Solar Power King Bomb! The 80 billion giant Tongwei Co., Ltd. plans to acquire the unicorn Lihua Qingneng, and veteran Duan Yong will return?

Source: Times Finance Author: He Mingjun

On the evening of February 24, the leading photovoltaic company Tongwei Co., Ltd. (600438.SH) dropped a heavy bombshell.

The announcement shows that Tongwei is planning to acquire 100% equity of Qinghai Lihao Qingneng Co., Ltd. (referred to as “Lihao Qingneng”) through issuing shares and paying cash, along with raising supporting funds. To ensure fair information disclosure and protect investors’ interests, the company’s stock, convertible bonds, and convertible bond conversions will be suspended starting February 25, with an expected suspension period of no more than 10 trading days.

Tongwei stated that this transaction will not lead to a change in the company’s controlling shareholder or actual controller, does not constitute a related-party transaction, and is not expected to be a major asset restructuring. As of February 24, Tongwei’s stock closed at 18.16 yuan per share, with a latest market value of about 81.8 billion yuan.

                      Tongwei Co., Ltd. Announcement Screenshot            

“Veteran Tongwei,” returning soon?

According to the announcement, Tongwei has signed a Letter of Intent for equity acquisition with the transaction intention parties Duan Yong, Hainan Zhuoyue Enterprise Management Partnership (Limited Partnership) (“Hainan Zhuoyue”), and Hainan Haoyue Enterprise Management Partnership (Limited Partnership) (“Hainan Haoyue”). Tianyancha shows that Duan Yong is the current chairman of Lihao Qingneng, holding about 4.79%; Hainan Zhuoyue holds about 9.57%; Hainan Haoyue holds about 8.85%.

Tianyancha indicates that Lihao Qingneng was established on April 29, 2021, with Cui Peng as legal representative and registered capital exceeding 1 billion yuan. The company mainly engages in the research, production, and sales of photovoltaic-grade high-purity silicon, electronic-grade polysilicon, and other semiconductor materials, and has been listed as a global unicorn enterprise for several consecutive years.

Information from Lihao Qingneng’s official website shows that the company is located in the Nanchuan Industrial Park, Xining Economic and Technological Development Zone, Qinghai, covering an area of 2,600 acres, with a planned total investment of 20 billion yuan. It aims to build an annual production capacity of 200,000 tons of photovoltaic-grade high-purity silicon and 2,000 tons of electronic-grade high-purity silicon. Its subsidiary, Sichuan Lihao Qingneng Co., Ltd., is based in Yibin, planning to invest in a project with an annual capacity of 200,000 tons of photovoltaic-grade high-purity silicon, 5,000 tons of electronic-grade high-purity silicon, and 250,000 tons of industrial silicon.

Times Finance notes that Duan Yong, chairman of Lihao Qingneng, previously served as a director at Tongwei and as chairman of Yongxiang Co., Ltd., a core silicon material platform under Tongwei, working there for nearly 7 years. On May 27, 2021, Duan Yong resigned from all positions at Tongwei and Yongxiang due to career planning and strategic layout. A month later, he joined Qinghai Lihao Semiconductor (later renamed Lihao Qingneng), established in April 2021, as chairman.

Under the leadership of industry veteran Duan Yong, Lihao Qingneng has developed rapidly. Its Phase I project in Xining, Qinghai, with a capacity of 50,000 tons, started construction in August 2021 and was put into operation in July 2022, achieving industry-leading capacity, cost, and quality within just over three years; independently developed a second-generation process, with a single-line capacity of 100,000 tons, photovoltaic-grade silicon purity exceeding 11N, and comprehensive power consumption reduced to 47 kWh/kg, surpassing industry standards; electronic-grade silicon achieved a metal element content of ≤0.2ppb, reaching above secondary electronic-grade standards, breaking through the “bottleneck” of semiconductor-grade silicon, and collaborating with institutions like the Chinese Academy of Sciences and Tsinghua University to develop 13N ultra-high purity electronic-grade silicon, filling domestic high-end capacity gaps.

A related person from Tongwei told Times Finance that Duan Yong previously worked at Tongwei, and both companies share similar management cultures and technical routes, making team integration highly compatible. This “internal integration” model can reduce acquisition risks, accelerate integration, and improve synergy and smooth transition.

Additionally, Lihao Qingneng’s shareholder lineup is quite impressive. According to Tianyancha, top industry capital and leading investment institutions such as IDG Capital, Chint Group, Aisidi Co., Ltd., Jing Sheng Electric, and Three Gorges Capital are involved.

However, amid the long winter of the photovoltaic industry, capital considerations for investment returns are also at play. Tongwei’s involvement undoubtedly provides exit options for the capital backing Lihao Qingneng.

A person familiar with Tongwei told Times Finance that from a financial perspective, this acquisition, completed through issuing shares and paying cash, can effectively reduce cash pressure, avoid large-scale cash expenditure, optimize capital structure, and ensure stable cash flow.

                      Image Source: TuChong Creative           

The industry’s must-answer question: industry consolidation

Currently, the photovoltaic industry still faces overcapacity issues.

Previously, the China Photovoltaic Industry Association, together with several polysilicon leading companies, established Beijing Guanghe Qiancheng Technology Co., Ltd., which once faced public scrutiny over “anti-monopoly” sentiments. Companies such as Tongwei, GCL-Poly, Lihao Qingneng, and others under the platform are shareholders.

During a briefing with top photovoltaic companies on January 6, the State Administration for Market Regulation drew a clear “red line,” proposing the “Three No’s” — no agreements on capacity, utilization rate, production, sales volume, or prices; no market division or profit sharing based on investment ratios; and no communication or coordination on prices, costs, or production and sales data, requiring written rectification measures by January 20.

Times Finance notes that this regulatory intervention has thoroughly cut off the illusion of “collusive pricing” among enterprises, forcing the industry back onto a fair competition track centered on cost and real strength.

Tongwei’s move this time may be an inevitable choice as the industry enters a “淘汰赛” (淘汰赛: elimination race) phase. In September last year, the new national standard for polysilicon energy consumption limits significantly lowered the allowable energy consumption, leading to the elimination of outdated capacities that do not meet standards, while compliant capacities can gain larger market space.

Although polysilicon faces a phase of overcapacity, in the long-term market space of the photovoltaic industry, low-cost, high-quality capacity remains a scarce resource, providing good opportunities for leading companies to acquire and consolidate.

A related person from Tongwei said that this acquisition is a normal market-driven merger, not a stockpiling strategy.

This acquisition by Tongwei reflects a broader trend in the photovoltaic industry. As the marginal benefits of capacity expansion diminish, deep integration of the supply chain and continuous technological iteration are key to companies navigating cycles.

For Tongwei, acquiring Lihao Qingneng is just the beginning. How to turn “1+1” into “greater than 2” will determine whether it can establish a foothold in the new round of competition. It will also set a clear example for other leading companies in the industry to pursue mergers and acquisitions and consolidation.