Hello, ladies and gentlemen, thank you for standing by for JinkoSolar's Holding Company's Limited Fourth Quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After management's — Excuse me. After management's prepared 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's call, Miss Stella Wang, JinkoSolar's of Investor Relations. Please go ahead, Miss Stella.
Thank you, operator. Thank you everyone for joining us today for JinkoSolar's Fourth Quarter 2022 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 services. We have also provided a supplemental presentation for today's earnings call, which can also be found on the IR website. On the call today from JinkoSolar are Mr. Xiande Li , Chairman of the Board of Directors and the Chief Executive Officer of JinkoSolar Holding Company Limited, Mr. Gener Miao, Chief Marketing Officer of JinkoSolar Company Limited, Mr. Pan Li, Chief Financial Officer of JinkoSolar Holding Company Limited, and Mr. Charlie Cao, Chief Financial Officer of JinkoSolar Company Limited. Mr. Li will discuss JinkoSolar's business 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 the 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 involve 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 JinkoSolar's public filings with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements except as required under the applicable law. It's now my pleasure to introduce Mr. Xiande Li , Chairman and CEO of JinkoSolar Holding.
Mr. Li will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Li. We closed our challenging 2022 with satisfactory results as we delivered strong operational and financial performance in the fourth quarter. Leveraging our outstanding global supply chain management and marketing network, our total shipments and total revenue increased significantly year-over-year. At the end of 2022, we became the first in the industry to have delivered a total of 130 gigawatts solar modules.
Throughout the year, as raw material costs continued to rise, we continued to optimize our cost structure through technical advancement and manufacturing process improvements, which partially relieved the pressure on our profitability. New shipments of high-efficiency premium N-type modules exceeded ten gigawatts, further optimizing our product mix and gradually improving our profitability.
Net income was approximately $102.9 million, up 29.1% sequentially and nearly tripling year-over-year. Throughout all 2022, the increase in demand for solar products did not slow down despite compounded challenges such as the surge in raw material costs, pandemic disruption and macroeconomic uncertainties. In particular, the energy crisis caused by the Russia-Ukraine conflict has caused the prices of traditional energies to rise quickly, and PV remains the optimum solution for countries to achieve energy transformation because of its low carbon footprint and economic advantage.
Global PV demand in 2022 was approximately 320-330 gigawatts DC, up about 50% year-over-year. Even in the more price-sensitive Chinese markets, newly added installations grow 59.3% year-over-year to reach 87.4 gigawatts AC, approximately 105 gigawatts DC, and distributed installations grow nearly 75% year-over-year.
大 元 末 ， 季 节 性 供 需 的 错 配 叠 加 产 业 链 部 分 企 业 年 底 的 去 库 存 诉 求 。 硅 料 、 硅 片 、 电 池 和 组 件 的 价 格 均 发 生 了 不 同 程 度 的 调 整 。 部 分 下 游 客 户 在 观 望 。 2月 以 来 ， 硅 料 价 格 反 弹 ， 产 业 链 上 下 游 进 入 新 一 轮 的 价 格 博 弈 ， 引 发 了 市 场 的 情 绪 担 忧 。 我 们 认 为 短 期 的 硅 料 价 格 上 涨 不 具 备 持 续 性 。 2023 年 全 员 硅 料 供 应 足 够 支 撑 终 端 组 件 的 需 求 ， 而 硅 料 价 格 的 下 降 将 推 动 组 件 价 格 回 归 合 理 区 间 ， 提 升 项 目 的 经 济 性 。 我 们 看 好 2023 年 光 伏 需 求 的 持 续 增 长 。 我 们 有 信 心 品 鉴 完 善 的 全 球 产 业 链 、 电 池 和 N 型 产 品 力 的 优 势 ， 进 一 步 提 升 我 们 在 全 球 市 场 的 竞 争 力 和 盈 利 水 平 。
At the end of December, because of a seasonal imbalance between polysilicon supply and demand, combined with inventory adjustments across the supply chain, prices of polysilicon wafers, sales and modules were adjusted to varying degrees. This volatility led to some downstream customers to pause orders. Since February, polysilicon prices have rebounded.
Pricing gains between the upstream and downstream of the solar industrial chain have to some extent impacted market sentiment. With polysilicon supply sufficient to support module demand throughout the whole year 2023, we believe the short term rise in polysilicon prices will not last. Instead a decline in polysilicon prices will drive down module prices and improve the economics of PV projects. Global PV demand is expected to continue to grow in 2023. We are confident that we will further improve our competitiveness and profitability in the global market with our well-developed global industrial chain and the advantage of our N-type products.
四 季 度 具 体 来 看 ， 我 们 持 续 加 强 产 业 链 波 动 情 况 下 的 经 营 管 理 ， 严 控 库 存 ， 灵 活 调 整 开 工 和 开 工 。 四 季 度 投 产 的 河 北 二 期 八 吉 瓦 TOPCon 的 电 池 产 能 ， 在 四 季 度 满 产 。 天 山 二 期 十 一 吉 瓦 TOPCon 电 池 已 经 在 十 一 月 顺 利 投 产 ， 预 计 在 今 年 三 月 份 满 产 。 随 着 三 十 五 吉 瓦 的 电 池 陆 续 满 产 释 放 ， 一 体 化 率 逐 渐 提 升 ， 推 动 综 合 成 本 的 下 降 。
During the fourth quarter, as the industrial chain remained volatile, we continue to enhance operation management, including strictly controlling inventories and flexibly adjusting production, scheduling and volumes. The phase II of 8 gigawatt TOPCon cell capacity in Hefei reached full production in the fourth quarter, and the second phase of 11 gigawatt TOPCon cell capacity in Jianshan is expected to reach full production in March 2023. With our 35 gigawatts of TOPCon cell capacity gradually reaching full production in the coming quarters, our integrated capacity structure continue to rise, driving blended costs lower.
四 月, 我 们 宣 布 了 TOPCon 电 池 实 验 室 效 率 最 高 达 到 26.4%, 刷 新 了 十 月 份 创 下 26.1 效 率 的 纪 录. 截 止 2022 年, 已 满 产 的 TOPCon 电 池 平 均 量 产 效 率 已 经 达 到 25.1%. N-type 一 体 化 已 经 跟 P-type 基 本 持 平. 我 们 有 信 心 在 产 品 量 产 效 率 上, 生 产 能 力 以 及 工 艺 水 平 上 继 续 保 持 全 球 领 先 的 优 势.
In December, the lab efficiency of our entire TOPCon cell set a new record with maximum conversion efficiency of 26.4%, improving on our previous record of 26.1% set in October. At the end of 2022, the mass-produced efficiency of our TOPCon cell capacity that has reached the full production reached 25.1% and our integrated cost of N-type almost on par with P-type. We are confident we will maintain our leading position in terms of R&D, mass-produced efficiency and production capacity.
截 止 二 零 二 零 年 底 ， 晶 科 成 为 全 球 首 家 N 型 产 品 出 货 量 超 过 十 个 吉 瓦 的 组 件 制 造 商 。 晶 科 以 广 泛 的 营 销 布 局 和 优 异 的 N 型 产 品 力 已 经 成 为 全 球 客 户 的 最 佳 选 择 。 随 着 越 来 越 多 的 行 业 玩 家 规 划 建 设 N 型 的 厂 ， 愈 发 证 明 了 晶 科 率 先 选 择 的 N 型 道 路 是 大 势 所 趋 。 二 零 二 三 年 ，N 型 TOPCon 有 效 供 给 将 达 到 一 百 二 十 到 一 百 三 十 个 吉 瓦 ， 占 全 行 业 总 需 求 的 百 分 之 三 十 左 右 。 依 托 我 们 前 期 积 累 的 量 产 和 市 场 推 广 经 验 ， 二 零 二 三 年 晶 科 的 N 型 出 货 量 将 进 一 步 提 升 。N 型 市 场 份 额 远 超 行 业 的 平 均 渗 透 率 。
At the end of 2022, we became the first module manufacturer in the world to ship over 10 GW of N-type products. We are already a preferred supplier for global clients, thanks to our well-established global marketing footprint and the technological advantage of our N-type products. With more and more industry players building up N-type capacity, our strategy to embrace and lead N-type technology is now becoming an industry trend. Effective supply of N-type TOPCon modules in the whole industry is expected to reach 120-130 GW in 2023, accounting for about 30% of the total PV demand. Leveraging our accumulated experience in mass production and marketing, we expect our proportion of N-type shipments in 2023 to further increase with penetration of N-type products far exceeding the industry average.
By the end of 2023, mass production efficiency of TOPCon cells is expected to reach 75.8%. We are optimistic on the growth potential for the PV market in the mid and long term, and we'll continue to invest in N-type capacity, which is now competitive in terms of technology and cost. By the end of 2023, we expect our annual production capacity for mono wafers, solar cells, and solar modules to reach 75, and 90 gigawatts respectively. We expect module shipments to be in the range of 11-13 gigawatts for the first quarter of 2023, and 60-70 gigawatts for the full year 2023. We will continue to maintain our leading position in N-type modules through technology integration, improvement in mass production capability, and cost optimization.
We are pleased to announce that we have achieved a historically high shipment on quarterly and annually basis. Thanks to our technology advantage and extensive global marketing network, the total shipment in fourth quarter of 2022 has approached to 16.8 gigawatt, where the module shipment was accounted for 95% with a 78% increase year-over-year. The total annual module shipments were 44.5 gigawatt, double the year-over-year. Regarding our regional markets, the shipments in China and Europe markets were the top two highest in 2022, accounted for more than 65% of the total amount. In terms of absolute numbers, the annual module shipments year-over-year growth in China was more than triple. The annual module shipments to Europe were double, and our growth in emerging markets was nearly doubled as well.
In China market, due to COVID and cost concerns, mainly brought by upstream supply, some projects that have not been connected to the grid last year have been delayed to 2023. Considering the cost of our supply chain is dropping towards a more reasonable level, we expect our installations will increase in 2023. Europe will continue to expand PV installations due to energy crisis and increasing electricity costs. As for U.S. market, with the policy incentives brought by IRA and third-party institutions' high expectations of U.S. market demand, we believe the project pipeline is sufficient there. In addition, we have seen the energy transformation accelerating in Latin America, Asia-Pacific, Middle East, and more and more regions and countries in the world, bringing more opportunities.
In 2023, we will continue to pursue our global expansion strategy with Europe and China markets continue to be our major ones, where the shipment would be accounted for over 50% of total amount, and the shipments to the U.S. market were expected to recover gradually. Our shipment structure continues to optimize. Distribution generation business accounted for over 50% for the full year, improved compared to 2021. In terms of the products, our competitive N-type Tiger Neo module shipments were around 7 GW, with a premium remained within reasonable range. Until the year end of 2022, we have become the first module manufacturer in the world shipped over 10 GW N-type module. We expect our proportion of N-type module shipments in 2023 to further increase to about 60%, which could further strengthen our leading position in N-type technology in the industry.
Moreover, the global clean energy transition has started a new growth cycle for solar plus energy storage business. So far, we have already signed framework agreements and distribution agreement with multiple power developers and distributors around the world. In 2023, we will continue to expand the investment on cultivating our storage business to bringing our clients safer and more sustainable solar plus storage system solutions. In terms of price and orders, our order book visibility in 2023 has already achieved over 50%, with overseas orders has the major contributor. Proportion of the high efficient and high premium N-type Tiger Neo will be significantly higher than 2022. All this will keep our product competitive in this industry. By working through various challenges, a PV enterprise can grow up to be more resilient.
Under this background, we, JinkoSolar, are also continuously enhancing our capacities to handle risks and strengthening our marketing network and the client relationship. We are committed to provide more reliable and high-quality products and services to our clients, bringing them more economic value. This will also help us to further improve our global market share. With that, I will turn the call to Pan.
Thank you, Gener. We are pleased to have achieved strong fourth quarter results based on our solid operation and management strategy. Against the backdrop of strong demand in the global market, both solar shipments and total revenues increased significantly year-over-year. Shipments of N-type modules, which have premium and cost advantages, more than doubled sequentially in the fourth quarter, partially contributing to our improved profitability. In addition, we continue to enhance control over our operating expenses.
Total operating expenses accounted for about 12% of total revenues in the fourth quarter, a significant decrease from over 15% last quarter. Operating margin was more than 9 x higher sequentially, increasing to 2.1% from 0.3% last quarter. As a 35 gigawatt cell capacity put into production in 2022 reaches full production in the coming quarters, our integrated capacity structure is expected to improve further.
As shipments of our competitive N-type products increase, we hope to gradually improve our profitability. Let me go into more details now. Total revenues was $4.4 billion, an increase of about 56% sequentially and 85% year-over-year. Gross margin was 14.1% compared with 15.7% in the third quarter this year and 16.1% in fourth quarter last year. The sequential and year-over-year decreases were mainly due to an increase in the cost of solar module raw materials. Total operating expenses were $526 million, up 21% sequentially and up 68% year-over-year. The increases were mainly attributed to an increase in shipping costs for solar modules and an increase in impairment loss on property, plant, and equipment. Net income attribute to the JinkoSolar Holdings ordinary shareholder was about $103 million in the fourth quarter.
Excluding the impacts from a change in fair value of the notes, long-term investments and the share-based compensation expenses, adjusted net income was $45 million, up 33% year-over-year. I'll brief you on our 2022 full year financial results. Total module shipments were 44.5 gigawatts, doubled year-over-year, and total revenues were $12 billion, also doubled. For the full year of 2022, gross profit was $1.8 billion, an increase of 85% year-over-year. Gross margin was 14.8% compared to 16.3% last year. The decrease was mainly attributed to an increase in the cost of solar module raw materials. Total operating expenses were $1.7 billion, increased year-over-year.
The increase was mainly attributed to an increase in shipping cost for solar modules, an increase in impairment loss and disposal of PPE, an increase in share-based compensation expenses. Net income attribute to the JinkoSolar Holdings ordinary shareholders was about $96 million in the fourth quarter. Excluding the impacts from a change in fair value of the notes, long-term investments and share-based compensation expenses, adjusted net income was $208 million, up 1.7 x year-over-year. Moving to the balance sheet. At the end of the fourth quarter, our cash and cash equivalents were $1.6 billion, compared with $2.1 billion at the end of third quarter and $1.4 billion at the end of the fourth quarter last year.
Air turnover days were 73 days in the fourth quarter, compared with 69 days in the third quarter this year. Inventory turnover days were reduced to 59 days in the fourth quarter compared to 117 days in the third quarter. Total debt was about $4 billion, and net debt was $2.3 billion at the end of 2022. This concludes our prepared remarks. We're now happy to take your questions. Operator, please proceed.
Thank you. If you wish to ask a question, please press star then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then two. If you're on a speakerphone, please pick up the handset to ask your question, and we'll pause momentarily to assemble our roster. The first question will come from Brian Lee with Goldman Sachs and Company. Please go ahead.
Hi, everyone. This is Miguel on for Brian. My first question was just on the capacity expectations for 2023. You're guiding to the very strong growth in capacity for the year. What are your CapEx requirements for 2023 to support this growth?
Yeah. Hi, Miguel. I think we are in the middle of a calculation right now. I think our team will follow up with you after the call for the further detail of CapEx numbers. Right.
Okay, thanks. I appreciate that. My follow-up question was just on margins during the fourth quarter. Given the overall decline in the market prices for polysilicon that was observed in the fourth quarter, could you just give more color on what drove the lower quarter-on-quarter gross margins? What are your expectations for polysilicon prices, and then also on margins through the first quarter of 2023 and through the rest of the year? Thanks.
Yeah. For the polysilicon, I think, overall, we are, we are observing, oversupply of polysilicon, in the long run. We believe the recent turbulence is just, you know, the start of the market trend. In general, we believe the polysilicon will go back to the market-based pricing. That's what we believe, in the long term. In short term, for sure, because of the different seasonalities and the behavior of, let's say, top players in the polysilicon industry, we still believe there might be some short-term challenge or turbulence. That's what we see.
For the margin-wise, we still believe, with more and more capacity online, especially the N-type-based, high-end capacity online, with the premium and the competitive cost structure we have, the margin will gradually improve, quarter by quarter if there's no big surprises in the market. Hope that answered your question.
If I could just squeeze in a follow-up on that. Just on the 4Q margins, I guess if you were able to realize any of the lower polysilicon market prices for polysilicon that we saw in the fourth quarter? I guess specifically in the fourth quarter, what drove the lower gross margins? Thanks.
I think if you look into financial figures, I see the turbulence happened in the polysilicon prices in early Q1 this year will not be helpful for the Q4 margins. If you look into the Q1 margins, we have to look into the overall polysilicon cost instead of a short-term, let's say, one week or two weeks, low price of polysilicon. In my opinion, you know, that will not significantly change the margin expectations. Again, we will gradually improve the margins, but most of them is due to our internal, let's say, management improvement and the cost structure improvement instead of polysilicon turbulence.
Okay. Understood.
You know, you have to think about the polysilicon inventory numbers, right? That numbers is a very important impact factor to the cost of the polysilicon.
Okay. Understood. Thanks. I'll pass it on.
No problem.
The next question will come from Philip Shen with Roth MKM. Please go ahead.
Hey, guys. Thanks for taking my questions. First I'd like to address the U.S. market and the UFLPA situation. I was wondering, you know, if you could share how things are improving. Specifically, you know, have you ramped up manufacturing in Southeast Asia for fresh shipments to the U.S.? When do you expect those new shipments to reach the U.S.? What is the utilization of the Southeast Asia capacity set aside for the U.S.? Thanks.
Phil, thanks for the question. For the U.S. market, especially regarding the UFLPA, you know, inspections, we have seen the light at the end under the tunnel, and we see the improvement, the efficiencies, the turnover days, et cetera, is gradually improving. While, you know, the official CBP officials are becoming more and more professional in that perspective. We have seen the hopes, but it's still not 100% smooth, transactional, let's say, custom clearance yet, we are hoping that could happen soon. Regarding the question of the Southeast Asia factories, Jinko and our factory is as a high utilization rates, not only because of U.S. market.
I think mainly thanks to the other markets who are also have a strong demand for, you know, capacities or productions outside China. Our capacity is up and running almost in the full speed even by end of last year. We're we are hoping to allocate more capacity and the shipments to U.S once all the, you know, all the customer clearance is back to a normal status, which we believe could happen soon.
Thanks, Gener. When you say soon, are we talking about a couple of months, or are we talking about maybe 6 - 9 months?
My perspective, I hope it could happen tomorrow, but, it's not something I can handle or I can decide. We are working closely with CBP officers to make it happen as soon as possible.
Okay, thanks. You mentioned, you know, you're at almost 100% utilization in your Southeast Asia facility serving other countries. Can you share which countries those might be and how they might be impacted once the U.S. market opens up for you? Which markets would decline, if you will? Thanks.
One of the important source is, there are many names on the list, but one of the big market is Indian market. You know that Indian market has strong demand as well. They have a high tariff against Chinese products, or they have a strong appetite for the Southeast Asia products.
Got it. That makes sense. Shifting to your comment that the order book visibility in 2023 has already achieved over 50%, in large part from international markets. Can you talk to us about what your current contracting activity looks like for the U.S.? Are you taking new orders yet, or do you have to remind us how much backlog you have to get through before... You know, backlog created by the trade situation, before you can maybe take new orders.
Based on what we have right now, we are not capable to take new orders because we have lots of backlogs, which is big enough for us to for the factory running under the current status of the CBP, you know, approval rates. However, we have a faith that, you know, everything will get better because once the approval rates and efficiency back to normal, I think we are hoping to allocate more capacities to U.S. market, which will help us to solve the backlog pipelines and the commitments to our clients and starting to pick up new orders. That is, you know, chicken egg question. It's really difficult to give expectation of timeline, but we are working hard on it. Thank you.
That all makes sense. One last question on the U.S. As it relates to pricing in the U.S, can you talk about, you know, how you expect panel pricing to trend, you know, not just this year, but also in the future years? I know you're not contracting fresh, but I know you guys probably are very much in touch with your customers. You know, with the ramp up of IRA manufacturing capacity in the U.S, how much do you think panel prices decline as we get through 2024, 2025, 2026, 2027, but you also have the other forces of UFLPA and other trade actions. What's your view on module pricing in the coming years? Thanks. In the U.S.
Phil, you know that we are not picking new deals at the current stage to U.S., in U.S. market, I'm not in the right position to discuss a fair market numbers. I can confirm there are many rumors in the market that, you know, U.S. market price is big enough or let's say high enough for many, let's say, middle small size suppliers who has not suffered or experienced the UFLPA inspection. We believe there are big room to correct the right market price in the future, given the UFLPA inspection complexity of the UFLPA and also, you know, the IRA to bring additional, you know, returns to the both investor side and the manufacturer side.
Okay. Thanks for taking all the questions. I'll pass it on.
No problem. Thank you, Phil.
If you have a question, please press Star then one. Our next question will come from Rajiv Chaudhri with Sunsara Capital. Please go ahead, sir.
Yes. good morning. I have a few questions. The first question is on the cost of polysilicon. You mentioned that was the primary reason why gross margin went down from Q3 to Q1. I'm wondering if you can give us an idea of what your polysilicon cost was, the cost embedded in the Q4 earnings result versus Q3, either in RMB or in terms of the % increase from Q3 to Q1. That's my first question. Sorry, Q3 to Q4.
Hey, Rajiv, we are talking about the polysilicon price, the cost components, right?
Yes. Yes. If you can give us.
Yeah
M ore granularity on how much it went up from Q3 to Q4, and what the gross margin might have been if the polysilicon cost had been flat, for example. You know.
Yeah
G ive us an idea of how the cost numbers are playing out.
Yeah. I think, you know, our trend is likely, you know, it's like the public, you know, the polysilicon price from the public, like the PV InfoLink or other public are available, you know, online site. You know, if you look at the trend of the polysilicon, it's reached to a peak, you know, during from October and to November. In December because of destock and the China rush, you know, the end of rush and the poly is down dramatically. But because of the production shipments, the positive impact is going to be reflected in the first quarter. It's really, you know, the poly reached to a peak from the cost perspective in Q4. I think, you know, it's roughly, I think 10%-15% quarter-over-quarter increase if you look at the trend.
Okay. You, you're saying that, or you're implying that, to ship product modules in November, December, you had to buy poly in October, November when the prices were very high. The benefit of the lower price of poly in December, to the extent that you are going to get a benefit, will be felt much more in Q1 because that's when the that product gets shipped out. 10%-15% increase in the cost of poly from Q3 to Q4 would mean that the gross margin would have gone up from Q3 to Q4 if the cost of poly had stayed flat?
Yes, you're right. If the polysilicon price, this assumption is stable, I think the gross margin is up in Q4 versus Q3. The poly is significant up and, you know, drive down the gross margin, you know, in Q4. I think the most important for the company business is we are doing investment in N-type, starting the beginning of 2022. We reached to 35 gigawatts N-type capacity, you know, by end of last year. With more N-type shipments and polysilicon, now the supply is sufficient. It's on, you know, on the downward trend.
We have significant, you know, sales order pipelines in Q 2023, and we think we are in a good position to drive the company's growth, including the revenue gross margin net profitabilities.
Would you say that from here onwards, if the price of polysilicon continues to come down, whether it comes down slowly or rapidly, we don't know. If it keeps on coming down every quarter, that we should expect improvement in gross margin on a steady basis quarter by quarter?
Yeah. It's, if you know, year basis, 2023, we are optimistic, on our profitabilities. You know, it's not only the polysilicon, you know. It's, our competitive is, you know, improving, you know, a lot. We have good, you know, products. We have very, you know, strong R&D teams, and we have, branding, global sales and marketings, and we have a very solid, you know, supply chain teams and drive up, you know, the overall performance.
Can you also talk about the capacity that you had for wafers, cells and modules at the end of 2022?
It's, I think we disclosed in the presentations, right? The 65, 55, 70 gigawatts by the end of last year. We continue to expand our N-type capacity. Total capacity will reach to I think, 75, 90 gigawatts by the end of this year.
Right. Yes. Can you also talk about the trends that we should expect in operating expenses in 2023 versus the fourth quarter of 2022? You know, for example, you should incur less costs or no costs related to the product coming out of Xinjiang. You should also incur less shipping costs. Should we be expecting a 100 to 200 basis point improvement in operating expenses in 2023 versus the fourth quarter?
Hey, Rajeev. You know, the operating expenses, you know, in the U.S. companies, compose a lot of key components. One of the most important is shipping costs, which is, you know, is going to improve a lot. You know, the global economy is, you know, the impact to the shipping logistics is, you know, is not so significant. We expect shipping costs will improve a lot. On top of that, our U.S., you know, the UFLPA will improve step by step. We have incurred significant unexpected stock, storage costs, for the shipments to the U.S. markets. That we expect a significant improvement.
As well as we, you know, even in our management teams, you know, internal meetings, we are expecting our overall, you know, let's say the labor efficiencies will expect to increase 20%-30%. Sure, that's going to be, I think, you know, with the expansion 60-70 gigawatts versus 45 gigawatts, roughly a 50% increase on the top line. Shipment cost improvement and the efficiency continue to improved. We expect the OpEx will be, you know, in a downward trend, you know, quarter-over-quarter.
Can you talk a little bit about what trend you see in the G&A, in the general and administrative expenses? They went up a lot in 2022 compared to 2021. What sort of growth do you see in those expenses going forward?
Well, we have, you know, some obsolete, you know, let's say one-off items. Like, you know, we dispose obsolete, you know, equipment. For the small size, you know, the equipment to produce small size modules. We granted stock options. We have one-off, you know, stock option-based compensation expenses. That is the key reasons, you know, for the G&A expenses increase year-over-year.
Thank you, Charlie.
Welcome. Welcome.
Again, if you have a question, please press star then one. Our next question will come from Alan Lau with Jefferies. Please go ahead.
Thanks a lot for taking my question. would like to ask again about on the 4Q results. Because the A-share results actually show a very strong quarter-over-quarter earnings growth, almost doubled. Whereas the, at the U.S. level, the adjusted net income actually declined. How should we reconcile the difference between these two? Is there any further share-based expenses in there or? just what is the difference between the two levels?
The first thing, you know, the A-share, you know, the accounting is under the, you know, the PRC GAAP, and the U.S is under the US GAAP, and the consolidation base is different. The U.S entity holds only 58% of the, you know, the equity of the A-share. Under that, you know, under US GAAP, we have, for 2022, we have significant difference on the income tax expenses relating to the deferred tax assets. Because, you know, because of the UFLPA, we have significant loss on the overseas entities. Under US GAAP, we did not recognize the cumulative losses under the deferred tax assets. Under the PRC GAAP from the beginning, we did not recognize, you know, so there's a significant difference on the income tax expenses.
Additionally, we have some difference on the accounting for the welfare benefits for the employees and, based on the different, you know, accounting policies. Under US GAAP, we have separate items like the change in value, fair value of convertible bonds. For the long-term equity investment, we put for the ecosystem investment. We record it under the fair value gains and the adjusted net income, excluding, you know, that two items as well. Back to your questions. I think that it's a one-off, you know, income tax accounting difference for the Q4 as well as some, you know, employee benefits, you know, welfare accounting.
Understood. There's quite a significant increase in the tax. Also I would like to ask another relative detailed question on the FX gain, because the company has made significant FX gain in 3 Q, and actually RMB has depreciated in 4 Q, but seems there's a FX loss. Is it because of the hedging issue, or why is that?
What are you talking about? For which line item?
For the FX gain. Foreign exchange loss.
Okay. For the 2022 overall, I think we did very good, you know, on the foreign exchange hedge. We, you know, on the net basis, we recognize, you know, I think the net gain. There are some fluctuations quarter by quarter. I think Q4, the net gains is relatively smaller versus the Q3 because RMB depreciated a lot, you know, in the Q3 last year.
Understood. Thank you. Switching the topic to this technology. What would you expect the unit net profit or the ASP premium of TOPCon versus PERC in coming into first Q because the shipment % is higher and the N-type shipment should have even higher contribution to the net profit?
Mm.
Yeah. Can you share with us? Yeah.
Yeah. The premium is roughly 1.5, you know, cent, U.S cent. you know, our efficiency is pretty good, you know, leading the industries, we, you know, the products provide additional values to the end customers. We think it's, you know, the 1 to 1.5 U.S cents premium is, you know, reasonable, you know, the price mechanism.
Understood. Is it fair to say the accounting issues will not exist going forward and we have declining freight costs, plus shipping costs and also the ASP premium is also high, then we should expect a strong first quarter in terms of the gross margin?
Yeah. We expect the gross margin expansion, you know, first quarter. You know, the, we have, more integrated levels and the N-type, the percentage I expect to reach to, you know, 50% and the polysilicon is in a downward trend. So, it's, you're right. We expect it in the first half year. The gross margin is in expansion stage.
Thank you. I think my last question is, what is JinkoSolar's plan in the U.S. because it has 400 MW already. Some of the Chinese peers has already started construction for expansion in module capacity. What are the plans for JinkoSolar for now in the U.S.?
We are doing a very solid, you know, analysis evaluation for expansion in the US. We're optimistic because the IRA is going to be. I think it's a very attractive, you know, scheme. As well as the U.S. market is expected, you know, strong demand. We are in the final evaluation stage, but we have already 400 megawatts in capacity. The way we expand, we will expand very quickly.
Understood. Thanks a lot. Thanks a lot, Charlie, for replying my question. I'll pass it on. Thank you.
Welcome, Wilson.
The next question will come from Irma with Citigroup. Please go ahead.
Thank you, management, for taking up my call. I have two follow-up questions regarding on the N-type product capacity. My first question is about the current. What is the current unit product cost level of your N-type TOPCon modules compared to the PERC ones? What is the target level by end of this year? My second question is about the capacity. How many new N-type capacity that you would like to build this year? By adding, in addition to the 35 gigawatts by end of 2022. That's my question.
Thanks. In terms of, you know, the N-type, you know, N-type modules integrated cost versus the, you know, P-type, and we have reached to the parity. Let's say the same cost for the N-type versus the P-type by the end of last year. This year, because of the polysilicon is in downward trend, which will, you know, some have some negative impact, but we continue to improve the efficiencies and implement new process materials. We expect, you know, We will maintain, you know, the same cost structure and by the end of this year for the N-type versus the P-type. The N-type, you know, by the end of last year, we have 35, you know, the N-type, right?
The cell capacity. By the end of this year, and we will have, I think 55 gigawatts in N-type TOPCon cell capacity. Expansion is roughly-.
Can I have the second question?
30-55 cell capacity expansion.
Okay. Thank you.
This concludes our question and answer session as well as our conference call for today. Thank you for your participation. You may now disconnect.