LONGi Green Energy`s Quest for Growth and Sustainability in a Changing Solar Landscape

Case Code: BSTR683 Case Length: 13 Pages Period: 2010-2024 Pub Date: 2024 Teaching Note: Available

Price: Rs.400 Organization : Public company Industry : Energy Countries : China Themes: Competitive Strategy, Sustainability, Business Environment,Innovation

Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

Solar Technology Market

Over the decade 2010-2020, the global solar PV production capacity had shifted away from Europe, Japan, and the US toward China. Since 2011, China had invested $50 billion in expanding its photovoltaic (PV) supply capacity, a figure ten times greater than Europe’s investment. This effort led to the creation of over 300,000 jobs within the PV manufacturing sector. As of 2021 China represented over 80% of global solar panel production, including polysilicon, ingots, wafers, cells, and modules, which was more than double its share of global PV demand. Additionally, the country was home to the top ten global suppliers of solar PV production equipment..

Longi- A Background Note

LONGi Green Energy Technology Co., Ltd. (LONGi), a leading global manufacturer of solar panels and related solar energy products, was established on February 14, 2000, by Li Zhenguo, who served as the company’s CEO. Initially founded as Xi’an LONGi Silicon Materials Corporation, the company was headquartered in Xi’an, Shaanxi Province, China. Li Zhenguo began his career in the 1990s as an independent contractor following his tenure at a state-owned semiconductor facility. In 2000, Li and two college friends co-founded LONGi, naming the company after Jiang Longji, a former headmaster of Lanzhou University, their alma mater. LONGi Green Energy was headquartered in Xi’an, Shaanxi province, China..

Innovation at Longi

Research and development (R&D) was Longi Solar’s constant focus, which had given it the ability to continuously manufacture high-quality solar products with greater durability and efficiency. The company worked with top organizations and solar industry specialists, and made significant investments in state-of-the-art research..

Vertical Integration and Production

LONGi focused on the vertical integration of its operations to gain efficiencies and control costs. The completely vertical integrated monocrystalline wafer, cell, and module facilities of LONGi Solar (Kuching) SDN BHD, a wholly-owned subsidiary of LONGi, were formally opened in Malaysia in Kuching, Sarawak, in April 2018. This was Longi’s first overseas production base. LONGi Kuching was able to guarantee quality control along the whole solar value chain, from silicon ingot manufacture to crystal pulling, slicing, cell production, and module manufacturing, thanks to vertical integration. Customers all over the world were able to receive high-quality, high-performance monocrystalline products from the facilities..

Business Growth

Initially, LONGi focused on wafer fabrication. The company began producing high-efficiency monocrystalline PV modules in 2014 after acquiring Lerri Solar, steadily rising through the ranks to take the top spot in the segment by 2020. Over the period 2017-2022, the company had expanded revenue and earnings at a 40%+ CAGR, resulting in 55% annualized returns for shareholders. LONGi began producing cells after the PV market was convinced that monocrystalline had a competitive edge over the cheaper but less efficient multicrystalline cells. The market’s overall shift from multi to mono began in earnest in 2017..

Global Expansion and Roadblocks

The International Energy Agency reported that solar photovoltaics (PV) had emerged as the fastest-growing renewable energy technology and one of the most cost-effective choices for new electricity generation in numerous countries. It was anticipated that by 2027, the installed capacity of PV would exceed that of coal, making it the leading source of power globally..

Future Outlook

The production capacity of both the upstream and downstream activities in the PV value chain had increased significantly over the years and a large part of the production was from cross-border businesses. This had led to production capacity going up significantly in a short period of time (2010-2020), leading to a supply-demand imbalance. The impact of this was seriously felt in 2023 when the prices of solar PV products fell precipitously..

Exhibits

Exhibit I: Solar Industry Value Chain
Exhibit II: Key Products in Solar Industry
Exhibit III: Major Operational Milestones
Exhibit IV: Longi Green Energy’s Annual Production (GW)
Exhibit V: Solar Module Industry Revenue (Top 5 players)

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