On July 25, Song Zhiping, President of China Association of Listed Companies, delivered a speech entitled "Overcoming Involution Vicious Competition and Building a Healthy and Benign Ecology of the Industry" at the Seminar on the Review of the Development of the Photovoltaic Industry in the First Half of 2025 and the Prospect of the Situation in the Second Half of 2025 sponsored by China Photovoltaic Industry Association. In
his speech, based on the experience of the cement industry and the electrolytic aluminum industry, Song Zhiping put forward five suggestions for the "anti-involution" of the photovoltaic industry: first, strengthen the self-discipline of the industry from competition to competition and cooperation; second, improve the concentration of the industry from decentralization to integration; third, address both the symptoms and root causes from reducing the output to reducing the capacity; fourth, improve the pricing level from the cost and profit of quantity to the cost and profit of price; Fifth, from the Red Sea to the Blue Sea, the "four modernizations" innovation adds value.
Benign competition refers to competition in terms of technology, quality, service and brand. If the price is lower than cost, it is vicious competition. At the beginning, many people confused "involution" with competition and thought that the more "involution", the better.
Last July, the meeting of the Political Bureau of the Central Committee proposed to prevent "involution" vicious competition. Until now, the Central Committee has also put forward a series of spirits and instructions. On the other hand, the industry has also made a profound reflection in practice, it should be said that today's market has a unified understanding of "involution competition is a vicious competition".
I think this is a great progress, because it is difficult to carry out anti-involution work in various industries if we do not realize that there are healthy competition and vicious competition in competition, and that "involution" competition is very harmful.
In the past, the market talked about competition, but now we should not only talk about competition, but also about competition and cooperation. In the past, we always said that "business is like a battlefield", but I later told you that business is not a battlefield, and competition is not a war. There are essential differences between business and war, business and battlefield, competition and war.
Enterprises should not only do well by themselves, but also have a healthy ecology. The interests of the industry are higher than interests of the enterprise, and the interests of the enterprise are in the interests of the industry. In 2009, at the cement conference of Conch Group, I said this. At that time, the competition in the cement industry was very fierce.
People say that General Song is talking about "beautiful words", and finally we have to fight a bloody battle, the strong win, and then raise the price. Later, I told them that the war should be over, the industry has been fighting for many years, but it has not won, but has made the industry a "Red Sea". I say you all listen to me and we start over.
Peers are enemies, but peers are stakeholders. The building materials industry began to integrate and coordinate at that time, and then made money for more than ten years.
In the past, cement was very profitable for a period of time, but in fact, cement is also a very surplus industry. In the past, the overcapacity was as high as 35%, but now it is about 40%. Market economy itself is a surplus economy, so the problem of enterprise research is whether it can make money in the case of economic surplus. If enterprises can make money when there is a shortage of production capacity and lose money when there is a surplus, then there will be no market economy.
Another is to emphasize industry self-discipline.
Today, China Photovoltaic Industry Association is on the scene. I am also the president of the Association of Listed Companies. The Association of Listed Companies has positioned itself as the self-regulatory management organization of the industry.
I think all trade associations should take self-discipline as the primary task of their work. Industry associations have five tasks, namely, industry planning, formulation and maintenance of industry policies and standards, promotion of technological innovation in the industry, internal anti-unfair competition, and external protection of domestic enterprises in accordance with international norms. Among
these tasks, anti-unfair competition is more difficult, but this is what the association must do. Therefore, industry self-discipline includes two aspects, on the one hand, industry associations must strengthen self-discipline, on the other hand, large enterprises must take the lead in industry self-discipline, small and medium-sized enterprises should also follow the rules and regulations of the industry, can not be price destroyers. In doing so, we will have a win-win basis.
Recently, I have studied the electrolytic aluminum industry, which is worth learning and studying. From 2002 to 2017, the electrolytic aluminum industry has carried out seven times of regulation and control, but the first six times failed, and it did not succeed until 2017.
Why success? After the ceiling of the industry was set, their capacity utilization rate remained above 95%, so the profits of the electrolytic aluminium industry have been rising in the past eight years.
Including Tongwei shares, Daquan Energy and other enterprises are reducing production capacity and output, electrolytic aluminum industry can be used as a good reference sample.
The second point is to improve industry concentration from decentralization to integration.
To be an enterprise, we should not only create resources, but also integrate resources. The ability to integrate resources is even greater than ability to create resources.
Westerners are also "involute", and 100 years ago they were also "involute" badly. How did they get here? At that time, the scale of steel mills was very small, and JP Morgan restructured 65% of the steel mills. Later, the railway and oil industries in the United States carried out a series of integration.
Nowadays, with the rapid development of market economy and the rapid development of enterprises, it has come to an "era of integration". Recently, the Securities Regulatory Commission has launched six mergers and acquisitions to promote large-scale industrial mergers and acquisitions in the capital market.
I personally think that mergers and acquisitions have five advantages: first, it is conducive to becoming bigger and stronger, and creating industry leaders; second, it is conducive to the structural adjustment of listed companies; third, it is conducive to those innovative enterprises entering the capital market; fourth, it is conducive to increasing concentration and overcoming industry involution; fifth, it is conducive to enterprises going out and going to sea.
Let me give you a case. After Japan's bubble economy burst in the 1990s, Japan's cement production capacity was 1. What to do?
Japan's cement industry has not increased its sales and production in more than ten or twenty years, maintaining more than 40 million tons, but the price of cement in Japan has been very stable, maintaining around $100 a ton. China is currently $50 a ton.
Japan's method is to expand the scale through restructuring and mergers and acquisitions, and then large enterprises will reduce production in equal proportion. If the production capacity is reduced one by one, the enterprises will be reduced. Therefore, we should restructure first and then reduce production capacity.
In this process, a key point is that the anti-monopoly law is not applicable in the reorganization (exemption from the anti-monopoly law). Because large-scale reorganization usually involves anti-monopoly law issues, it is necessary to exempt anti-monopoly law to ensure the smooth progress of reorganization. This is worth studying in depth.
In this process, a key point is that the anti-monopoly law is not applicable at the time of reorganization (exemption from the anti-monopoly law). Because large-scale reorganization will involve anti-monopoly law, it is necessary for anti-monopoly law not to apply to open the way for reorganization. This is also worthy of our study.
The third is to address both the symptoms and root causes from reducing output to reducing production capacity.
First of all, we should go to production. Now But the market can't accommodate so much capacity. What to do? It is necessary to limit production, limit production capacity, stabilize prices, maintain efficiency, and provide time and guarantee for limiting production capacity. Followed by limited production capacity. Limiting production capacity means not only reducing excess backward production capacity, but also limiting advanced production capacity. When making advanced production capacity, we should also set production according to market sales. In 2015, why do I want to carry out off-peak production and off-peak production in China's building materials? For example, it stops production for more than three months in the heating season in the north and for more than three months in the rainy season in the south. Isn't there a 35% surplus of cement production capacity? In fact, like cement, steel, photovoltaic and other products, there is not much price elasticity, price reduction is useless, because one enterprise has reduced the price, other enterprises have also reduced, but the demand is still the same, not because the price reduction can increase demand, which is the characteristics of the vast majority of industrial products. Therefore, in order to balance production and marketing, production must be limited. The practice of limiting production will not affect sales, because sales are constant. The output only determines whether the stock in the warehouse is less or more. From 2018 to 2021, the profit of cement business increased from 20 billion yuan and 30 billion yuan in the past to more than 150 billion yuan, making a lot of money. This is the benefit of off-peak production, that is, production restriction. There is one thing to be vigilant after the production restriction. Because of production restriction, the price has come up, and after the price has come up, enterprises have the impulse to expand production capacity. Therefore, limiting production and limiting production capacity must be carried out at the same time in order to maintain this price. The fourth point is to raise the pricing level from volume to price. There is a small formula when an enterprise is doing business. Profit is equal to sales volume multiplied by price minus cost. This small formula contains all the connotations of business operation. If you can understand this little formula, you will operate. If you don't understand this little formula, you won't operate. But many Chinese entrepreneurs do not look at this formula, but only look at two things they prefer: one is sales volume, and the other is cost. I remember when I talked to some people in charge of photovoltaic enterprises, I said what is your goal? He told me to be "number one in terms of shipment volume", and I asked the same question when I talked to the leading automobile companies, "What is your goal?"? Everyone is competing for shipments, no one mentions profits and quality, the pursuit of shipments is particularly strong, to increase the volume, to improve the utilization rate of production capacity, to increase the market share. If we sacrifice a little market share, we will feel that it is a "great shame". The second is to reduce costs and increase efficiency. Some entrepreneurs think that the cost can be reduced indefinitely, but in fact the cost is rigid. If it falls to a certain extent, it will not be able to go down, or it will be able to sacrifice quality. Some Chinese entrepreneurs believe that the price is given by the market and can only follow the market, or even give the price to the salesman, which is some of the problems in the market. In fact, the competition is between salesmen, and the "involution" is also between salesmen. I have worked as a salesman, and I know how salesmen think about problems: the first is price reduction, and the second is credit. But if the price is lowered, there will be no profit, and if there is too much credit, the cash chain will be broken, so we can't do it blindly. Hermann Simon, who writes about invisible champions, has also written a book called Pricing to Win: Scientific Pricing Helps Double Net Profits. He said that if the sales volume is reduced by 20%, it will affect 15% of the profits, and if the price is reduced by 10%, it will affect 60% of the profits or even bring losses. He believes that the impact of price on profit is 10 times, the impact of cost on profit is 6 times, and the impact of sales on profit is only 4 times, that is to say, enterprises should not always reduce prices. Mr. Kaz uo Inamori has a saying that pricing is operation, and pricing determines life and death. The price should be set by the management leader, not by the salesman. Pricing is operation. If you don't know how to price, you won't operate. Beixin Building Materials has done a good job in making gypsum boards without much new technology, but it has an annual income of 25 billion yuan, a net profit of about 4 billion yuan, and a market share of about 70% in the country. What is the business philosophy of this enterprise? The quality and service are good, but it is not easy to make concessions. It has been very good for so many years. The last point is that from "Red Sea" to "Blue Sea", "Four Modernizations" innovation adds value. Many of the issues mentioned just now belong to meso issues, but as an enterprise, how to go from the "Red Sea" to the "Blue Sea"? I sum it up as "four modernizations". The first is differentiation. I remember Zhong Baoshen (chairman of Longji Green Energy) told me that if there is no innovation, no new production capacity will be added. At that time, everyone made polysilicon, he made monocrystalline silicon, and now everyone makes TOPCon (Tunneling Oxide Passivation Contact Cell) and he makes BC (Back Contact Cell), which is differentiation. The second is subdivision. I talked to the sunshine power supply yesterday. Sunshine Power is an inverter, and it also does The third is high-end. Photovoltaics are mostly used in large power plants, but if they are used on household photovoltaics and roofs, there will be high-end products, because some high-end household products are 50% -150% more expensive than ordinary products. The fourth is branding. According to the concept of "Shi Zhengrong Curve" (smile curve, that is, in the upper, middle and lower reaches of the whole IT industry, the closer to the two ends of the curve, that is, the components, core technology and intellectual property rights on the left side, and the brand and service on the right side, the higher the added value created), without technology and service, manufacturing will not make money. I remember that 20 years ago, the photovoltaic market was dominated by some overseas brands such as Panasonic and Toshiba. Now Chinese brands dominate the photovoltaic industry. Chinese enterprises account for 85% of the world's photovoltaic products. Longji Green Energy, Jingke Technology, Trina Solar Energy, Tongwei Stock, Daqo Energy, Xiexin Technology and so on are all Chinese brands. Now that we have a brand, we should also have a brand premium. Therefore, I also suggest that these brand enterprises should take the road of high quality and high price in the future, instead of price war. Low-end, no brand products, will fight a price war, since already high-end, and brand, can not fight a price war. In fact, in the final analysis, the "four modernizations" are for the sake of price and for enterprises to raise prices. Only by realizing the "four modernizations" can we have bargaining power. If enterprises produce mass goods and ordinary goods, why should they raise prices. This is what enterprises should pay attention to in their operation.
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