Now Q& A session will begin. Please press star one, that is star and one. If you have any questions, questions will be taken according to the order. You have pressed the number one. For cancellation, please press star two, that is star and two on your phone. The first question will be provided by Dong-Jin Kang from Hyundai Motor Securities. Please go ahead with your question.
Thank you for the opportunity. I have three questions for you and the first is about the cell quality issue that was mentioned during the presentation. I believe that the trend is to move away from the materials that are manufactured in the United States. The policy that Hanwha Solutions has taken is to utilize the parts manufactured in plants in Korea and also the plant in Malaysia and have the module produced in the U.S. plant. In the process of moving away from the Chinese manufactured parts and materials, especially the question is centered around securing the wafers which are mostly manufactured by the Chinese company. In the process of finding an alternative supplier, is there any possibility of the cost to increase? If that is the case, then is it likely that the increased cost can be transferred to the product cost?
The second question is about the TPO and I'd like to ask for the annual guidance of the TPO business. The third is that the tax credit on the investment seems that it is going away much quicker than people have anticipated. It is likely that it will be by the end of or by 1H26 where the project that will kick start by the year 2030, then that will be eligible, still eligible for some amount of the tax credit. That might drive some escalation or the acceleration rather of the project initiation. What kind of impact do you foresee for your module business and also the downstream business?
Let me respond to the first question first. As you have rightly mentioned, we are increasing the volume from also polysilicon manufactured not by the Chinese company and with these manufacturers we are in very close collaboration to verify the origin. In parallel, we try to diversify the supply network and have them managed very closely. We have the facilities in Cartersville, Georgia and they will be operational with the facilities to manufacture ingot, wafer and cell. This will leave no room for any doubt in the future. Regarding your second question for the TPO business and annual guidance more broadly about our residential business after the enactment of the OBBBA Act, there is a heightened uncertainty in the market. We will have more details once the executive order is finalized and we have more details associated with it.
I believe that you could understand our position that we cannot disclose the guidance for the third quarter and also for the second half of this year. Regarding the third question, the AMPC was recently revised. That means that these Chinese, the solar manufacturers who simply assembled modules, will not be eligible for the AMPC. That means that the Chinese company will no longer have the price competitiveness against the module manufactured in the United States. To be eligible for the AMPC incentives going forward, you need to satisfy the criteria of the material cost of 65% or higher being manufactured in the United States by the year 2032. We are making all the necessary preparations to meet or exceed the target by those time. As you have mentioned, to be eligible for the additional subsidy, this project initiation will be accelerated.
It is possible that the order will be placed for an item where the period for the delivery is rather long and the project groundbreaking of the particular project might be accelerated, the timing of which and some project might decide to invest 5% of the total investment to get the certification of the project initiation before that. In case of the CNI, the modules are provided to the developers because the modules can be stored for a longer period of time. There could be some concentration of the demand on modules. Next question please.
The following question will be presented by Parsley Ong from JPMorgan . Please go ahead with your question.
Thank you for the chance to ask questions. My first question is I think you mentioned earlier that the renewable energy residential energy business had cumulative KRW 180 billion Op in first half and KRW 145 billion non-op loss from financial instrument valuation. Does that mean that the cumulative first half 2025 net profit attributable to your residential energy or TPO business is about KRW 39 billion? What kind of growth outlook do you expect over the next few years? I believe your current market share in the TPO business is low. What kind of margin and volume growth or market share do you plan to target over the next three years? The second question is on your module business. I think I heard you mention earlier that you're now targeting 7.5 GW module volumes in 2025, is that correct?
Can I assume that the downward revision in guidance is because of the quality issue? In that case, how much your 2Q module volumes were up or down by how much Q-on-Q? If your U.S. wafer plant starts up, will that resolve the problem? If so, when does your wafer plant start up? Lastly, in the mid to long term in the TPO market, what do you think are your company's advantages versus disadvantages versus a company like Sunrun? Also, for your development, asset sales or EPC, I think it was quite loss making in the first and second quarters. What is your expectation for second half opinion? Thank you.
Let me first respond to your question on the residential energy (TPO) segment and the prospect because of the revision or the end of the 25D initiative. It is likely that the overall market size might decline, especially those relying on the cash and loan model, and the volume or the demand for that model will transfer into TPO. As you might be aware, our business model is already based upon TPO, so we might be eligible for 48E incentives. In the next three years, by the year 2028, it might be possible that the total size of the market might decline. From the company's perspective, we will continue to focus on items that satisfy the non FEOC, and we will actively utilize the DCA model and thereby increase the market share.
As you could appreciate, there are still large amounts of uncertainties in the market and many people have adopted the wait and see mode. Please understand that we cannot share any detailed guidance for the near future and mid to long term basis regarding the market share and the expected margin. If I may elaborate on the strength that we have in the residential market, then it could be the market share. The Qcells model has already established its brand value, and if and when it is associated with other financial services providers like Enfin, then with this well-established position and order awareness of our modules, we can expect further upside. Regarding your question about the adjustment in the annual shipment from 9 gigawatts, which was disclosed in the earlier conference call, to 7.5 GW, I can share three reasons behind it.
First is the delay in the Cartersville, Georgia operational schedule. The plan was to have the Cartersville site operational and utilize the high efficiency cell and thereby manufacture high efficiency models. Because of the delay, we are currently utilizing the lower output products and that resulted in the adjustment of the volume of 450 MW. If I may share, the reason for the delay in the Cartersville project is because of such tight construction market situation in the United States and also there is additional need to increase the maintenance to strengthen the safety and operational efficiency. That is why there has been some delay in the construction of ingot, wafer, and cell facility. The revised schedule will be for the mass production.
It will start from the fourth quarter of this year, fourth quarter 2025, and the actual sales in earnest will be initiated from the first quarter of next year. The second reason behind the adjustment is because of the quality issue that has happened in the Korea and the Malaysia state, and that translates into the defect of volume worth 450 MW. That has contributed to the decline in the export volume from these two states. Luckily, we were able to rectify this issue, and we believe that we can resume the export from August and onwards. Because we want to make sure that there are no defective products or materials that are used for the U.S. facility, that operation has been at a lower pace, and that also contributed to the lower volume.
The third reason is because of the delay in some of the projects that happened in the European countries, and the affected amount is around 500 MW. That is part of the delay in some of the projects that has happened outside of the United States. We expect the shipment will resume its normal pace from the year 2026. Additional information about the quarterly module sales versus the previous year's performance, on Q2 on a Q2 basis, Q-o-Q basis, it has increased by 10%. On Q3, we expect the sales volume will be in the same range as the previous quarter. About the generation asset sales and the EPC, the guidance that we are sharing with the market is regarding the revenue, and for the third quarter, the figure that we are sharing with you is about KRW 80 billion- KRW 90 billion. For the whole year, we maintained the KRW 4 trillion.
In terms of the profitability, the project sales are mostly concentrated on the second half of this year. We expect the figure will get better towards the end of the year.
The following question will be presented by Woo Young Eom from Sang Sang Securities. Please go ahead with your question.
I have one question about the third quarter guidance. You said earlier that the module sales for the third quarter will be in the same range as that of the second quarter and the development asset sales will be concentrated on the second half. That means that the figure will be higher in the third quarter. The figure that you have given us for the third quarter for this business is still in the negative. That means that do you expect a larger loss in the residential sector or can I expect there is a one-off expense associated with the Cartersville, Georgia project?
Let me share the guidance for the third quarter for the renewable energy. We expect a loss of KRW 100 billion, around that figure, and that can be broken down into the Advanced Manufacturing Production Credit (AMPC) amount of reduction that comes from the quality issue associated with the Malaysia and also the Korea plant, and the change in the amount will be about KRW 60 billion. For the AMPC, the guidance figure that we are sharing for the third quarter is KRW 120 billion.
As was mentioned earlier, this cell issue is being rectified. We expect that to happen by the end of July. We can resume the export from August and everything will be normalized starting from September. Additionally, because of this lower utilization of our facility while we address this quality issue, that translated into the higher cost associated with the fabrication and also we expect that tariff impact will be felt for the materials that we use starting from the third quarter.
That means that the overall cost pressure will be increased and thereby the module spread will decline. Despite the fact that we believe that the module shipment or the sales volume for the third quarter will be in the same range as the second quarter, we have other response measures in place such as the inventory adjustment. As for the residential business, as was mentioned earlier, because of the OBBBA Act, there is increased uncertainty in the market. Please understand that we cannot share any official guidance for the third quarter and also for the second half.
The following question will be presented by Jae-Sung Yoon from Hana Securities. Please go ahead with your question.
I have two questions for you. First, is the model ASP, what has been the trend on a Q-on-Q basis? What do you expect the ASP to be in the third quarter? The second question is, I understand that the U.S. customs authority has initiated investigation into the possible anti-dumping practices for such countries as Laos and India. I'd like to ask if you are aware of any future schedule, please share.
Regarding the ASP, we cannot share with you any exact figure, but what we can share is the general trend in the market with the AD and the CVD. You are right in pointing out that the ASP went up until the second quarter, but towards the end of the second quarter with the enactment of the OBBBA, the market has taken the wait and see mode.
We expect the ASP in the following quarter will maintain the current phase . If I may share, the ASP for the company for the second quarter, because of the concentration of the national utilities project, there was an increase in the ASP. We expect this to be a one-time event and ASP will go down slightly in the third quarter. Let me share the schedule for the AD and the CVD investigation that are slated to happen for India, Indonesia, and Laos. The investigation is set to be started from August 6th and the initial findings will be available by the end of August. We expect the final result on AD to be made available in April 2026, for CVD to February 2026.
The following question will be presented by Jinho Lee from Mirae Asset Securities. Please go ahead with your question.
I have one question. The future prospect of the U.S. solar market, I believe that the market has taken the wait and see mode because of the executive order and the initiation of the digital investigation. If you have any plan for the future, could you share the timeline? If you have any scenarios to actually tackle these upcoming challenges, then please share first about executive orders.
As you're aware, the details are yet to be disclosed, so the company is keenly monitoring any development. What we can share could be the potential impact that this move might have on the company. If the FEOC certificate is something that is required, then it might work in our favor as an opportunity because we are rather free from those certificates. The second thing is that if the Safe Harbor certification gets even more complicated to acquire, then maybe the large customers or large potential customers might decide to move away from other sources of energy than solar.
The following question will be presented by Dong-J in Kang from Hyundai Motor Securities. Please go ahead with your question.
I have two follow up questions. The first is about the downstream business. As was mentioned earlier, there will be the increased demand to initiate the construction as soon as possible to be eligible for the subsidy. Will that have any positive impact on our or the company's downstream project? The second question is about the restructuring of the supply chain. You said that the cell quality issue in some of your plant or some of your sites has been resolved. Starting from the third quarter and onwards, there will be the impact from the tariff issue. For the fourth quarter, the cell production will be normalized and the module will start to be assembled in the United States. This additional cost factor that rises in the third quarter, will that be likely to be transferred to the final price?
I understand your question to be that the value of the project will be elevated at the time of the sales. Let me answer this way. Maybe that is possible for this project that satisfies the Safe harbor requirements. That is eligible for the ITC, then of course those projects will be valued higher than the project that does not. We do not know at the timing of the sales how many of those projects will be valuable. That will determine the final price. I would not say that it is the absolute important fact, but it is one of the many important factors to consider. About the other part of the question, as you have rightly mentioned, the tariff effect will be felt from the second half. Also, internally we are adjusting our supply chain to utilize the materials manufactured outside of China.
There is a possibility that will impact our cost. Will that be transferred to the final price? It depends on multiple factors. When the demand from the market increases for the short term and there is a definite likelihood, then there could be some likelihood for the increased cost to be transferred. If the FEOC certificate process to get that gets even more complicated than it is now, it is likely that the demand will be concentrated towards our company because we are rather free from it. We will know when the time comes whether we can transfer some of the cost or a significant portion of the cost to the final price. I would like to end the earnings call here. Thank you very much for joining us.