JinkoSolar Holding Co Ltd DR

Hello, ladies and gentlemen, and thank you for standing by for Junko Solar Holding Company Limited Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in listening-only mode, and after management's preference 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, Ms. Stella Wang. Jinko Solar's investor relations. Please proceed, Stella.

Thank you, operator. Hi, everyone. Thank you for joining us today for Jinko Solar's fourth 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 on Newswire's services. We have also provided a supplemental presentation for today's earnings call. which can also be found on the IOR website. On the call today from Zinco Solar are Mr. Li Xianduo, Chairman of the Board of Directors and Chief Executive Officer of Zinco Solar Holding Company Limited, Mr. Janet Miao, Chief Marketing Officer of Zinco Solar Company Limited, Mr. Pan Li, Chief Financial Officer of Zinco Solar Holding Company Limited, and Mr. Charlie Cao, Chief Financial Officer of Zinco Solar Company Limited. Mr. Li will discuss Zimco Solar Spaces operations and company highlights, followed by Mr. Miao, who will talk about the sales and the marketing, and then Mr. Pan Li, who will go through the financials. They will all be available to answer your questions during 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 securities 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 Zinco Solar's public filings with the Securities and Exchange Commission. Zinco Solar does not assume any obligation to update any further looking statement except as required under the applicable law. It is now my pleasure to introduce Mr. Li Xiande, Chairman and CEO of Zinco Solar Holdings. Mr. Li will speak in Mandarin and I will translate his comments into English. Please go ahead, Mr. Li. 我们很高兴凭借四季度优异的运营和财务业绩

In 2021, which is full of challenges, we have made a full-fledged commitment. Despite the increase in the price of raw materials and the challenges brought by high-end marine fuel, we have achieved a significant growth in sales revenue and export volume through the strong supply chain management and market prediction ability. Due to the increase in the market capacity of large-capacity factories and the increase in the sales capacity of large-capacity factories, our cost structure has been further optimized and the level of profit has been increased. In the fourth quarter, our operating profit has increased by more than three times compared to the previous year. In the fourth quarter, our operating profit has increased by more than three times compared to the previous year. In the fourth quarter, our operating profit has increased by more than three times compared to the previous year. In the fourth quarter, our operating profit has increased by more than three times compared to the previous year. In the fourth quarter, our operating profit has increased by more than three times compared to the previous year. In the fourth quarter, our operating profit has increased by more than three times compared to the previous year.

We were very pleased to close a very challenging 2021 with excellent results. We were able to swiftly respond to supply chain volatility and logistic challenges thanks to our competitive advantages in supply chain management and the comprehensive advantages of our global network. Revenues and shipments grew significantly in the fourth quarter as a result of the increasing proportion of in-house large-size production capacity and large-size product sales. Our integrated costs declined further and our profitability further improved. Consequently, operating profit quadrupled and the non-GAAP net profit increased by approximately 13 times In the first quarter of 2022, our principal operating subsidiary, John Finkel, completed its listing on the Shanghai Stock Exchange Science and Technology Innovation Board. The capital raised to this provides greater momentum for the development of our state of the art technology and the business. Our ability to successfully compete in the future rest on our comprehensive strength. We will continue to increase our competitiveness in technology, global market network, and also the comprehensive management skills.

虽然斯坦博弈贯彻了2021年全年, 终端需求依然强劲, 2021年中国全年竞争装机规模近55个GW, 其中分布是凭借 more flexible business models and higher price tolerance, contributing more than half of the new equipment. It is expected that it will become the driving force of new equipment this year. We look forward to the future of distribution and expanded the layout in the distribution field. Since 2022, in order to improve energy independence and achieve economic energy transformation, it has become a fundamental demand for the global main economy. We believe that the growth space of the light industry in the next few years will still last.

Despite a challenging 2021, the demand from end users keeps increasing compared with 2020. More flexible business models and a lower price sensitivity are helping the distributed generation business achieve rapid growth. China's installation capacity reached 55 gigawatts for the full year of 2021. with DG contributing more than half of new installations due to its higher economic returns. We hope this trend to remain the driving force for newly added installations in 2022. We are highly optimistic about the development prospects in distributed generation markets, and we continue to grow our brand influence in this market. With the strategic needs for energy transformation and energy security in major world economies, we expect the PV industry to continue its strong growth momentum in the coming years. Advanced and high-efficient end-time products will support the continued growth of the global PV industry.

When technology improves and becomes the main force for the development of the light industry, we will maintain the bright market growth and innovation of technology, and continue to lead the industry forward. According to this, our Haining base 900-watt battery capacity efficiency has reached 24.5%, and the power has been nearly broken. According to this year, our Hefei and Haining 16-watt N-type batteries have been officially produced, and are currently running smoothly. Our integrated energy production structure is constantly improving,

有助于一体化成本的持续下降。 We continue to lead the industry with our innovative technology and in-depth market knowledge. In our Henning facility, our mass-produced N-type cell reached an ultra-high conversion efficiency of up to 24.5% in the fourth quarter last year, an energy yield similar to that of PERC. We have roughly 16 gigawatts of end-time cell capacity operational in the first quarter of 2022 and currently are steadily ramping up our production capacity. Our integrated cost is expected to further decrease as our integrated production capacity structure consistently improves.

In the face of the industry's rapid transformation from P-type to N-type, and the need for lower-end customers for more efficient products, we have launched the ultra-efficient new generation of N-type products, TechNeo, with higher development performance, which is welcomed by the global market. In other words, our stable supply and demand capabilities and local sales service systems effectively protect the reliability and consistency of products and services. These are In light of the rapid industry transition from P-type to N-type and the growing demand for higher efficiency products,

we have launched the next generation of N-type ultra-efficiency Tiger Neo modules. These modules have received a worldwide claim from our customers for better power generation performance and obtained premium. In the long run, our stable supply and localized after-sales service network will continue to guarantee the reliability and consistency of our products and services. These core qualities have become our competitive mode. We will reinforce the leadership position of our end-type modules globally and further enhance our global market share and profit ability. 我们的越南7GW的硅片厂在一季度正式投产, 在海外将形成7GW的单晶硅片电池组件的一体化生产制造能力。

Global supply chain advantages are further consolidated. In the next year's shortage of raw materials, we will work together on the small and medium-sized oil to support and complement each other, and strive to build a global industry ecosystem. The ability of vertical unification is a must-have ability for leading enterprises to compete. By continuously establishing the advantages of industrial chain unification, we hope to continue to reduce the cost of core products and increase the added value of high-performance products.

Our 7 gigawatt monowafer plant in Vietnam became officially operational in the first quarter this year. This integrated monowafer cell module manufacturing capacity of roughly 7 gigawatts overseas further consolidates our global supply chain advantage. We are coordinating with our upstream and downstream partners to tap into all our complementary resources. and enhance our strategic cooperation. This will help us mitigate raw material shortages and production weak links. At the same time, we are committed to building a cluster of industrial ecosystems to solidify our supply chain. Vertical integration is essential to compete in the global PV market by continuously consolidating our diversified industrial chain infrastructure, we believe we will continue to strengthen the competitiveness of our core products and bring great value to our global customers with high-quality, reliable modules and premium services. 话题交给杰娜之前,我来介绍一下业绩指引2021年第

2022年第一季度公司的总出货量在7.5到8个GW之间,到2022年底,我们的单晶硅片电池组件的产能预计分别达到50GW,40GW和60GW。2022年全年包括硅片电池组件的总出货量在35到40个GW之间。

Before turning over to Jenner, I would like to go over our guidance for the first quarter and full year 2022. We expect the total shipments to be in the range of 7.5 to 8 gigawatts for the first quarter of 2022. The annual morning wave for solar cells and solar module production capacity is expected to reach 50, 40, and 60 gigawatts respectively by the end of 2022. We expect our four-year 2022 shipments, including wafers, cells, and modules, to be in the range of 35 to 40 gigawatts.

Thank you, Ms. Li. Total shipments in the fourth quarter were 9.7 gigawatts, of which module shipments were 9 gigawatts, a significant increase compared with the third quarter of 2021 and the same period of 2015. ASP outside North America improved sequentially thanks to the sales of high-efficiency products in high-end markets. In terms of regions, module shipments in Asia Pacific and emerging markets increased sequentially and year-over-year. China outpaced all other countries by contributing the largest portion in the fourth quarter, from less than 10% in the first half of the year to nearly 34%. As distributed generation gradually becomes the main driving force for newly added installations in China, the sector is expected to increasingly contribute to incremental market volume, encouraged by incentives from the 1 plus N policy framework that guides the country's climate action and action plan on peak emissions and other policies. We are optimistic about China's demand will exceed 100 gigawatts in 2022, and we expect the shipments in China's market to further increase in 2022. In Europe, one of the most developed PV markets, clients have accumulated matured awareness for PV and have a higher acceptance of new products such as Tiger Neo modules. By end of 2021, we had shipped our products to more than 30 countries across Europe. Europe become one of our top contributors for total shipments in 2021. With increasing electricity prices making solar energy more economical and strategic necessity of energy transformation and energy security, Europe is expected to maintain strong growth momentum We are confident in maintaining our competitiveness in European market by leveraging our local network and the next generation N-type ultra efficiency module Tiger Neo. We launched the next generation N-type Tiger Neo module in the first quarter of 2021 and increased the global promotion and the sales. Delivering high energy density, high bifacial factor, and lower linear degradation, Tiger Neo modules bring clients better power generation performance and obtain a competitive premium. Meanwhile, we are heavily invested in the future of distributed generation sector. The proportion of distributed generation in our shipment is expected to reach around 40% this year. We will continue to explore the global market demand for distributed generation based on market trends and customer needs, and proactively increase our presence in China, United States, Europe, Brazil, Australia, and explore other potential markets. Countries around the world have adopted various strategies in response to COVID-19, supply chain disruptions, and soaring household gas and electricity bills as the energy crisis bites. Under this backdrop, the global PV market has been driven by green, low-carbon, and long-term energy security investments, which will usher in a new period of rapid development. Market demand in 2023 is expected to grow in excess of 20%. We will continue to track market conditions and adjust our business strategy accordingly. We are confident that we will contribute to the global energy transformation with our high-efficiency products and support customers with our sound marketing and global service network. With that, I will turn it over to Pat. Thank you, Jenner.

Our fourth quarter results existed expectations. Total revenues grew significantly quarter over quarter. We continued relentlessly to take effective management of integrated production costs and operating expenses. Sequentially, gross profit doubled, operating profit more than quadrupled, and non-GAAP net profit increased by 13 times. Operating efficiency improved as a result of our efforts to closely align inventory management with market supply and demand dynamics. Let me go into more details now. Total revenue was $2.57 billion, an increase of 91% sequentially and $17.5 billion. 74% year-over-year. Gross margin was 16.1% compared with 51% in the third quarter this year and 16% in the fourth quarter last year. Excluding anti-dumping and countervailing duties reversal benefits, gross margin was 14.3%. Total operating expenses nearly doubled year-over-year. due to a substantial increase in motor shipments during the fourth quarter, which increased shipping costs. On one hand, we increased shipments to China to reduce the impact of shipping costs on profitability. And on the other hand, we leveraged our long-term agreement with major shipping companies to obtain more competitive prices compared with the rest of the market. In general, the impact from changes in shipping costs on profitability was relatively under control. Total operating expenses accounted for 13% of total revenues in the fourth quarter this year, flat sequentially and slightly improved compared with 15% in the fourth quarter last year. Operating margin was 3% in the fourth quarter of 2021 compared with 1.3% in the third quarter and 0.8% in the fourth quarter last year. EBITDA was 183 million doubled compared with 89 million in the third quarter of 2021. Non-GAAP net income was 34 million an increase of 13 times sequentially, resulting in diluted earnings per 80th of 67 cents. Now I'll brief you on our 2021 full-year financial results. Total module shipments were 22.2 gigawatts, up 18% year-over-year. Total revenues were 6.41 billion up 16.2 year-over-year. Increase in motor shipments, higher integrated production volumes, together with cost reduction from our industry-leading integrated cost structure, resulting improved profitability. For the full year of 2021, gross profit was about $1 billion in increase of about 8% year-over-year. Gross margin was 16.3 compared with 17.6% last year. Operating margin for the full year of 2021 was 2.7% compared to 5.1% in 2020. Operating expenses were 13.6% of the total revenues in 2021 compared to 12.5% last year. EBITDA was $538 million in 2021 compared to $463.5 million last year. Non-government income was about $88 million in 2021 compared to 147 million last year. This translates into non-GAAP basic and diluted earnings per 80 days of 1.84 and 1.7 days, respectively. Moving to the balance sheet. At the end of the fourth quarter, our cash and cash equivalents were 1.4 billion up from 1.3 billion $14 billion at the end of the third quarter and $1.24 billion at the end of the fourth quarter last year. Our printing efficiency continues to improve quarter over quarter. Air turnover days were 52 days in the fourth quarter compared with 65 days in the third quarter of 2021. Inventory turnover days were reduced to 88 days in the fourth quarter, compared with 171 days in the third quarter of 2021. Total debt was $4 billion at the end of the fourth quarter, compared to $2.8 billion at the end of the fourth quarter last year. Net debt was $2.56 billion, compared to $1.56 billion at the end of the fourth quarter last year. With the listing of Jiangxi Jingkou earlier this year, our financial structure is expected to improve with access to competitive financing. This concludes my prepared remarks. We are now happy to take your questions. Operator, please proceed.

Thank you. If you do wish to ask a question, please press 01. your telephone and 02 to cancel our first question comes from Brian Lee with Goldman Sachs please go ahead hey guys thanks for taking the questions I guess

maybe just to start off on the guidance, appreciate you giving the views for shipments here in Q1 and for the full year. I think customarily you've given gross margin guidance, not for the year per se, but at least for the outquarter. Any reason, I might have missed this, but did you provide the gross margin guidance and revenue guidance for Q1? And if not, kind of what's the rationale and I guess what are the puts and takes around the outlook for those metrics in Q1?

Brian, this is Charlie speaking. And you're right, you know, in terms of guidance, we make some, you know, small changes compared to, you know, the couple, you know, the quarters before. And we plan to only give the guidance for assignments And in terms of gross margin revenue range, and firstly, we want to be consistent with, you know, because our subsidiaries in China has been invested in China's capital market. So we want to make the consistency, you know, with, you know, the regulations in China, which the entities did not provide any, you know, gross margin guidance or as well as the revenue range. Second one is in terms of gross margin, because... you know, the supply chain is so volatile and we don't believe it's, you know, at this stage to give a reliable, you know, the gross margin range is still in challenge.

Okay, that's fair enough. Maybe at a big picture level, you know, gross margins came in sort of right above the high end of the range for 4Q. So, you know, kudos to you for good execution on that. Are you saying that the supply chain slash margin environment is more uncertain in Q1 2022 than what you saw in Q4 21? You know, the

The polysilicon price is still well above our expectations, so in terms of gross margin, we expect some pressures from that perspective. From the long-term perspective, we think the price will return to a more rational level, with more supply, you know, production volume from poly producers in the second half year.

Okay, fair enough. And then for Q4, you know, there was a good amount of non-module shipments. What was your kind of gross margin delta roughly between modules and non-modules? Were they same range or? you know, higher on the non-modules and if higher, what sort of, you know, percentage or, you know, basis points difference?

You mean the Q4 last year or Q1 this year? Sorry.

Yeah, asking about Q4 and then I guess the follow-up to that would be what's embedded in your shipment guidance for 22 and Q1 in terms of, you know, wafer and non-module versus module.

Okay. So, you know, for the 2022, the guidance for Q1, as well as, you know, the four-year, the majority part is the module. So you can take the guidance as the module measurements. And regarding the Q4 last year, we did have some, you know, the 600 megawatts, you know, for the vapor and cell measurements. It's for the low-efficiency, you know, wafer and sale, so the margin is roughly very low. I think if you're excluding the wafer and the sale margins, the module margins will be a little bit better than the total amount.

Okay, that's great. Last two housekeeping ones, and I'll get back in the queue. The capex guidance for 2022, I might have missed that, but do you have a capex range or number for this year? And then I noticed the tax expense was much higher than usual in Q4. You know, maybe what was the driver of that? And should we be modeling a similar tax rate in 2022? It seems like it was high 20%, sort of close to 30% in Q4. Thank you.

Yeah. It comes from me. Yeah. Yeah, this is for CapEx.

Go ahead. Yeah, for CapEx for last year, 2021, and it's approximately 1.3 billion U.S. dollars. And we expect some new capacity in this year. So it might be in around 1.8 to 1.9 billion U.S. dollars.

And just lastly, on the tax rate?

Yeah, the tax rate, it's in the range of 15% to 20%. OK, thanks, guys.

I'll pass it on.

Thank you. Our next question comes from Philip Shen with Roth Capital. Please go ahead.

Hi, everyone. Thanks for taking my questions. Just wanted to revisit the margin question for Q1. You know, there are just three days left in the quarter, so you guys probably have a sense for where margins are. What do you think could still drive or change, you know, be a material kind of impact versus your view given how late in the quarter we are? And what do you think can you give us a sense for, you know, how – Do you expect margins in Q1 to be flat versus Q4 or potentially weaker as a result of the higher poly price? Thanks.

In terms of margin, first quarter, I think it's roughly, you know, be flat, you know, quarter over quarter, and maybe slightly lower because of the polycyclic compliance. And as well as the R&D, the appreciation standards, particularly January and February.

Okay. Thanks, Charlie. And shifting back to some comments I think Jenner made about Europe and the demand there, I was wondering if you could provide a little bit more color on how demand has changed over the past four weeks to the European market. Do you also serve the European market from your Southeast Asia facilities? Any kind of color there would be really helpful. Thanks.

Thank you, Phil. This is Jennifer. For the global demand of 2022, we are pretty optimistic about the global demand, especially what happened in the last, let's say, three, four weeks' time in Europe. We have observed quite, let's say, we'll observe a stronger-than-expected demand coming from Europe, plus the, you know, this rush in India and also the recent strong push from China's side. So, you know, adding everything together, we are, you know, looking at the global demand at the range around 240 to 250 gigawatt range. And regarding Europe, we believe European market will beat 30 gigawatt pretty soon as a whole. And currently, we still supply European market from China manufacturing base. Our non-China factory base is mainly the origin for U.S. market right now. Hope that answers your question.

Yeah, that's great. Thank you. As it relates to the capacity expansion, I think last quarter you guys were expecting wafer cell module to be 40, 40, and 50 gigawatts respectively, and now you're expecting it to be 50, 40, and 60 gigawatts. And so I wanted to see if you could help us understand, you know, what's driving that meaningful increase in capacity. It seems like it could be related to the stronger demand, but was wondering if you might be able to share more there. And then can you talk about, you know, if you expect 2022 to be, you know, call it – 35 to 40 gigawatts, how much of that is booked already for the year? You know, you often have bookings well in advance. And so do you think that's 50% booked or possibly even more? Thanks.

Hey, Phil. I think let me briefly talk about this topic. For the capacity expansion, yes, we have seen a stronger than expected demand. But mainly, we are holding the conference about the long-term momentum of the stronger global demand. And that is very important, one of the important reasons why we expand our capacities. Meanwhile, we noticed that lots of capacity will release in the second half, even year-end. That might, you know, help our, you know, to meet the demand not only in 22, but also in 23 and, you know, 24 even. And also for the booking side, I think we are looking at our bookings. We are more or less around half bookings based on our plan. And we are trying to build more. And very important note here is that we are witnessing stronger than expected demand for the untyped product. So that's, I think, the key highlight we're trying to expand our capacity. The focus will only be the expansion on the untyped product. Thank you.

Okay. Great. Thanks. One last question for me as it relates to the shipments from Vietnam and Southeast Asia into the U.S. Have you guys been able to get new volume of shipments into the U.S.? I think you guys have non-China poly going into modules. And if so, when do you expect those shipments to arrive at U.S. shores without being impacted by the Hoshine WRO? Thanks.

For that, I think we have seen some positive feedbacks in the last couple of weeks. And we have seen some smaller volume, let's call it samples, being accepted and passed through the CBP inspection. And we are expecting to build a trustworthy tracking system to make sure that all the shipments going to U.S. market will be fully compliant with the CBP and the WRO requirements. So with that, we relaunch or we started our non-China productions, I think, in the last month or two. And back to your question, we haven't got any massive, let's say, 100 megawatt level of shipment arrival in U.S. border yet, but we're still holding the positive views about the future shipments to U.S. market. For sure, there are still some concerns on this recent feelings about this anti-convention stuff, but we will keep a close eye on it. But in general, I think we have one of the best solutions in the industry with our vertical integrated non-China production basis.

Okay, thank you very much, Jenner. I'll pass it on.

Thank you, Phil.

Our next question comes from Alan now with Jefferies. Please go ahead.

Thanks a lot for the management for holding the meeting and congratulations on the good results. So my first question is about the new Topcon product. So on a reward basis, what do you expect the premium

of top con products versus prep products thank you for your question this is general speaking and regarding the premium it's hard to justify you know our general numbers but we are building the business business model based on you know profit sharing business model with our customers in some cases we might share a we might get a bigger premium. In some cases, we might get a smaller premium based on, you know, different markets, different radiation conditions, different system designing or, you know, et cetera. So it's very slow. But in general, we are seeing, you know, the anti-premium in the current stage, we are seeing anti-premium stay around two to three U.S. dollar cents. But we expect that may become up and down a little, but we still are pretty optimistic about this stronger than expected demand about the anti-product. Thank you.

Thank you. So it's around two to three cents, and I wonder in terms of the margin, would this be better compared to the product?

You know, this is Torren speaking, it's for sure, you know. And the new products in time, we can get the price premium as well as we are in the progress to ramp up our capacities to make the cost, integrated production cost is competitive with traditional PERC product.

Thank you. And next question relates to the European markets because they were ambitious installation targets with the RepowerEU initiative, etc. But at the same time, actually, euros are depreciating, meaning that probably module prices are increasing to them. So I wonder if the company sees still strong demand from the European market in the second quarter versus the first quarter. Do you see quarter-over-quarter growth?

with higher probably higher module prices oh okay this is jr let me pick this one uh the european demand is stronger than expected especially in the recent three four weeks time we uh we uh we can feel the stronger than expected amount of mainly coming from this uh not only from the distributed generation market segment, but also coming from the utility side as well. But we have seen, you know, quite several, let's say, highways around the stronger demand from Europe. One of the challenge just mentioned by you is currency exchange rate. But the other challenges are like the logistics cost. You know, the shipping costs continue to climbing up, which is... you know, big impact factors. And as well as, you know, this, you know, just the cost of raw material, like the polysilicon, like aluminum frames, et cetera. So, but having said that, you know, because the local electricity cost is higher and higher, so we can expect that even with a slightly higher than expected module or solar system cost, you know, the solar system or solar electricity from solar system is one of the most competitive electricity contributors across the whole Europe. I think we are still, that's the reason why we are holding a very big confidence on the European demand, not only for the next coming quarters, but also for the next coming even, you know, three or even five years time.

Did that answer your question? Yeah, that's very comprehensive. Thanks a lot. Yeah, thanks for management. And I've finished all my questions. Thanks a lot.

Thank you. Reminder, to ask a question, please press 01 on your telephone keypad. Our next question comes from Rajiv Kaudhari with Sansara Capital. Please go ahead.

Good morning, and first of all, I want to congratulate you on an amazing fourth quarter, as well as on a very successful IPO. Those are big game changers for Jinko Solar going forward. The question I wanted to ask you, I have several questions. The first question is about operating expenses. You had noted that the big change from quarter to quarter in the operating expenses, which was almost $100 million, was because of shipping expenses. And yet when I look at the line items, the GNA went up from $60 million in Q3 to $122 million in Q4. So is there any shipping expense included in the GNA? Can you just explain why GNA went up so much and what the components are of that and how sustainable that is on a go-forward basis? Because DNA has been trending at $50 to $60 million for several quarters now, and all of a sudden it has jumped up 100% in one quarter. So that's my first question.

Hello, this is Charlie speaking. And regarding the DNA expenses, it's because the increase of the you know, full score is particularly, you know, some of QA expenses, it's relating to the employee, you know, year-end bonus, as well as we have incur additional, you know, expenses relating to the base year company listings. So it's, you know, some of the parties are not recurring. And looking, I think the most important is looking to 2022. And we plan, you know, a significant increase of revenue, you know, 35 to 40 gigawatts, which is 25 gigawatts. In terms of operating expenses, including everything, you know, we think we are going to benefit from the, you know, leverage of the large scale and the are paying fences, which is, you know, the total revenue will continue to drop quarter by quarter.

So, absent the employee bonuses, would you say that at least in the first few quarters of the year, G&A will drop back to the $60 million range? And then the employee bonus will kick in at the end of the year, I assume?

No, I think the majority part is the incremental part. The majority part is the IPO expenses as well as the legal expenses. We are doing a lot of legal-related work, particularly, for example, the WRO in the U.S. and the litigation with the patent. And for the year-end bonus, we did accrue quarter by quarter And because we have better, you know, performance, particularly in the fourth quarter, and so the employee, you know, the bonus is relatively higher in the fourth quarter because it's passed down better than expected year-end performance.

Okay. Charlie, my next question is about shipping costs. At this point, it has become very clear that the shipping costs will stay higher for longer than was originally thought maybe a year ago. Are you having any success in passing the shipping costs and the risk of changes in shipping costs to the final consumer, or you are still having to swallow that cost and its volatility by yourselves?

Sure, sure. You know, shipping costs were, you know, firstly, the shipping costs were continued to maintain a high level, you know, throughout the 2020, 2022, you know. But given, you know, the solar, you know, energy is very competitive. A lot of, you know, markets are highly, you know, demanding, you know, for the solar modules. So we are saying, you know, our flexibility is, you know, from the, let's say, the customer acceptance for the higher module price, including the shipping cost. So we, you know, based on our experience with customers, I think we are able to, you know, pass through the majority part of the shipping cost to our customers.

So, Charlie, as you're looking out at Q1 is almost over, Q2 and beyond, It's clear that, at least for now, polysilicon costs have also been higher and may stay higher for longer, especially in the second quarter. Does that mean that module prices will continue to go up? Would you say that module prices in Q1 were higher than Q4 and Q2 they'll be higher than Q1?

Last year in Q4, you know, you know, the module price, you know, market price is reaching to extremely high, almost over, you know, I think RMB2, some, you know, cases. But it's, you know, lower a little bit in the first quarter. But given the high pilot silicon price, particularly in the first half year, we're expecting, you know, strong demands and a relatively shortage of pilot silicons. We are expecting that, you know, the module price will be relatively stable and may have upwards pressure. But in the second half year, given more, I think, the policy supply, we are relatively, you know, optimistic for the, you know, the downward trend for the policy.

But are you giving yourself some pricing flexibility in the way you are writing your long-term contracts? So in case silicon tries to stay higher for longer, you are not squeezed by that?

I see we have different arrangements, you know, for our customers. Some of the customers, the modular appliances, they have some kind of linkage for the small market of polysilicons. Some of the contracts are, you know, fixed.

But the ones that are variable, are those going up as a percent of total contracts?

Excuse me, can you speak again?

The number of contracts where module pricing is variable based on the spot price of polysilicon, is that kind of contract gaining in popularity right now?

I think depending on different regions, different customers. So it's hard to say, but some customers, they like to, based on their estimations, they are more pessimistic or optimistic for the polysilicon price. So some of the customers, they're more confident on the projections of polysilicon price may they may like to have the variable arrangements with us.

OK. And a final question is on the n-type. You mentioned that you have got 16 gigawatts of n-type operational right now. But you also mentioned that the target for capacity for n-type cells at the end of 2022 is also 16 gigawatts. I don't understand. You're not increasing the N-type cell capacity at all this year?

The N-type, the 16 gigawatts. The 16 gigawatts is getting online in the first quarter, but it's in the ramping up stage. So by the end of this year, we didn't have planned so far to increase again. So that is, you know, the N-type, the 16 gigawatts is new for 2018. but it's good really in first quarter. So that is why, you know, when we gave the guidance, you know, by the end of the year, the end type capacity is 16.9 gigawatts.

So you're saying right now it is not 4 gigawatts a quarter?

So, sorry, let me explain that. We get 16 gigawatts n-type TopCon cell capacity online in the first quarter. The 16 gigawatts is annual capacity, and it's in the ramping up stage, and we expect the capacity will reach to full capacity by the end of second quarter. So far, we have already get 16 gigawatt capacity for the n-type.

But the goal for end of the year is also 16 gigawatts N-type. Out of the 40 gigawatts cell capacity, the target is only 16 gigawatts N-type? Or did I read that wrong?

You're right. You're right. Because by the end of last year, we had only, I think, 24 gigawatts cell capacity. The additional new 16 gigawatts this year. So get... Total number, 40 gigawatts.

Okay. I'll take it up later, Charlie. Thank you. Congratulations again.

Thank you. Our next question comes from Tony Sa with Bank of China. Please go ahead.

Hi, thanks very much, Jim. Thanks for your time. This is Tony Faith from POTI. I have two questions. First one is also a follow-up on the NTAC product. So I understand the new plants are still ramping up, and you may not have the final color on the cost side. But maybe, can you speak of the kind of plant design, these new N-type products? Are they thinner compared to the PERF products, so they consume less poly?

So Tony, can you repeat the question regarding the N-type poly? You mean the wafer? The N-type wafer?

The wafer and the cell, their thickness, are they thinner compared to their prep modules, so they consume kind of less polysilicon, so it will help on your production cost side?

Yeah, you're right. You know, we have that advantage, you know, for the n-type, not only the top-count cell, you know, solar cell productions, as well as we are, you know, doing the n-type wafer, you know, n-type modules. For the n-type wafer, it has an advantage of thinner wafer compared to the P-type. And we think it's going to, from the, I think that perspective, N-type wafer, it could get some advantage from the consumption, less consumption of polysilicon.

Got it. So, you just said that you are not going to add new anti-sale capacity this year. So, in the coming quarters, we see the premium of the anti-products is certain enough. So, do you think that you will continue to invest in the future and early retire your existing peak bulk sale capacities?

For the next stage, the capacity expansion plan, we are still evaluating You know, if we will, let's say if we plan to invest additional more, you know, let's say solar cell capacities, it's 100%. It's a top-count N-type, you know, cell capacity. But at this stage, we are still in the evaluation stage.

Okay, got it. Thanks. So my last question is on your product mix. So last year, I guess your DG shipment should be around 30% to 35% of the total market shipment. So in this year, do you think the share of DG products should be higher than last year? And how does it have the margins? Because some of the new DG sales should be coming from China market. So do you see higher maybe sales channeling, sales expenses on the price?

I think you can prepare remarks by dinner. And we mentioned, you know, the DG roughly will increase around, you know, 40%, which is 30% to 35%. And it will, you know, we will focus not only in the overseas markets as well as China DG markets.

Okay. Okay. So do you think the DG, kind of in the matching side, do you think the DG product has higher than the regular utility-scale products?

Yeah, it's helpful. You know, DG, it's, you know, the ASP, you know, the customer, you know, for the price is more, it's better, you know, so we expect to get more a higher margin and from the DG perspective.

Okay.

Thanks a lot, Charlie. That's all from me.

Okay.

Thank you. This is the end of today's call. Thank you all for participating. You may now disconnect your lines.