Summary of Key Points in Plain Language
The once highly touted "golden track" for energy storage inverters, which was promised to yield effortless profits for years, has seen its growth myth shattered. In the first half of this year, the total revenue of 11 leading domestic listed companies only increased by 6.77%, while the net profit actually decreased by 4.48% year-on-year. The entire industry has fallen into a paradox where the more they sell, the less profit they make.
The situation has become even more extreme due to significant industry differentiation, which has broken the traditional "80/20 rule": three top companies have taken 95% of the industry's profits, while the remaining eight companies combined earn less than 5% of the total profits. Many small and medium-sized manufacturers are already in the red. Now, the industry is shifting its focus overseas, with Europe being the core growth market. Domestic leaders have abandoned plans to build factories in the U.S. due to high policy risks and are instead exploring new opportunities in emerging markets such as Asia, Africa, and Latin America.
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Detailed Analysis
1. The Once-Prosperous Industry Has Suddenly Slumped
How booming was the energy storage inverter industry a few years ago? Even small newcomers could achieve annual growth rates of over 50%, and many companies' stock prices increased tenfold in just a few years, making it a seemingly guaranteed gold mine with no need to worry about orders. However, this year's results have been a stark wake-up call: the total revenue of the 11 leading companies was only 72.7 billion yuan, an increase of 4.6 billion yuan compared to the same period last year, with an average growth rate of less than 7%, which is lower than that of traditional consumer industries like beverage and home appliance sales. Even more troubling is that, despite selling more products, the total net profit decreased by 500 million yuan. This indicates overcapacity, with companies desperately cutting prices to compete for orders, resulting in a significant reduction in profit margins.
2. Extreme Industry Diferentialization
The usual pattern of "20% of companies earning 80% of the profits" has been completely reversed. In the first half of this year, the three top companies—Sunny Power, Deye Co., Ltd., and Sige New Energy—earned 10.4 billion yuan, accounting for 95.4% of the total profits, while the remaining eight companies earned less than 5% each. For these companies with annual revenues in the billions, this profit is not even enough to cover their annual research and development costs. This leads to bizarre situations such as a 77% increase in revenue but a 160 million yuan loss. Interestingly, despite overall declines in revenue and profit, Sunny Power's gross margin actually increased by 1.5 percentage points by focusing on higher-margin products for the European market and cutting unprofitable businesses. In other words, the industry is not failing to generate profits; the money is being monopolized by the top players, leaving smaller companies struggling to survive.
3. The Industry Is Moving Overseas to Avoid Risks
The overseas revenue of leading companies has become a major focus, with Europe being the priority. For example, Sunny Power's domestic revenue has dropped from 58% to 26% this year, with over 70% of its income coming from overseas. The domestic market is so competitive that prices have dropped to the point where it's almost unprofitable. Europe is an attractive market due to the EU's goal of installing 200 GW of energy storage by 2030, creating a huge potential for growth. Additionally, Europe offers favorable electricity prices, with significant differences between peak and off-peak rates, making energy storage devices a profitable investment. Ukraine's damaged power grid and the power shortages in Asia, Africa, and Latin America also create new opportunities for growth.
4. The U.S. Market Has Become a Risky Investment
Many companies hoped to build factories in the U.S. to avoid tariffs, but Sunny Power has clearly stated it will not do so due to high policy risks. The U.S. has imposed restrictions on Chinese power equipment, and new energy storage products are not allowed to enter. The labor costs in the U.S. are much higher, and the cost of manufacturing and shipping products there is higher than in China. Moreover, there are geopolitical risks, with the possibility of factories being confiscated. The overall strategy for the industry is to gradually reduce sales in the U.S. and focus on other markets.
5. The Industry Logic Has Changed Completely
The previous logic of rapid growth relied on a doubling of the market size each year, ensuring easy profits. Now, the industry has entered a phase of intense competition for existing market share. The trend will be similar to the home appliance industry, with three top companies dominating over 90% of the market, using their scale to lower costs and expand global channels. Smaller companies will either need to develop unique technologies to secure niche markets or face merger or bankruptcy. Both industry players and investors should no longer rely on the past growth myths; investing in small, non-competitive companies could lead to significant losses.