000. So I would like to know if this 380,000,000 is 58 percent of 665,000,000 in the Asia level?

Speaker 3

Yes. You're talking about the total numbers for the Asia is kind of the number we are talking about. And because the U. S. Closed 58%, so the minority, there's a, I think, separate line.

Speaker 3

Net income attributable to the non controlling interest that consolidates all the net income should be allocated to the minority interest from the perspective of the U. S. Mexico.

Speaker 6

Understood. Including the loss from the Shanxi province, right? Yes. It's also proportionated?

Speaker 3

Yes, proportionated. Yes.

Speaker 6

Thank you. So my final question is, what is the usage of FPL polysilicon now? Can you use 100% of that to save cost?

Speaker 3

You mean the polysilicon out of China, right?

Speaker 6

FBR, the granular polysilicon, Yes.

Speaker 3

I think we will get kind of improvement on the utilization levels. And typically, it's kind of 30% to 50%.

Speaker 6

Thank you. Thank you. I'll pass on. Thanks a lot, Charlie.

Speaker 3

Thank

Operator

Your next question comes from William Griffin with UBS.

Speaker 7

Hi, thanks a lot for the time. Just a couple for me. The first one was on the tandem cell efficiency that you noted in the press release. Could you just talk about kind of where you are in the development process for that technology? And how long before you think we could see something become commercially available?

Speaker 3

Yes. The Tantan is still in R and D stage, but we are optimistic for future commercialization of the top car plus the Tantan technology. But still, it's if you look at the time scheme, it's we believe in the next 5 years, it's still in the laboratory stage. And it's possible after the 5 years, it could be commercialized, but it depends a lot of progress. So it's so back to the pricing, we don't believe it's commercially 100% of visibility at this stage.

Speaker 3

And the earlier time, maybe after 5 years.

Speaker 7

Got it. Thank you. And then just on the Topcon side, obviously, there's been a lot of headlines and reports of litigation companies claiming IP around Topcon, a little bit hard to get a good handle on the patent landscape there. Just wondering if you could speak to how comfortable you are with your position sort of in the Topcon IP landscape across your key markets and maybe any sort of discussions around licensing or other legal actions that maybe you've been having?

Speaker 3

So the patents, we if you look at the Jingle is kind of the top kind of promoter, the leader of technology and in addition 3 years, we invested around 5% to 6% total revenue on R and D and the significant part we put into the Topgolf. So we're really very confident about our patents, particularly on top count. If you look at the total volume, if you look at the quality, if you look at the patents and the spreads in different countries, particularly out of China. So I think at the beginning of this year, we also announced some kind of news. We granted some kind of patents to 1 solar company 1 solar model company, 1 solar cell company.

Speaker 8

So that

Speaker 3

demonstrate our strong capabilities on R and D and patent position.

Speaker 5

All right. Thanks very much.

Operator

Thank you. Your next question comes from Rajeev Chaudhry with Sensara Capital.

Speaker 8

Good morning. I have a few questions. The first couple of questions are just housekeeping. Can you tell us what the depreciation and the capital spending numbers were for the Q2 and what the targets are right now for the full year?

Speaker 4

Okay. Thank you for the question. In the Q2, we reduced the our CapEx as compared with the Q1, which was the total CapEx in the first half year was about to be RMB 4,000,000,000. And our prospective total CapEx in the whole year would be adjusted to about RMB 9,000,000,000.

Speaker 3

Yes, Rajiv, I think the big question is the big picture is, it's a tough situation, right, in the industry wise. But the industry has suffered in, I think, 3 or 4 quarters. And as top 1 companies, we carefully manage the companies and sustainable growth. And we balance the segment for full credit and further solidify our positions on the cash flows, particularly. On top of that, we significant cut off cut the CapEx this year as well as next year as well as lower the operating expenses and optimize our operation and

Speaker 5

including the train

Speaker 3

some labor force. So and if you look at our CapEx, if you look at next year, we don't have any plan CapEx plan except for the Saudi Arabia capacities, which is a strategic move. So just for illustration and we understand. But we think after several quarters, we cannot project exactly. And but we have seen the big players top to top 3, even some kind of relatively middle players have been consolidated or be freeze out in during the downward cycle.

Speaker 3

So we are getting I think we are getting prepared really to go through the cycle tab.

Speaker 8

So are you suggesting that CapEx in 2025 will be even less than the $9,000,000,000 in 2024?

Speaker 3

Yes, definitely. And if you saw the previous, I'm very unique even because we take 40% equity and really equity will be $100,000,000 and next year. So except for that, I think we have some kind of return this CapEx as well as some kind of investment on R and D CapEx. So definitely, it's going to be lower next year.

Speaker 8

Okay. And what about depreciation in the second quarter?

Speaker 3

So each month, roughly, if you want to use your financial model, it's kind of RMB 500,000,000 to RMB 600,000,000 you can put in your financial model. Anyway, if you have detailed number of questions, I would suggest you can have a follow-up with our IRR teams and give you detailed number.

Speaker 8

Okay. Okay. So moving on to the next question, that is on your average selling prices. Your average selling price in the Q2 was down quite a bit. It was down actually more than 10%, 15% from the Q1.

Speaker 8

And part of the reason I get from reading the presentation is that DG was 50% of sales and most of DG is, I think, in China. So the combination of focus on China and DG led to more than a pretty sharp decline in ASPs. Now as we go into the second half of the year and shipments as a proportion of total shift away from China, shift away from DG, will that provide a more benign backdrop for pricing for

Speaker 3

The spot market price in the last 3 or 6 months has continued to decline, but we think it's going to be the lowest level to be stabilized. If you look at financial numbers, because we have different markets, the utility scale of the DTE segment, we have different markets, U. S, Japan, different regions and different lead time for signing contracts. So if you look at ASP, you're right, I think it's reflecting the industry wide downward of sports market price for the modules. But because we have different lead times, different countries, so in each quarter, Q2, Q1 and the average is based in downward size.

Speaker 3

And we expect that to continue to trend in the Q3, but relatively stable in the Q4. So it's but on our side, if you look at the supply chain perspective, the material costs continue

Speaker 6

to trend.

Speaker 8

So can we expect that the decline in ASPs will moderate in from Q2 to Q3 relative to what we saw in Q1 to Q2?

Speaker 3

Yes. I would like to say, if you look at Q4 versus Q3, it's kind of the relatively normalized.

Speaker 8

Okay. But can you say that we are at the point where pricing can be expected to be stable or we are not there yet?

Speaker 3

I think in terms of time scheme, if you look at the sectors, most of the sectors is suffering cash losses and we don't believe there's a significant room further. And with the phase of the capacity, it should be kind of stabilized. If you look at the solar wafer price in recent weeks, some of top players, they have increased the small market price a little bit. And even the party price has been stabilized. So step by step, I think you will see the module and as well as the solar sales in the price.

Speaker 8

I see. Okay. Charlie, your costs were down apart from the decline in polysilicon prices, your production costs were down quite significantly also in the Q2, and that helped you maintain the gross margin at a double digit level. Can you break down some of the reasons why the costs were down? And can we expect costs to keep on coming down at the same rates that we saw from Q4 to Q1 and then Q1 to Q2?

Speaker 8

We have had some pretty dramatic declines in costs and that is separate from the polysilicon.

Speaker 3

Yes. There are a lot of efforts we are working on. The contingent to optimize our design and the key materials, the purchase price coming here to be have been improved and improve the working efficiencies and labor costs cut off and operating expenses optimizations. So there are a lot of efforts we are working on.

Speaker 8

So does that mean that gross margin can go up in the 3rd quarter relative to the Q2?

Speaker 3

No, I don't believe that, frankly, but I think we are confident the gross margin bottom line, we try to stabilize.

Speaker 8

But you're not confident that it can go up from Q2 to Q3 yet?

Speaker 3

No, I would like to say stabilize kind of the if you look at our peers, we are in relatively good positions and stabilize and the face out takes time. I think it's not going to take 1 or 2 years, but maybe it take several quarters. And on top of that, take the leverage of our global manufacturing and marketing capabilities and optimize the economics.

Speaker 8

Okay. Another question is on the N type market. What do you think the size of the N type market will be in 2020 4 this year? I mean and what will your market share be if you do 90 to 95 gigawatts?

Speaker 1

Sorry, Jeff, sorry to interrupt you. We will take this as the final And for more questions, we can discuss after the call. Is that okay?

Speaker 7

Yes.

Speaker 1

Okay. Thank you.

Speaker 3

I think, in time, this year, it's kind of the top content dominance. This is a domination year for N type, particularly N type Top Gun. And the market penetration for Top Gun, roughly, I'd say maybe 70% to 75% and Jinko, roughly 90%. So that's if you look at look for next year, I think it should be 1% penetration for NAND.

Operator

There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.

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