Daqo’s Q3 Net Income Plummets 92.5% YoY as Polysilicon Prices Continue to Drop

The company recorded a revenue of $484.8 million, a 60% YoY decrease


China-based photovoltaic (PV)-grade polysilicon manufacturer Daqo New Energy Corporation has recorded a net income of $44 million in the third quarter (Q3) of the financial year (FY) 2023, a year-over-year decrease of 92.5% as compared to $590.4 million.

The company recorded a revenue of $484.8 million, a 60% YoY decrease from $1.22 billion. Daqo said the drop in revenue was primarily due to a decrease in Average Selling Price (ASP) mitigated by an increase in polysilicon sales volume.

The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) in Q3 2023 stood at $70.2 million, a YoY fall of 90.25% compared to $720 million.

The drop in net income and EBITDA in Q3 was attributed to the complex interplay of market dynamics like competitive pricing, polysilicon supply constraints, and the ongoing industry-wide transition to N-type cell technology.

In Q3, the company shipped 62,967 MT of polysilicon, 9,465 MT more than the Q2 shipments. This has led to a significant reduction in polysilicon product inventory across the two facilities, now at less than one week of production volume.

Polysilicon production volume increased from 45,306 MT in Q2 2023 to 57,664 MT in Q3. Polysilicon sales volume also saw an increase, rising from 51,550 MT in Q2 2023 to 63,263 MT in Q3.

In July, competition among module makers intensified, leading to a drop in module prices from approximately RMB1.5 (~$0.23)/W in June to around RMB1.3 (~$0.20)/W in July, impacting the company’s overall profitability.

Daqo said that the high demand in the module sector, combined with lower utilization rates for polysilicon due to factors such as power rationing and system maintenance, contributed to only a marginal recovery in polysilicon prices.

The company said while there was a recovery in polysilicon prices, it was a slow and partial one. Monograde polysilicon prices rebounded from their lowest point in June to RMB63-68 (~$9.87-10.63)/kg by the end of July and averaged RMB87(~$13.59)/kg by the end of September. These price levels still pose challenges to profitability, especially for new entrants with higher cost structures.

At the end of the second quarter, there was a significant reduction in industry inventory levels as customers began reordering and taking delivery of products after polysilicon prices had hit their lowest point.

Additionally, during Q3, there was a noticeable shift in the industry from P-type to N-type cell technology. This transition was driven by strong growth in N-type product demand volume, and the prices for N-type products commanded a premium of RMB10-12 (~$1.56-1.87)/kg in Q3.

This transition is expected to continue, further impacting the market dynamics and demand for certain product types.

Xiang Xu, Chairman and CEO of the Company, mentioned, “Our Inner Mongolia 5A facility, which is now in full production, contributed approximately 40% of our total production volume. Meanwhile, our production cost further decreased by 5.8% from Q2 to $6.52/kg, primarily due to improvements in manufacturing efficiency, as well as a reduction in the cost of raw materials, particularly metallurgical-grade silicon. Compared to our Q1 average production cost of $7.55/kg, the cost has declined by more than $1/kg.”

In the second quarter of FY 2023, the company reported a net income of $103.7 million, an 83.5% decrease from $627.8 million in the corresponding period in 2022.

Mercom earlier reported on how solar manufacturers in China have scaled up capacity as the price of polysilicon materials dropped by almost 50% during the first half of 2023.