JinkoSolar Holding Co Ltd DR

Ladies and gentlemen, thank you for standing by for Jinko Sola Holding Company Limited's second quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. After the management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Ms. Ripple Tsang, Jinko Sola's Investor Relations Manager. Please proceed, Ripple.

Thank you, operator. Thank you, everyone, for joining us today for Jinko Solar's second quarter 2021 earnings conference call. The company's results were released earlier today and available on the company's IR website at www.jinkosolar.com, as well as our 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 Jinko Solar are Mr. Li Xiande, Chairman of the Board of Directors and Chief Executive Officer of Jinko Solar Holding Company Limited, Mr. Jenna Miao, Chief Marketing Officer of Jinko Solar Company Limited, Mr. Pan Li, Chief Financial Officer of Jinko Solar Holding Company Limited, and Mr. Charlie Cao, Chief Financial Officer of Jinko Solar Company Limited. Mr. Li will discuss Jinko Solar's business operations and company highlights. followed by Mr. Miao, who will talk about the sales and marketing, and then Mr. Pan Li, who will go through the financials. They will all be available to answer your questions in the Q&A session that follows. Please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involving 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 Jinko Solar's public filings with the Securities and Exchange Commission. Jinko Solar 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 Xiande, Chairman and CEO of Jinko Solar Holdings. Mr. Li will speak in Mandarin and I will translate his comments into English. Please go ahead, Mr. Li.

and price growth from the industrial chain up and down, leading to a certain time difference. We quickly increased the external sales of gold and silver, and at the same time actively reduced the opening power of the main supply chain. The total amount of goods and sales income in the second quarter has dropped significantly, and the profit-saving ratio has improved significantly. With the high stability of the supply chain price in the second half of the year and the overall increase in customer acceptance of the price, We are very pleased to have delivered a revenue of US$1.23 billion and a growth margin of 17.1%, as well as a significant increase in non-GAAP net profit quarter-over-quarter, despite very challenging market conditions.

In response to the sharp polysilicon price increases in May and June, and there is a certain time gap in the transmission of price increases from upstream to downstream in the supply chain, we quickly increased the external sales of silicon wafers and proactively lowered the production volume modules. Total shipments and revenues in the second quarter were approximately flat compared with the first quarter, while profits improved sequentially. As prices along the supply chain remain high but relatively stable, we see overall acceptance of module price increases continuing well into the second half of the year. Demand for modules is gradually resuming, and our module production volume increased remarkably month over month in the third quarter.

but we have long-term experience, which gives us more risk-resistant capabilities. Over the past year, we have continued to optimize and improve the supply chain management of the entire community. We announced that we will invest in a multi-billion-dollar project with a common share of 4.5 trillion yen per year. We have also invested in the Inner Mongolia Xinte Farm, a full-supported company of Xinte Energy. We have signed a five-year material supply agreement with WACC. WACC will start from its US and German factories We will continue to supply our production facilities in the U.S. and Malaysia.

As one of the first PV enterprises to go global, we have accumulated rich experience and insights into the development and management of overseas supply chains. This has given us the know-how and capability to mitigate risk. Since the beginning of the year, we have continued to optimize and improve our global supply chain management. So far, we have announced a few strategic cooperations such as the joint investment with Tongwei Company Limited, in a high-purity crystalline silicon project with annual capacity of 45,000 metric tons, an investment in Inamogolia Shinto Silicon Material Company Limited, a wholly-owned subsidiary of Shinto Energy Company Limited. And we have signed a strategic five-year polysilicon supply agreement with Wecker Chemie AG. Wecker will supply polysilicon to Jinko Solar from its production sites in Germany and the United States, which contributes to a long-term stability of our supply chain and the business growth. Meanwhile, the overseas wafer manufacturing facility will start construction soon and will serve our production facilities in Malaysia and the United States when production ramps up.

to support the rapid growth of large-scale products. With the development of new energy, the utilization of new technologies, and the continuous improvement of technology, we are confident that the improvement of energy structure with ET will be gradually reflected in the second half of the year. At the same time, electronic technology is in the transition period from P-type to N-type,

In terms of integrated operations, over 7 GW of newly added capacity of large-size cells has put into production during the second quarter to support the rapid growth in demand for large-size products. With the release of new capacity aided by the application of new technologies, and continuous optimization of our process. We are confident that optimizing the integrated capacity structure will gradually be reflected in cost reductions during the second half of the year. At the same time, cell technology is at a transitional stage from P-type to N-type, and we are expanding the investment plan for N-type cell capacity based on technical advantages and two years mass production experience.

Good products and services are the basis for the company's independent market and the constant improvement of market power. Recently, our N-class single-cell battery efficiency reached 25.25%, and the maximum conversion efficiency of the efficiency component reached 25.53%, again breaking the world record. This year, the shortage of multi-cell materials has reflected the economic effect of large-scale products. Our large-scale products will grow rapidly in the second half of the year. It is expected that the market flexibility of large-scale products will be further improved next year. Gradually increasing prices will lead to changes in the market structure. Dividing business with a more flexible business model and a lower level of sensitivity or rapid development. We have also increased the ratio of distribution. Leading technology, high-quality products, and reliable services form the foundation of our success and growth of our market share worldwide. Recently, the maximum laboratory

Conversion efficiency of our large-area N-type monocrystalline silicon solar cell reached 25.25%, and the maximum laboratory conversion efficiency of our high-efficiency module reached 23.53%, both making history with new world records. This year, the shortage of polysilicon highlighted the economics of large-size products, We expect the proportion of our large-sized product shipment to increase rapidly in the second half of 2021, and the market penetration rate of large-sized products to further increase next year. High module prices have also brought about changes in the market structure. The uptake of the distributed generation business achieved rapid development with more flexible business models and lower sensitivity to prices. In response, To this trend, we have also raised the proportion of distributed business for the full year to around 40% of total shipments, compared with 20 to 25 last year, in order to meet the needs of customers facing different distributed application scenarios. 光复行业已经基本完成了从依赖政策补贴扶持到政策占领性扶持的转变。

The cost-reduction and product upgrades brought by the technology innovation will provide a long-term growth space for the supply and demand of light. This year, the second half of the year, and next year will be the year of the light installation. The large-scale products of limited enterprises with higher proportions and faster delivery rates will quickly reach the industry level, and the market share will continue to expand. In order to ensure the global transport of the year-round growth, we have signed a joint partnership agreement with Zhongyuan Haiyun and Ma Siqi. The PV industry has largely completed its transition from relying on policy

subsidies to policy strategic support, and the continuous cost reduction and product upgrades brought about by technology innovations have continued to fuel solar demand. We expect the second half of 2021 through 2022 to be a big moment for solar installations. Top-tier enterprises are expected to grow even faster than the industry average and further increase market share with higher proportions of large-sized products, and faster penetration of distributed generation markets. In order to secure the annual growth rate of our global shipments, we signed strategic cooperation agreements with both Costco Shipping and MASK. At the same time, in order to facilitate the rapid penetration of China's distributed generation business and the accelerated development of the energy storage business, We recently signed strategic cooperation agreements with contemporary Amperex Technology, Coating Hightech, and other industry chain leaders. The partners will set up project teams to do joint research and development, share resources, and leverage their respective advantages to jointly promote further business development for solar plus energy solutions.

Before I hand over the topic to Jenna, I would like to introduce the value of the company. In 2021, the total output of the third group of companies was between 5 to 5.5 GW. Among them, the total output was between 4.5 to 5 GW. The revenue will be between 12.4 to 13.7 U.S. dollars. The profit will be between 12 to 15 percent. Before turning over to Jenner, I would like to go over our guidance for the third quarter 2021.

We expect total shipment to be in the range of 5 to 5.5 gigawatts, including module shipment to be in the range of 4.5 to 5 gigawatts for the third quarter of 2021. Total revenue for the third quarter is expected to be in the range of 1.24 billion to 1.37 billion US dollars. Growth margin for the third quarter is expected to be in the range of 12% to 15%. The annual monowafer Solar cell and solar module production capacity is expected to reach 32.5, 24, and 45 gigawatts, respectively, by the end of 2021. The full year 2021 shipment guidance, including wafer, cell, and modules, is still expected to be in the range of 25 to 30 gigawatts.

Thank you, Ms. Lee. In the second quarter, total shipment reached 5.2 gigawatts, inclusive of over 1 gigawatt of wafer and cell shipped to China market. In terms of module shipment by region, Europe contributed the largest portion of the module shipment this quarter, as module shipments increased by more than 40% year over year. Shipments to China and the United States remained stable sequentially. The rapid developing Chinese market has been given a boost by government policy and expected to contribute a large proportion of shipment in the second half of this year and 2022. Through continuously monitoring China's market demand and our customers' need, we have allocated the utility projects and the distribution market with different personnel products and the resources to support the coming strong growth. Overall, demand from overseas market remains strong in the second quarter, benefiting from both increasing power consumption brought about by the gradual recovery of energy consumption level, thanks to effective pandemic control measures, and the effective implementation of carbon emission reduction goals in major economies like Europe and the United States. In addition, the expected reduction in subsidies in some market has brought forward some demand. We believe that Europe and the United States and India will become even bigger driving forces for the newly overseas installation. The United States is one of our most important markets. Although the supplies have become more difficult of late due to challenges with shipping and the policies in short term, we have made strategic and long-term commitment to adapt our resources and infrastructure to better serve the U.S. market. Our teams have already been proactively deploying researching and promoting suitable long-term solutions that will allow us to continuously grow and meet the needs of U.S. market. We expect annual global installation in 2021 to be in the range between 150 to 160 gigawatts. Some projects scheduled for this year have been delayed to the following year due to higher cost in the supply chain. Along with the new project in 2022, Installations in 2022 are expected to increase by over 30%. We reiterate our total shipment guidance of 25 to 30 gigawatts for the full year 2021. Looking forward, as we have a high degree of certainty on the future demand, we are striving to deliver faster shipment growth compared with industry average to increase our global market share as well as reaffirm our competitive position and leading position in this industry. In terms of product prices outside the United States, markets have generally maintained an upward trend. In terms of product structure, the proportion of our large-sized products have been rapidly increasing. with the 182-millimeter product accounting for approximately 50% of shipment in the second half of this year. We are bullish about the development prospects of distributed generation markets and expect up to 40% of total shipment this year would be going to distributed generation markets. we will continue to explore the global market demand for the distributed generation based on market trends and customer needs, and proactively increase our presence in China, United States, Europe, and explore other potential markets. With that, I will turn it over to Pat.

Thank you, Jenner. In the second quarter, We remained flexible and adjusted shipments for wafers, cells, and solar modules according to the prevailing market conditions. As a result, we achieved a relatively balanced performance in terms of shipments and profitability. Sales revenue was basically flat with the first quarter of 2021, while gross margin exceeded our expectations. The changes we addressed on the management and control operating expenses and exchange rate volatility have proven to be effective. Income from operations and net profit excluding non-return items increased significantly compared with the first quarter of 2021. For second half of 2021, we expect Raw material prices to further stabilize and production volume to gradually increase, which combined with cost reductions resulting from new production capacity should have a positive impact on profitability. Let me go into more details about this quarter now. Total revenue was $1.23 billion, sequentially flat. Gross margin were 17.1%, sequentially flat. Disposal and impairment loss on property, plant, and equipment in the second quarter decreased significantly compared with the first quarter of 2021. Total operating expenses in the second quarter were $155.3 million, which accounted for 12.6% of total revenues, in terms of absolute amount and proportion, both improved significantly compared with the first quarter of 2021. Excluding shipping costs, we expect operating expenses as a percentage of total revenues to remain stable. The effective management and control of operating expenses increased income from operations to 55.2 million, up to 139% sequentially. Operating margin increased to 4.5% from 1.9% in the first quarter of 2021. EBITDA was 143 million compared with 123 million in the first quarter of 2021. Net income was 10.3 million, and non-GAAP net income was 42.5 million, significantly sequentially. Non-GAAP diluted earnings per ADA increased to 0.89. We continued to optimize our hedging against foreign exchange risks and recorded a net exchange loss of 0.7 million. a significant reduction from a loss of $4.1 billion in the first quarter of 2021. Moving to the balance sheet, at the end of the second quarter, our balance sheet of cash as cash equivalents was $1.01 billion, approximately flat with the first quarter of 2021. Accounts receivables due from third parties improved significantly sequentially, and we will continue to work on improving liquidity. AR turnover days were 62 days compared with 68 days in the first quarter of 2021. Inventory turnover days were 138 days compared with 126 days in the first quarter of 2021. Total debt was $3.12 billion at the end of the second quarter, compared to $2.67 billion at the end of the first quarter. Out of total debt, $67.6 million was related to international solar projects. Net debt was $2.11 billion, compared with $1.8 59 billion at the end of the first quarter of 2021. This concludes our prepared remarks. We are happy to take your questions. Operator, please proceed.

We will now begin the question and answer session. Audio participants with questions to pose, please press 01 on your telephone keypad and you will be placed in the queue. To cancel the queue, please press 02. Once again, 01 on your telephone keypad now. Our first question is from Mr. Philip Shen from Roth Capital Partners. Please go ahead, sir.

Hi, everybody. Thank you for taking my questions. I'd like to ask about your view of the anti-circumvention Southeast Asia ADCV tariffs. That could come around. So if the Department of Commerce takes on the case in the coming weeks, what would you expect to do? Would you continue to ship into the U.S.? And if so, how would you mitigate that risk of retroactive tariffs? Or is there a possibility that you might stop shipping into the U.S.? ?

Philip, this is Charlie speaking. To mitigate the risk, not only the risk you are talking about, let's say the U.S.-China solar industries, and we have accelerated the process to build up more strong supply chain and integrated production line out of China. And I think you know, we signed the silicon arrangement with Walker. And we have began to build up the around seven gigawatts wafer capacities in and to match our capacity in existing capacities in Malaysia and the US. So from the, let's say, We are optimistic, and we will continue to serve our U.S. customers. And for the circumvention, you are talking about the risk, and it's still in the early stage, and it did have some uncertainties. But we are following up the event and closely keeping in touch with our customers.

Okay, thanks, Charlie. I know it's a tough situation, and I think you brought up the silicon arrangement with Walker, and your 7 gigawatts of wafer capacity in Vietnam. I think in the anti-circumvention case, the Jinko Vietnam facility is mentioned in that case, and so if they do take the case on, does the wafer facility in Vietnam, would you continue to expand that or build that facility out? Or is there a chance that you might slow things down there?

You know, we don't have any further plan to, you know, expand capacity on the wafer out of China. And the first step, we want to have, you know, relatively competitive list to build up the integrated, including the silicon, right, out of China to make sure to mitigate the risk to zero. And we think we are in a good position to mitigate this risk.

Okay, great. And then how much, with the WRO enforcement, how much product has not made it How much of your product from Malaysia has not made it to the U.S. shores thus far? You know, and what is the impact of that on Q3 results? Because, you know, I think in your prepared remarks you talked about OPEX should be, you know, flat ahead except for excluding shipping costs. And so to what degree, you know, How much product has been not able to get to the U.S. shores, and then how much is it costing you to store that product? Because my understanding is it can be quite expensive. And have you been able to find other markets for that product, or do you expect to wait for that product to make it to the U.S.? Thanks.

So, yes. We did have some modules, you know, stopped by the U.S. CPP and to request additional, you know, documentations. And we're still in the process in the preparations of relevant documentations. And at this stage, we are, you know, cautiously optimistic, you know, for the results. And it did have, you know, because it's going to take time, so it did have some, you know, impact our shipments to the U.S. market. And in terms of the storage, we did have additional, you know, we were expecting to incur additional storage for the inventories and waiting for the preparation of the relevant documentations. And back to your question, now is the solar, you know, demand is pretty strong. And, you know, I think it's not the demand issues. It's just, you know, globally, it's just the supply, you know, supply chain, you know, higher supply chain cost and production capacity bottleneck.

Okay. Charlie, sorry to ask the question again, but can you quantify how much product has not been able to make it to the U.S. and what the cost might be to

Well, in the process evaluation, you know, at additional cost, it did have, I said, you know, have negative impact on the shipment to the U.S., as well as, you know, the gross margin, even, you know, net profitability in the short term. But we are not in a position to discuss the digital number.

Okay. I really appreciate you taking the questions. I know there are some tough questions. With that, I'll pass it on. Sure. Thank you.

Thank you. Our next question is from Credit Suisse, Mr. Jerry Tsao. Please go ahead, sir.

Hello. Thank you for taking my questions. This is Gary from CS. I have three questions. So firstly, can management share with us what is your module price outlook into the fourth quarter this year, so especially after the recent upstream cost hikes? And what do we think is the maximum kind of module price can the developers in China accept?

Sure. Thank you, Gary, for your question. This is . Regarding market price, we have seen the latest changes from the upper stream supply chain side like the polysilicon price change and the EVA price change and even sometimes the glass price changes upwards as well. So we are anticipating the modules price will not be able to accept all the upwards because there are certain bottleneck and the ceilings for the downstream players and the customers to adopt all these numbers. So, in our observations, the latest, I think, tenders by some of Chinese SOEs number are just released today and yesterday. We have observed all these Tier 1 players are about 1.80 RMB per watt-peak. So, if we make it more specific, I think the range is somewhere between 1.82 to 1.86. that should be our flagship price for the rest of 21.

Okay, thank you. So my second question is can management share with us a little bit more information on our cooperation with CATL? So just wondering if there's any kind of a numerical target on the energy storage business and other corporations? And my last question is if our company can share with us some updates on the subsidiary Asia listing. Thank you.

Yeah, thank you for the question again. So for the corporations with all this storage battery companies including CATL, Gosha, and others, I think that's a very strategic move. In our pre-prepared remarks, we emphasized that that is our long-term strategy prepared for the future because with grid parity ongoing, we are anticipating a massive installation in the renewable sector, especially in PV industry, to be happening in the next coming years. And because the nature of the PV solar power generation system and the storage is massed for the whole industry's further growth. That's why we have established the partnership with the key players in the storage sectors to make sure that we are well prepared for that. To make it more specific, we joined research and development together with some of the resources sharing. and leverage each other's respective advantage to jointly promote the future business development for the solar plus energy solutions. And the next question, I think Charlie will take that.

The IPO process is still on the track, and we submitted the application to Shanghai Stock Exchange by the end of June. And as of today, it's still in the review process by the regulators.

Okay. Thank you for taking my questions. And we'll pass on. Thank you. Thank you.

Thank you. Our next question, Sansara Capital, Mr. Rajiv. Please go ahead, sir.

Yes. Good morning. Good evening. I had a few questions earlier. The first question is about gross income. You guys did a very good job improving the gross income number from the first quarter and balancing the mix of waivers and modules to get there. Is it reasonable to think that, you know, obviously there's a lot of dynamics, that gross income will continue to grow in the third quarter and even as you are increasing sharply the amount of modules that you will ship relative to wafers and sales. I'm not talking about the gross margin number, but the gross income itself. Is it reasonable to think that that will continue to increase in the third quarter?

So you have two questions. One is the gross income and gross margins. And growth margin, you know, second quarter, we did have relatively good, you know, compared to our expectations. The major part is the waiver, third-party sales, contributions. And towards, you know, third quarter, we expect the growth income will continue to increase while the growth margin is under pressure because we are trying to have more solar module shipments. At the same time, the upstream, the material costs are upwards. But we are trying to continue to increase our module price, but it's still facing the high polysilicon, the EVA classes and the price upwards. So in general, we expect the gross income will increase while the gross margin is in the downward trend.

I understand. I understand. But the important thing is that gross income will continue to grow. The second question is that, you know, you maintained your guidance of 25 to 30 gigawatts for full-year shipments, which suggests that you're expecting shipments of about 9 gigawatts in the fourth quarter. Can you elaborate, can you give us some insights into what the reasons are to expect such a big ramp from third quarter shipments? And then I have one more question.

Yeah, so I think we are, I think a strong Q4 is within the plan. I think it's part of the nature of the solar industry because if you look back in the last two, even three years' time, Q4 is always the peak season as of the whole year, mainly because people are expecting a very strong demand from China. I think each company or the whole industry as a whole everyone will expect a stronger Q4. That's one part of the nature of the industry demand. And another part is we are steadily wrapping up our in-house capacity as well. So naturally, you know, our capacity will grow by time flying and also as well as preparing for the 2022 as well. Okay.

So obviously you are expecting a very substantial increase in module shipments as well in the fourth quarter. So the way you'll get to the 9 gigawatts will be a substantial increase in module shipments.

Well, in general, yes, that's the direction, but we still have the flexibility to expose our cells, break our cells into cells wafer cells or modules as we did in the Q2 or even Q3. So we have the flexibility, but in general, the total shipment will grow for sure.

Okay. And my final question is on your capacity. You have substantially increased your capacity for modules, and you're now talking about 45 gigawatts for next year. That's a very significant increase. um and uh and this is the despite the fact that your module treatments this year are are not growing as rapidly as they have grown in past years so um you know can you give us some insights into why you actually think that 45 gigawatts for modules in 2022 is the right number especially given that you'll have shipped about you know 21 or 22 gigawatts this year uh

It's a strategic preparation for next year. And this year, the market is constrained by the polysilicon. And after bottleneck is debunked from polysilicon, and we expect next year the market will be accelerated to the demands. And on top of that, we are planning the n-type cell capacities. you know, it's next generation and the capacities and the module, you know, the capacity is relatively small and we want to build up, you know, module as quickly as possible and for the preparation on next year. And if you look at our shipment, let's say 9 gigawatts and based on your calculations in fourth quarter and the module is still, you know, we face some you know, supply shortage, particularly we are building the large size module capacities for the, you know, next generations.

Okay, thank you very much. Thank you.

Thank you. Our next question is from Goldman Sachs, Mr. Brian Lee. Please go ahead, sir.

Hey, guys. Thanks for squeezing me in for some questions. I had a couple housekeeping ones. First one, you know, you guys gave us the breakout for modules and wafers. Can you do anything similar for what is embedded in the 3Q guidance as well as, you know, since you're maintaining the full year, you know, there's an implicit mix you're assuming in 4Q. Can you give us a sense of, you know, module versus... non-module shipments in 3Q and 4Q?

Third quarter, you know, we gave the guidance, total shipments 5 to 5.5, including module 4.5 to 5. So the gap, the difference, you know, is the majority part is the wafer, third part itself. But taking to the fourth quarter, yeah, we are still flexible, but majority part of where at this stage we are expecting it's from the module shipments.

Okay, fair enough. And then just on the earlier question about gross margins, it sounds like you're seeing some margin pressure on both product types. Can you give us a rough sense of where gross margins are for modules versus non-module shipments in your guidance?

Third quarter, we give the guidance 12% to 15%. And the majority part is module. So the gross margin is very same with module gross margin. For the fourth quarter, it's still some uncertainties. The material cost is upward very quickly. And at the same time, we are shifting our module shipment to China, the majority part. And we are trying to get relatively high the module price. And hopefully, we are able to offset the cost upward pressures.

Okay, fair enough. Maybe two more from me. I know you can't quantify or you don't want to quantify the shipments that have been held up at the border here with the WRO in the U.S. Can you give us a sense, I guess, what sort of mix impact or mix, are you assuming in terms of shipments for the U.S. in Q3 and Q4? Are you actually embedding U.S. shipments, module shipments into the forecast here for either quarter? And then maybe related to that, you know, you have the 400 megawatt facility in Florida. Are you able to get sales I guess non-Ginkgo or Ginkgo cells into the country to run that module facility?

I think the mix is something difficult to discuss at the current stage because even we are cautiously optimistic about our documentations, which has been well prepared. But still, it's not 100% JNCO's call to decide what to do next. That's why we are cautious in monitoring the situation and doing our best. And right now, like Charlie just said just now, I think we are very confident about the demand. Right now, it's not the problem of the demand. It's the problem of supply. Shipment-wise, we have multiple alternatives, and even we have a full commitment to our U.S. customers and our U.S. market, and we are preparing for it, but it's difficult to disclose any detailed number even for Q3 or Q4 in U.S. shipment yet.

I guess maybe to ask it another way, if you don't have clarity that you can move product into the US, ship product into the US? Are you still planning to bring product to the border at risk of having it being seized for months until it gets released and you can maybe ship it to another alternative location as you mentioned? I guess what's the strategy around taking that risk of having shipments which get delayed and then ultimately you do have to reroute them elsewhere versus waiting out the process to see what you should do with future shipments over the next couple of quarters.

I think we'll still continue to stick to our plan for the shipment. Even we have some challenges. because of the COVID control in the local Southeast Asia countries, but we're still doing our best to find solutions with our customers right now. So for detailed number-wise, again, we cannot quantify it yet because we don't have any number which we can disclose, but still we are doing our best, and we have the confidence to to continue to have our business ongoing, not only in the U.S., but in other markets as well. So we are working in different alternatives in parallel, so we have no concerns on that.

Okay, last housekeeping one for me. What was the CAPEX here for the first half of the year, and then is there an updated view on CAPEX guidance for 2021? Thank you, guys.

Okay. Okay, for the first half of 2021, the CapEx number is approximately 580.

U.S.

dollars.

And, you know, we increased the plan to build up more, you know, module capacities to reach to 45 gigawatts. So we increased our CapEx, you know, target this year. And it's, for the four years, roughly around 1.1 billion U.S. dollars.

Okay. Thanks, guys.

Thank you. The Q&A session is still open. If you would like to ask a question, please press 01 on your telephone keypad now. If you would like to ask a question, please press 01 on your telephone keypad now. Our next question is from UBS, Mr. William Grippen. Please go ahead, sir.

Great. Thank you very much for fitting me in here. Just another one on the shipments. Obviously, the guidance implies a pretty substantial ramp in the fourth quarter for shipments to reach the total guidance. I'm curious, going into the quarter, are you expecting to hold more module inventory, or do you have the ability to ramp production that quickly, depending on what the final mix of module and component sell and wait for sales end up being?

So first, let me comment in general. I think my colleagues will give you a breakdown detail later. So in general, I think the market demand is quite strong. And we are holding some of the inventory really because of the accounting issues. And we have the contract to fulfill. But right now, the global international logistics shipping lines are facing big headaches right now. I think it's not only for solar industry, but for all the industries. So it's difficult to get the ship on time and on schedule. So that's why sometimes we have to face accounting point. We have some inventories on hand, but actually we have all the contract covered for those inventories.

Okay. And then just one more for me. You know, the guidance obviously implies cost pressures accelerating here in the third quarter. You know, despite polysilicon prices being pretty stable over the time period, glass obviously coming down. Just wondering if you could provide a or expected to see margin compression in the third quarter relative to the second quarter? And what level of confidence do you have here that, you know, you may actually meet or exceed the high end of the range again?

You know, the major part is, I think, how we calculate the cost in second quarter and third quarter. It's based on the weighted average. And the polysilicon, you know, reached to the high price starting from, you know, May this year. So in the second quarter, you know, based on the average, the polysilicon price is not so high. It's not, you know, let's say 200 RMB, you know, kilo. It's not based on that cost in the calculation in the second quarter. It's fairly low, you know. But with the time collapse, you know, to the third quarter, and the polysilicon, the average cost is raised to a relatively high level. That is the major part, you know, and hopefully you understand that, you know, this is really average, and the polysilicon price, and it's accelerated, you know, the pace, you know, starting from, May, and so from the calculation perspective, the more impact will be reflected in the third quarter. So I think it's one of the key impacts on the cost side.

Got it. Thanks very much.

Thank you.

Thank you. Our next question is a follow-up from Mr. Rajiv from Sansara Capital. Please go ahead, sir.

Yes. I would like you to give us a little bit more clarification on the revenue number that you have guided for the third quarter because using different combinations of wafers and modules shipments in the third quarter and assuming that there is some price increases from Q2 to Q3, the revenue numbers that I'm coming up with are higher than $1.4 billion, which is obviously higher than your guidance. So can you help us understand why your revenue guidance at the high end is $1.35 when using your low end of your shipment guidance combined with assuming that prices are stable or up? for both modules and wafers, the revenue number that we come up with is higher than $1.4 billion.

It's a mixed issue. And, you know, I mean the shipment to the U.S. versus our regions. The U.S., you know, the SP relatively stable, you know, by regions. But, you know, we have more shipments, you know, in the third quarter versus second quarter. And the third quarter, and the U.S. sharement is relatively lower than the second quarter. And the percentage-wise, the U.S. sharement is taking less percentage of the total sharement. And the U.S., because of the trade issues, and the ASP is dramatically higher than other regions. So it's mixed issues.

So what you're saying is that you can increase your gross income from second quarter to third quarter, even if at the aggregate level, the module price that you will realize will go down from second quarter to third quarter because you have less shipments to the U.S. where the module price is inflated.

Yes, you're right. And with the cost, you know, production cost is higher. And in the U.S., we need to pay additional, you know, 201 tariff cost. So the gross margin, gross income from U.S. shipments actually is not so significant difference with our regions. And we have more shipments, you know, in our regions, and which has no impact on the gross income contributions.

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