Earnings Call: Q4 2020

Mar 9, 2021

Good day, and welcome to the DotGen New Energy 4th Quarter and Fiscal Year 2020 Results Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Alex He, Investor Relations. Please go ahead. Hello, everyone. I'm Kevin He, the Investor Relations of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the Q1 of fiscal year 2020, which can be found on our website at ww.dqsolar.com. To facilitate today's conference call, we also have prepared a PPT presentation for your reference. Today attending the conference call, we have Mr. Longgen Zhang, our Chief Executive Officer and Mr. Ming Yang, our Chief Financial Officer. The call today will feature an update from Mr. Zhang on market and operations, and then Mr. Yang will discuss the company's financial performance for the Q4 fiscal year of 2020. After that, we will open the floor to Q and A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today's call, including expected future operational and financial performance and industry growth are forward looking statements that are made under the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward looking statements. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary view as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's call is as of today, and we undertake Also during the call, We will occasionally reference monetary amounts in U. S. Dollar terms. Please keep in mind that our functional currency is the We offer these translations into U. S. Dollars solely for the convenience for the audience. Without Further ado, I now turn the call over to our CEO, Mr. Zhang. Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. We are very pleased to report a strong quarter In terms of operational and financial results to bring a successful course of the year 2020, I would like to thank our entire team for their hard work, commitment and dedication in achieving These excellent results. During the quarter, we produced 21,008 metric tons of polysilicon, a record high In our company's history, our production cost was reduced by 2.7% in renminbi terms, primarily due to our efforts in additional energy savings, offset by a higher than expected rise in the cost of Compared to the Q3 was a result of exchange rate fluctuations due to renminbi appreciation. In 2021, we will continue our efforts to reduce costs as we begin To benefit from our newly implemented digital manufacturing system to maximize our output, optimize our production process and further improve our operational stability and product quality. During the month of November December 2020, we saw a significant pickup in polysilicon demand from our We sold 23,186 metric tons of polysilicon, which is the highest quarterly sales volume the company ever achieved. Since the beginning of 2021, we continue to see rising polysilicon market prices And most recently, market poly ASP has reached a range of $15 per kg to $16 per kg. As our mono wafer customers continue their capacity expansion plans supported by robust downstream market demand, We believe that the supply of polysilicon will continue to be very tight throughout the year, Given very limited additional polysilicon supply this year, regarding the status of proposed initial public The StarMarkets reviewed Xinjiang Daqo's application in February 2, 2021 and determined that Xinjiang Daqo has already met The offering, listing and disclosure requirements related to its potential stock market IPO as the next step, Xinjiang Daqo will need to go through the registration process with China Securities Regulatory commission before the Star Market IPO can take place. The proceeds of its potential IPO will be used to fund our Phase 4b polysilicon project with an annual capacity of 35,000 metric tons. We have already started the preparation works for Phase 4B, including the design and the procurement process. We plan to start the construction in middle of March and expect to complete the project by the end of 20 21 and ramp it to full capacity by the end of Q1 2022. I have been in the solar industry for over a decade and the prospects for the solar industry have never been bright, Driven by the due trends of solar, grid parity and the urgent need to address climate change, The industry is on the cusp of undergoing tremendous growth over the next few years without the need For government subsidies, solar energy is now one of the most competitive form of power generation ever even compared to And we are beginning to see real world applications where solar is the optimal choice to meet Growing energy needs and to replace legacy carbon based generation. Major Economists around the world have also begun to implement ambitious policies and initiatives It's a green deal to fight climate change through progressive policies for climate neutral and and to decarbonize the energy sector. Over the next few years, the European Climate Law is expected to turn this political commitment into a legal obligation. In China, President Xi Jinping Has announced that China will aim to hit peak emissions before 2,030 and reach carbon neutrality By 2,060, we expect various government agencies, including the NEA and the NDRC to introduce and implement policies to mandate and support the use of renewable energy. For 2021, The NEA has indicated its intention to accelerate the development of wind and the solar outage with a goal of adding a combined 120 gigawatts of wind and solar in 2021. In the U. S. With the Biden administration commitment to Fight climate change and plan for clean energy revolution with a goal of achieving a 100% clean energy economy and Reaching net zero emissions no later than 2,050, we believe favorable policies are forthcoming to support renewable energy's growth in the U. S. We are standing at the beginning of a new era that We'll demand more and more clean, renewable and cost effective energy resources, among which solar PV is one of the most Competitive. We will focus on our core business, continue to expand capacity and further Improve quality to better serve the fast growing solar PV market. Now let me discuss our outlook and guidance for our future. The company expects to produce Approximately 19,500 metric tons to 20,500 metric tons of polysilicon and the sale of approximately 20,000 metric tons to 21,000 metric tons of polysilicon to external customers during the Q1 of 2021. For the full year of 2021, the company expects to produce approximately 80,000 to 81,000 metric tons of polysilicon, inclusive of the impact of the company's Thank you, Facility Maintenance. Now I will turn the call over to our CFO, Mr. Yang, Fu will discuss the Company's financial performance for the Q4 fiscal year 2020. Thank you, Langhan, and hello, everyone. Thank you for joining our call today. Now I will discuss our compared to $125,500,000 in the Q3 of 2020 and $118,900,000 in the Q4 of 2019. The 97% increase in revenue in the 4th quarter compared to the 3rd quarter was primarily due to higher polysilicon sales volume and higher Average selling prices. Gross profit for the 4th quarter was $109,500,000 compared to $45,300,000 in the Q3 of 2020 $35,100,000 in the Q4 of 2019. Gross margin was 44.2% compared to 36% in the Q3 of 2020 and 29.5% in the Q4 of 2019. The increase in gross margin was primarily due to higher ASPs. Our polysilicon average production cost was $5.92 per kilogram in the 4th quarter compared to $5.82 Per kilogram in the 3rd quarter, the slight increase in ASP was primarily the result of RMB appreciation versus the U. S. Dollar during the quarter. In RMB terms, our production cost in Q4 was reduced by 2.7% as compared to Q3, primarily as a result of improvements in energy and operational efficiencies, despite a higher than rise in silicon metal raw material costs in the 4th quarter. Selling, general and administrative expenses were $11,200,000 compared to $9,200,000 in the Q3 of 2020 $9,000,000 in the Q4 of 2019. The increase in SG and A cost was primarily due to an increase in shipping costs as a result of higher sales volume for the 4th quarter as well as an increase in personnel costs. SG and A expenses during the quarter included $4,500,000 in non cash share based compensation costs related to the company's share incentive plan. R and D expenses for the quarter was $1,500,000 compared to $1,700,000 in the Q3 of 2020 $1,200,000 in the Q4 of 2019. R and D expenses for the quarter included projects related to quality and purity improvements for n type polysilicon as well as other technology upgrade projects and can vary from period to period reflecting R and D activities that take place during the quarter. Income from operations was $98,000,000 compared to $33,300,000 in the Q3 of 2020 $30,100,000 in the Q4 2019. Operating margin was 39.6% compared to 26.6% in the Q3 of 2020 and 25.3 percent in the Q4 of 2019. Interest expense was $8,300,000 compared to $5,400,000 in the Q3 of 2020 $3,900,000 in the Q4 of 2019. The increase was primarily due to an increase in bank interest charges as well as bank fees related to Chinese bank notes. EBITDA was $115,100,000 compared to $51,600,000 in the Q3 of 2020 and $45,400,000 in the Q4 of 2019. EBITDA margin was 46.5% compared to 41.1% in the Q3 of 2020 and 38.2% in the Q4 of 2019. Net income attributable to Daqo New Energy's shareholder was $72,800,000 compared to $20,800,000 in the Q3 of 2020 $20,100,000 in the Q4 of 2019. Earnings per basic ADS was $1.01 compared to $0.29 in the Q4 of 2020 and $0.29 in the Q4 of 2019. Now on the company's financial condition. As of December 31, 2020, the company had 118 $15,400,000 in cash and cash equivalents and restricted cash compared to 109,800,000 as of September 30, 2020. And as of December 31, 2020, the notes receivable balance was $200,000 compared to $1,900,000 as of September 30, 2020. As of December 31, 2020, Total bank borrowings were $193,700,000 of which $123,200,000 were long term borrowings Compared to total bank borrowings of $271,000,000 including $140,000,000 of long term bank borrowings as of September 30, 20 $209,700,000 compared to $181,000,000 in the same period of 2019. And for the full year of 2020, net cash used in investing activities was $118,500,000 compared to $261,800,000 in the same period of 2019. Net cash used in investing activities in 2020 2019 was primarily related to the capital expenditures on the company's Phase 4a polysilicon project. And for the 12 months ended December 31, 2020, net cash used in financing activities was $95,500,000 compared to net cash provided by financing activities of $102,300,000 in the same period of 2019. Now on the company's full year 2020 results. Revenues were $675,600,000 compared to $350,000,000 in 2019. The increase in revenue was primarily due to higher polysilicon sales volume 2020 polysilicon sales volume increased to 74,812 tons as compared to 38,110 tons in 2019. Gross profit was 234,000,000 compared to $80,100,000 in 20 19. Gross margin was 34.6% compared to 22.9% in 2019. The increase in gross margin was primarily due to lower polysilicon production costs. Selling, general and administrative expenses for 2020 was $39,500,000 compared to $32,900,000 in 20 19. The increase in SG and A expense was primarily due to an increase in shipping costs as relate as a result of higher sales volume as well as increase in personnel costs. R and D expenses were $6,900,000 compared to 5 point $3,000,000 in 2019. Income from operations was $187,900,000 compared to $47,500,000 in 20.19. Operating margin was 27.8% compared to 13.6 percent in 2019. Net income attributable to Daqo New Energy Shareholders was $129,200,000 compared to $29,500,000 in 20.19. Earnings per basic ADS was $1.82 compared to $0.43 in 2019. Adjusted net income attributable to Daqo New Energy shareholders was $147,100,000 compared to $47,400,000 in 20 19. Adjusted earnings per basic ADS was $2.07 compared to $0.70 in 2019. And that concludes our prepared remarks. Operator, now we would like to open the call The first question is from Gary Xu with Credit Suisse. Please go ahead. Thank you. Thanks for taking my questions and congratulations on the strong results. I have two questions. So firstly is on the polysilicon price outlook. So we noticed that there has been a significant Silicon price hike after Chinese New Year, so from around RMB90 to around RMB110 last week. So can management share with us your latest view on the near term polysilicon price outlook for the next few weeks? And if you can also share your estimate for the Q2 this year and also the second half of this year. And the second question is on the inventory. So wondering if management can share with us the company's latest polysilicon inventory and if you have also some information on Hello, Gary. I think, first of all, I think the price, basically, I think, January, our average, including the value adding tax, I think our selling ASP It is around RMB 80 per kg. February around 81. Right now, I think in March, think we're selling around 100 higher than 100, okay. Basically, I think we see The selling price go up and especially this week, I think we're selling our products around RMB 120 Renminbi per kg, so equivalent I think if you without value adding tax is more than higher than $16 per kg. We see the reasons because we see this year didn't have any capacity adding to the polysilicon supply side. On the demand side, really we see a lot of, I think, the wave expansion projects is On the road, as you see that recently we just announced 2 long term contracts. 1 is with Zhongkuan Another one is with Wuxi Sanji. Basically, those 2 long term contracts is Most I think majority, 90% quantity is forecast on 2022, 2023, 2024. This year actually is not too much. So you can see right now, people is more even concerned Even to next year, middle of next year, a possible demand is still higher than the supply. So as we see, the polysilicon price continue every week go up And we believe I think the 2nd quarter, the ASP should be around 120 to 130 Per kg, it's possible. And for second half of the year, I think definitely we believe Should be about RMB120 per kg. And I can't project how far away, but As we say today, polysilicon cost accounted for in module, okay, firing module only around 15% to 16%. Accountable total, I think, project cost maybe around 7% to 8% is total lower glasses cost. Glass today cost accounted for almost 18%, 19% of the module. So we do not believe I think polysilicon price go up little will affect I think the ending Product module price too much. And today, I think the major problem, think maybe the major price come back is around like renminbi1.7. We still think it's sellable. The market is still there, especially in China. So we believe, I think the polysilicon price will continue maybe First half of next year still can above I think around like RMB 100 and RMB per kg. And after the middle of next year, I cannot project. It's dependent on the aiming market And also how fast I think the wafer expansion and how fast the polysilicon can be adding supply can add in there. As we see that next year, the only capacity can end in, I think one is over 35,000 tons, then Tongwei maybe around 80,000 tons. And we also see Asian Silicon and Xinte Based upon their IPO, they also planning expansion. So their capacity, new capacity maybe we're Adding by the end of next year. So really, we do not think too much capacity supply even next year. Maybe the year 2020 3rd, I think the capacity come back A little more. So I'm not giving the year beyond the next year. So basically what I think is the silicon Supply and demand very tight this year. The situation will continue to mid of next year. The inventory, let Ming answer the second question. Okay. Hi, Gary. So let me discuss quickly about our inventory level. So I think you remember at the end of Q3 because of a delay of order from a particular customer, I think our inventory It was a bit higher than normal. So it was running more than 3 weeks of inventory at that time. I think during Q4, demand Improved and orders normalized, especially in December with very strong orders from our customers. So inventory has reduced To less than 2 weeks, approximately 10 days or so. So that's already a normalized level of inventory. And then by now, our inventory is running at very lean levels, so it's less than a week of inventory right now, which is really the minimum level that we need to prepare products For the different grade and to ship to different customers. So we're running at basically our minimum level of inventory right now of less than a week. I think across the industry and also at our customers, we're also seeing very lean inventory levels currently. Okay. Thank you very much. This is very helpful. Thank you. This is very helpful and I'll pass on. Thank you. Great. Thank you. Thank you. The next question is from Kyle Lu of CICC. Please go ahead. Hey, thanks management for taking my question. I only got 2 questions. The first, yes, I think we have no doubt about the But we are seeing some current change on the demand weakness, especially in the March. I think we have some challenge checks showing the module's company has already cut their capacity utilization recently. So Could you please give us some colors on the current market dynamic? And do we think the current price, The growth trend will be slowed down or do we expect the price to stabilize recently? I mean, we have no doubt about the whole price trend This year, but how about the recent fees? So do we expect that change in the modules will Have some pressures on us. And the second question is about the prepayment. So we know we have some prepayments we signed with the customer. So could you please share the The payment percentage we have signed with the customer or maybe just some colors that we can For example, how much money we can a down payment we can receive when we sign a contract with our customers? That's For my question. Kao, I think first question, I think today basically, okay, Module market, I think the Europe and the U. S. Market is still is very hot. Yes. I think You obviously see you're selling around $0.25 I think per watt still is good. The only thing right now China, I think right now it's increased to 1.65, 1.7 and it looks like a little slight. The reason is because everybody waiting for NEH to conference meeting the new policy. But definitely I think after middle of April, definitely I think China demand will be quickly come back. That's I think for certain. But to answer your question, yes, I think the module selling maybe will Slow down in China within 1 month. But if you look at the inventory, maybe some inventory is pipe on Sale. And the reason why, because I think right now, we have today almost mono we have no inventory As we told, I think then also some company, okay, I think keep a high in order to Hi, gross margin. Basically, they continue to increase the wafer prices. I'm not sure how long they can continue doing there, Okay. Basically, what I say in some segments because unbalanced gross margin And it cannot pass through the middle industry. What I say is the wafer, sale and the module and the cost maybe temporary, The module I think selling maybe a little slow down, but further for the future, you see, I think a module just like the building, as you build up, you always cancellable, okay, only is the price. So finally, you will sell in the module maybe at a lower price, Right. The only thing in the whole is going to lose money or not to say lose money, maybe adjust their gross margin in certain area, you see, To lower down their gross margin. So what I think is in the future, wafer gross margin should be go down. And Should it be the module, should it be gross margin, should it be reasonable to reach a reasonable margin to push the module continue to selling. So I'm not worried about just as I said, like you see, even polysilicon price continued to go up 10, 20 per kg, But that affected the final product is only little. If we increase RMB10 10 For KT, maybe only increase the module price 0.5%, 3%, 0.3%. It's not affect too much. The effective is less than the cost price right now affects the module. So what I think is Because of demand and supply, the market mechanism, for us, because we are chemistry industry, it's hard Long term investments, it's intensive capital investments. So it's hard to in time, just one time to increase capacity. So as you know that the demand supply is there. So even this year, all the polysilicon produced only maybe can support I around 150 gigawatts. So but as you can see, the wave capacity continued expansion. By the end of this year, In China, maybe it reached to more than 400 gigawatts. So we don't know basically. But I can tell you is The market is there. China will continue to go up. Even NDA today, the head of NDA just said, we were Detailed laid down the policy and to encourage, I think, wind, solar industry and encourage each provincial level to Continue to develop, adding together should be more than our original planning, the nationwide maybe 16, 80 gigawatts. So I think that's I think I'm very confident I think in China market. 2nd is the prepayments. We signed, I think, 2 long term contracts. 1 is with Zhong Han. And Zhong Han, the contract is signed actually Zhong Han signed before Chinese New Year. So we based on that time, I think we collect 5% of the current price, the total contract value. For Shang Chi, basically we base on right now I think the week before last week, the average selling price We collect a 6% I think the down payment is. So we are going to sign another contract also continue to keep in the 6%. So as you can see that, the only thing that we file under the contract, majority is for the next 3 years, It's not for this year, okay. This year, we're just going to squeeze maybe beginning inventory, maybe end of the year, You see our full beam or even December maybe we'll book some next year January quantity. In some contracts, we have the adjustments 10% up and down. So we still can, I think, do something, I think, To help some company, especially like I think some company, they are sizable in the future? And our strategy is in the future, one client cannot account for more than 20% of our sales. Yes. Thanks for taking the thanks for your answer. I actually have a follow-up question on your hard work. So it's interesting we have noticed that the wafer price has always like bending with The polysilicon price go up, the whisk price always follow-up and go up. And But if we look at the capacity, it should see some like, yes, the overcapacity or the competition on the WaferSight, but actually in the price level, we didn't see that. And so Could you give us some color on that? Do you think it's just something we will definitely happen, but it's just not happen? Do you think it's because currently the sales diversity is not big enough, so we still have I mean, the whole industry, the polysilicon industry, you have the sales contract with the leading players. So Actually, the 2nd tier players cannot get enough the polysilicon. So even they have Planning to build up more capacity, but actually they cannot produce more wafer. What do you think about this yet? I think as the module assembling gross margin right now is lower, so it's not Discourage, I think, the module sales in China temporary. But if you look at the sale, I think inventory is there. Think some company maybe the big in the history they almost manipulate the wafer capacity. But in the future right now, they are vertically integrated. If they can sell their wafer or in the module, I think it's okay. But if they continue to increase the price of the wafer, if they cannot selling the module, what's the next step? They have to reduce the module way by price, all right. So I think that's the time, only the time can tell you. So I'm not going to do any comments. I think the stock price tell everybody, right? Okay. Yes. Thanks. Thank you very much. That's The next question is from Philip Shen with Roth Capital Partners. Please go ahead. Hi, everybody. Thank you for taking my questions. The first one is just a follow-up on the outlook for China's demand. Can you share what you think the overall demand will be this year? Do you think it will be 60 gigawatts or do you think it's 80 gigawatts for example? And perhaps talk about what that split might be by quarter? Philip, I think I'm very optimistic about the China. Even though the I think the draft Didn't say any target for national level, but I think it's encouraged, I think each provincial To develop, I think, their own targets, then today, in the two conferences in Beijing, today, the head of the NDA Basically, set the target there, I think around I think 1200 gigawatts In next 10 years, so as you can see that, I'm pretty sure, Especially the distributed the rooftop and the distributed, I think, power Solar power plants in China is continuing to develop. I think this year definitely should be above 60, even above 80 gigawatts. Great. Thank you, Logan. And I think you guys are very fully booked for 21. For 2022, I believe with the new contracts, you might be fully booked as well. So would love to get some additional color on How you're thinking about capacity expansion? Clearly, with the China listing, you're going to raise Money for the Phase 4B expansion. Can you talk about the expectations for CapEx For Phase 4B, I believe it's maybe $13,000 sorry, 13,000 Or do we have the unit CapEx right for Phase 4B? And then beyond 4B, what are you thinking about now? Where do you think The location could be for the expansion and what kind of CapEx could that be? Thanks. Okay. I think that's it. I think the only thing I I can tell you is we are continuing to expansion. As you can see right now the information, Even right now, we are still not listing IPO, but we use our own money already starting for B. For B, design capacity is 35,000 tons, But that is integrated to our existing, I think, plans. So we think the actual output should be 40,000 tons. Basically, this year we already given guidance, 80,000 to 81,000 metric tons. So next year, I think it's not the final. I We can see if we can climb Ramp the 4B capacity quickly, I think next year, our TAM is going to increase capacity 50%, So that's I think 2 years plan. Beyond the 2 years, We also as you see that we are planning right now the IPO in China's stock market. So far we don't know the valuation, But we're very optimistic and we can raise I think right now the estimate is RMB5 1,000,000,000. Think if we can raise more than that, definitely I think use our own current free cash, then this year I think net profit plus I think the depreciation or EBITDA whatever, we think we can continue to planning expansion. That we cannot tell you how much and where we are looking, I'd say beyond Xinjiang, we are looking other places right now And maybe we are looking another 40 or even 80 or even 1,000 10s new plant. So I think that's what we're waiting for basically based on the proceeds of the IPO, the timing And also the market situation. Great. Thank you. Can you give us a little bit more color on the China listing in terms of timing? When do you expect that to be the CSRC to give you the final approval? And then one last question. As it relates to your cost structure, I think you mentioned that it went up a little bit in Q4 because of currency. What's your expectation for cost per watt In Q1 and then what is that how does that trend in 2021? Okay. I'll leave the cost I think to our CFO, Ming. Basically, I think the IPO, I think the processing status in the maybe already I think mentioned that so far we already I think go through the February 2nd, I think the Star Market Review Committee already approved. We are, I think, meet all the requirements for the listing and All the comments. Right now, we are doing the registration. I think we are the first one, I think the U. S. Company, I think right now Listing the subsidies in China. So we believe, I think, we maybe can quickly registration by the end of this month, Then hopefully we can listing in China Star Market by the end of April or beginning of May, that's right now the status. Then also I think I forget your first question about the 4B total investments. The 4b total investments because we are integrated to existing plants, so total investments is around RMB 3,500,000,000. Our 4A total investment is around RMB2.9 billion. So it's almost, I think, RMB500 million, RMB600 million increase. The increase because the capacity in some area, we are the capacity is higher than 35.10, okay. So basically, we are integrated the existing system. So we were Syndicated, I think after for being done, ensures the plant should be more than 120,000 tons of capacity, The actual output. Ming? Okay. Hi, Phil. In terms of our cost structure, so for Q1, we're expecting Our costs in terms of RMB to be roughly similar to our costs in Q4 And maybe just slightly higher because of high silicon metal costs. But I think in terms of movements in U. S. Dollar, I think because of The current continued appreciation of RMB, I think there is we could see maybe a 3% 4% increase in cost in U. S. Dollar terms in Q1 relative to Q4 of last year. So that's what we're seeing right now. The government continues to issue like $1,900,000,000,000 so cost, let me be continued appreciation. Right. So that's for Q1. And Ming, what do you think about Q2, Q3 and Q4? What is the trend of the cost structure, thanks. Okay. We think our cost for the remaining of the year should be similar, At least for Q2 and Q3, it should be similar to Q1 and then costs should come down by Q4, assuming constant U. S. Currency exchange rate. Okay. Thank you, guys. But the 4B, if the 4B totally ramp up, Our costs will continue to at least cut in 5%. Yes, 5% plus type of reduction from current cost level. Great. Appreciate it. Thank you. And I'll pass it on. Great. Thank you. Next question is from Colin Jen with Zai Lab This is Collin from Daiwa. My first question is a bit similar to Phillips because the Street, I think, has no concerns for another stellar earnings in 2021 Because very limited capacity additions from the industry wide, but people start to worry about The post 2022, especially about our major competitors including Tongwei and Xinta, we both announced a very aggressive capacity expansion plan. So do we worry about losing market share if we didn't expanding Tangent Miner? So if we expect if we expect you to announce another expansion plan, do we plan to Aided by another share placement of equity or debt financing. So this is my first question. My second question is regarding the FBR mindset because as you may notice that there is quite different reviews So what is our view on FBR including security, cost and extra? Thank you. Collin, I think for the first question, I'm going to compare to Tongwei. I know Tongwei right now currently have I think at least 2 We have a net expansion around 80,000 tons. But you have to consider Tongwei also I think close Equity investments with I think other company, for example, LONGi, I think Trina Solar. So basically, even by the year 2023, just like they claimed, their capacity is 290,000 tons. How much is sellable? We don't know, because I think of which maybe more than 100,000 tons they We'll use their own vertically integrated because they are going to do the waiver, sell and even module, right? So we I think, Rainer, focused our expansion. We think it is reasonable and based on our Capital, I think, status, our cash flow status, and I think we're going to do the 4B expansion. So by the end of this year, we are going to I think put into production. Hopefully, we can ramp production by the end of this year. So I think next year, our capacity, almost 50% increased to 1 in 20,000 tons, we think is bigger, I think, increase to meet our clients' As you can see right now today, almost all big wafer producers Signed long term contracts with us. For example, LONGi, Jinko, Trina, I think Jingao, even Shanxi, Zhong Huan, I think we will announce another company pretty soon. So we right now almost signed those big clients next 2 to 3 years. So I think The relationship with the clients is not only the quantity, how much you can produce, But also the quality of the products. So as you can see our quality, our service, I think we're very confident In the future, our expansion continued expansion and our clients' relationship. Secondly, for the FBR, we're not for us, I'm not going to go into comments Another company, a Hong Kong listing company, they're doing FBR. But as you know that we are one of the most transparent In terms of disclosing cost structure, product yield rate, however, we didn't see right now FBR, their cost structure, How much do they cost? What's the yield rate? As we know that they have a country already have like 10,000 Matching Tint production line, how much they produced? 200 Tint, 300 Tint? We don't have. Secondly, we are not users of FBR, polysilicon. However, we very pay attention to this issue. We communicate regularly communication with our clients to share with our clients. It's very clear that also Today, the quality of FBR polysilicon still has I think much room to implement And to match the polysilicon made by our modified silicon Siemens technology. So I have no more comments on our competitor or even they say substitute technology, Revolutionary Technology. So basically, as you can see that one of our clients most of our clients, one of our clients, They claim they will invest FVR. They just signed long term contract with us, pay 6% of the down payments. So I think that's strong to improve 2 methods, which one is the best. The next question is from Allen Han with JPMorgan. Please go ahead. Hi. I guess like I have Two minor questions here as most of the question is already answered. I noticed that in the Q4 last year, I mean, the realized price is around US10.8 dollars If we are to like take the average from say PV and ProLINK or Silicon China, it seems to me that the average price would be slightly higher. I just want to understand why. Is it due to like we have a slightly higher sales volume in December when price was relatively lower? I think, Alan, I think most important, if you look at our the structure of our product sale in Q4, We're selling, I think our products is around 23,186 Mr. Tense, almost 100% we are mono products. If we compare our Q3, We our products, you see the mono products still is 98%. So basically, we're selling most is right now, I think mono Then also of which we sell most is the high quality mono grade, I think, polysilicon. As you can see that Even monosilicon classified, I think right now is for, I think, products. So we are majority right now is selling the High surprise. So that's why our ASP is higher. I think around like $10.80 So I think that's my answer. Basically, I think we will continue to enjoy that. The reason is I said, I think in the middle of last year, we adopted, I think, a digital management. Even let's say in the deposit processing we use SynWOX to do the AI calculation, AI I think The technology, so right now our mono silicon products, I think every month we produced is above 99%. And just a follow-up to what Longgen said, I think, Allen, I think you're right. Q4 was a little bit unique and We did sell more volumes in December than during the months of October or November. I think part of the reason Some of our customers were taking advantage of very attractive pricing at the time and also they were preparing For building up additional volumes for production during the Chinese New Year. Yes. So that's where the ASP came in. Got you. And my second question and also my last one is that I noticed in your other operating income has declined from US5.5 million dollars in 2019 To 0.2%. I mean looking at periods like years, how it trended, it usually doesn't trend to almost So just wanted to get a sense of why over there. Okay. So other operating income historically Most of, for example, R and D grants and technology grants from various government agencies. Okay. And For this year, it just so happened that these were less than previous years, okay. And actually, I think for future periods, we would expect levels that actually would be more similar to our current year, The lower levels than previous years. Similar to the current year, but not the previous years. And now the previous years, yes. Got you. I guess I'll pass it on. Thanks. Great. Thank you. Thank you. The next question is from Chow Ji with Goldman Sachs. Please go ahead. Hi, thank you for taking my question. I remember you said that part of your R and D in 2020 was spent on the research So can you please share with some color in terms of progress on anti poly? Thank you. Okay. So basically, we are doing R and D to improve our purity Levels, because the N type requirements are much more stringent than the standard monotype And right now because of the strong demand from our customers, so we are optimizing our overall production For the monotype polysilicon, we do expect starting effectively starting this year Through the next, say, 2 years, the demand for N type wafer and translating to N type Poly will increase over this time. So we are doing R and D efforts to increase the share of N type Poly from our production. And one of the key goal is to increase the level of production In terms of percentage and at the same time without a significant impact to our production costs. So that's our current target right now. The next question is from Tony Fei with BOCI. Please go ahead. Hi, management. Thanks for your time. My first question is regarding your 1,000 tonne semi grade capacity. I understand it's at a very early stage right now, But can you share what is your expectation regarding the quality and ASP and maybe addressable market regarding this project? And will it be commissioned at the same time with Phase 4b? 2nd question regarding your maintenance schedule this year, which quarter would it take place and how much production volume would it have impact on that specific quarter? Thank you. Okay. I think first question about the 1,000 metric tons of semiconductor grade Polysilicon, this is also in our IPO proceeds. It's based on the IPO success. I think it's a time we think it's a time we are going to starting doing that production line. Basically, we were a joint venture with 1 of the I think I can't announce the name, okay, Very famous, I think, downstream semiconductor wafer producer, I think, continue together to do the, I think the projects and our I think angle is from the highest quality, I think The polysilicon is I think the polysilicon should be the highest. I think basically right now is I think it should above 12 inches waiver semiconductor waiver quality. So we went from top to down rather than our competitor, I think Xinhua, but not Europe, I think water, They have failed because they are starting from bottom, I think lower quality semiconductor. So basically, I think we have the planning And it depends on right now the I think it proceeds from the IPO and when we're going to successfully listing. At temporary, we will announce that at that time. 2nd is the annual maintenance. Annual maintenance mostly will happen I think in the Q3 And just a regular, I think that will not affect right now. I think in our Guidance for this year, dollars 8,000 to $8,000 I think the output It's already considering the annual maintenance. Okay. Thank you. The next question is from Dora Lu with JPMorgan. Please go ahead. Hi. I guess most of my questions have been asked. So I just follow-up with 2 minor questions. And the first one is related to our long term contracts. So could you share with us what is the percentage of our I noticed that the note receivables in 2020 has dropped significantly. So could you share with us the reason? Thank you. Okay. Dara, I think I'll answer your first question. Basically right now, we signed, I think, 2 contracts with I think another long term contract with another 5, I think major wafer producer. I think we've booked Almost 100%, I think, 2021 capacity. The only thing that we can continue maybe we will sign another contract, I think soon is just maybe Second half of the year, we can squeeze some little quantity for the contract then to I think to book The year 2022, 2023, 2024. So basically, my answer is 2021, the output 80,000 tons, Almost 100% booked. The second question, I think Well, I think our CFO, Ming, will answer that. Okay. I hope so. So actually the note Receivables number came down. So during the end of the year, we actually paid down a number of our Chinese bank loans and a wide source of the funding is from the notes receivables. We converted it to a pay down Chinese bank loan. So that's why you saw the balance came down. Yes. Thank you so much. That's very clear. Great. Thank you. The next question is from Robin Shao with CMBS. Please go ahead. Thank you, management, for taking my questions. I would like to ask about the customers' inventory level for Polysilicon. Do you think that your clients are building up inventory in buildup Okay. First of all, I'm not sure our clients build inventory or not, but basically you see our clients are the major player right now in the wafer industry. As you can see, LONGi, Zhongkuan, Jinko, I think I believe I don't think they build inventory on the Weber segment. I believe they're selling, I think all either sell their all even Shanxi sell their all Products or they integrated to I think sell module to selling the module. So basically to me, As I just said, right now, this year, total polysilicon capacity only can support 150 or 160 maybe gigawatts, I think, final products. So we're maybe Making some efforts to import some polysilicon. I think that's there. So maybe last year some inventory Come on, this year the ending products. So what I say is today, I'm not even today, I think we don't think any inventory In us polysilicon producer like Daqo, Tongwei, I don't think any inventory but besides Tongwei, okay, I don't know because Tongwei is much integrated. So I don't think, Tidian or other company have inventory silicon right now is sitting there. And also I don't think the wafer producer even today like Jinko or ZhongHang, they are Pipeline the waiver in the inventory, I don't think so. Okay. Thank you. Very clear. My second question is about the payment terms. So given that the supply is quite tight And downstream is running short of polysilicon supply. So do we getting better payment terms For policy and sales? We still I think like the usual, to us, I think if you can see, Most of our deliveries are paid. So most right now, yes, we accept the banking notes And we only accept banking notes, plus I think the cash, okay, the remittance. So basically, upon that, So we right now because of the supply and demand, so we maybe in each ending quarter months, we may be asking for more remittance cash Rather than the banking, I think it dropped. So I think that's what I was doing. But basically, I think our delivery is upon The cash received. I think as you know that banking notes also is very just like cash. So basically, right now what happens is, so one is customers are willing to sign long term contracts and pay a higher prepayment And per kilogram or higher percentage of prepayment for the contract, right? So I think that's Really a sign of customers are really willing to pay upfront to secure supply. And another situation we're seeing right now is that actually we usually contract around the end of the month for next month's volume. And actually customers now are eager to pay us ahead, no way after the contract is signed so that they could get On the delivery list, so that they could get earlier delivery of polysilicon for their order So basically, as Ming just said, I think the first one most important, we right now, I think take the advantage of The supply tight supply, so we are going to sign some contracts. Basically, I think a majority of quantity is forecast, I think next 3 years, so we collect high percentage of down payments. I think that's what we're doing right now. Good luck in the future. Great. Thank you. Okay. I have one more question regarding the competition landscape. So what do you see in the relatively longer term development for this polysilicon supplying business? So do you think that there will be a big player and several smaller ones with roughly equal capacity or You expect we'll have 4 to 5 manufacturer with similar scale. And the second Following question about this is what would be Daikou's long term market share target in this supply? I think basically the silicon industry is different from the middle, I think, stream, The solar industry like we have a sale in the module. We are a chemical industry. First of all, we need heavy capital Investments, capacity as you can see on balance sheet. Secondly, is long term investment in our circle. 3rd is For environmental, for the safety, all these, I think this industry, if you look at last year Q2, our selling price, Almost this industry only I think we make a little money. I think all the industry other players lose money. So basically, This industry is not just like you see the glasses. Glasses is even less Technology then the polysilicon. Then also you have to remember that in this industry, one of the player, you can know that They have the money, right, in Xinjiang, but they take their 5 years, they still didn't keep up the quality like a 1st tier player. So basically, I think in the future, maybe in this industry, maybe where we survive only 4 to 5 player there. And those 4 or 5 player, we forecast, I think, continue R and D, the investments and the capacity, I think expansion, I think definitely I think Tongwei is one of the Big player as you can see that, but they also continue to vertically integrate and we don't know the future what's going on, okay? How much percentage of their polysilicon will be go to vertical integrated? How much will we go to the market? But definitely, I think Daqo is one of purely I think silicon produced a player and we will not touch, I think, the downstream. We do whatever We expect on. So I think we definitely will be one off player. And then maybe I think Taqian is one off player. Then also I think Asian polysilicon is going to IPO. We don't know the future whether they can successfully IPO or not, Raise enough money to keep up, pay with us, compete with us. Then another is New Horizon. I think that's the only I think left right now the major player there. This concludes our question and answer session. I would like to turn the conference back over to Alex Hoefer and go hand over. Thank you everyone again for participating in today's conference call. Should you have any further questions, please don't hesitate to contact us. Thank you and bye bye. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.