In December last year, Chinese solar panel billionaire Li Zhenguo addressed the UN climate change conference in Dubai, promising a “benevolent and equitable” energy system to support the world’s decarbonisation.
“The opportunities for everyone to contribute to the fight against climate change through renewable energy solutions are boundless,” Li said.
But three months later, the founder of Longi Green Energy Technology has been forced into retreat as a result of a global supply glut, firing thousands of factory workers and new office staff as the industry grapples with a collapse in prices. In China, the lay-offs have sparked criticism of the company’s corporate culture.
Longi, one of the world’s biggest solar panel manufacturers, said last week it expected to cut 5 per cent of its 80,000-strong workforce after Bloomberg reported the company was planning to slash 30 per cent of its staff. Longi said the 30 per cent figure was “false”, though experts said the eventual job losses were likely to be higher than 5 per cent after solar module prices halved over the past year.
The pressure on Li comes after a production boom in China resulted in oversupply. The job cuts threaten to test Li’s reputation with the government in Beijing at a time of slowing economic growth and concerns about industrial overcapacity. Overseas, he faces a world increasingly polarised by China’s dominance of global supply chains for renewable technology, including electric vehicles, wind turbines and solar panels.
Li graduated from Lanzhou University, in China’s northern Gansu province, in 1990. He initially worked at a state-owned computer chip factory before founding Longi. Two of his university classmates serve as company executives.
Longi was one of several Chinese companies, private and state-backed, that accounted for more than 80 per cent of global solar production, the result of decades of deep state support and rapid domestic growth. Listed in Shanghai in 2012, it reported annual revenues of nearly Rmb130bn ($18bn) in 2022, up from Rmb54bn in 2020.
As of October, Li and his wife Xiyan were worth about $5.7bn, ranking just outside the 100 richest people in China, according to the Hurun Research Institute, a group tracking wealth in China.
Experts said Li’s fortune reflected the success of a series of breakthroughs in solar materials and manufacturing that have significantly improved the efficiency and longevity of solar panels. Longi’s advances include the replacement of polycrystalline material with monocrystalline in solar panels, allowing greater power production, as well as diamond wire cutting technology, which reduces the time and cost of manufacturing.
Li plays an important role in the Chinese Communist party’s plan to boost the country’s energy security, said Alex Payette, chief executive of Cercius Group, a consultancy that specialises in elite Chinese politics.
“It is important to remember that Li Zhenguo directly plays his part in Xi Jinping’s self-sufficiency, domestic self-innovation programme — to secure China’s own supply chains — and of course, military-civilian integration strategy,” Payette said.
The solar industry is cyclical, resulting in periods of boom and bust. Analysts have warned that massive job cuts across the industry are inevitable after several years of excessive focus on output rather than on sustainable profits.
Xuyang Dong of Climate Energy Finance, an Australian think-tank, noted that at of the start of this year, China had more than 1,000GW of solar module production capacity in development for domestic and international markets, a far higher amount than current domestic demand. China needs around 280-320GW of new solar capacity a year until 2030 to reach its dual carbon targets.
“The amount of money saved by laying off staff is insufficient compared to the 40-50 per cent decline in prices in the market over the last 12 months,” she said.
Dennis She, a Longi vice-president, told the Financial Times last month that the company’s factory utilisation rate had fallen to as low as 70 per cent and that industry consolidation was likely to follow.
“You have to be very tough at this moment,” he warned, adding that the company would try to increase its market share as smaller companies and newer entrants to the industry struggle to survive.
The Chinese solar industry’s expansion is coming under increasing scrutiny, especially in the US and Europe. In January, Brussels said it was considering emergency support measures after a flood of cheap Chinese equipment sparked a series of factory closures.
That same month, a bipartisan group of US senators called on President Joe Biden to increase tariffs on Chinese-made solar imports. In August, the US Department of Commerce found Chinese producers, including Longi subsidiary Vina Solar, “were attempting to avoid the payment of US duties by completing minor processing in third countries”.
However, there are few signs that the company’s global ambitions have been dented, said experts. Longi already has factories in Vietnam and Malaysia, a joint venture with Invenergy in Ohio and sales offices in the US, Australia, Japan, India and the UAE. It is also in talks to enter Saudi Arabia through a local partner.
Yanmei Xie, a China analyst at Beijing-based consultancy Gavekal Research, said Longi had proved itself to be “quite adaptable” through several rounds of tariffs levelled at Chinese solar companies by Europe and the US over the past 15 years.
“This is not a new wave of protectionism. The international backlash against Chinese solar exports started quite a while ago and mostly has proven to be fairly ineffective,” she said.
Li and his lieutenants are trying to convince governments they risk slower decarbonisation of their economies if they restrict Chinese companies from their renewable energy supply chains. They argue China should not be seen as a threat to the energy security of other countries.
“China is not going to export sunshine,” said She.
Additional reporting by Amanda Chu in New York and Wang Xueqiao in Shanghai
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Source: Economy - ft.com
