Yan Zhuang: Well, so 2024 is actually pretty unique year because we all know that in Q1 we’re actually in — the industry is under pressure on margin. Price came down pretty fast since Q4 last year. So — but however, we’re expecting the second half of bouncing back, Q2 is likely to be a transition quarter. So if you ask me, we’ll kind of try to make the right balance between margin and volume. So we believe this year is going to be uptrend year. So we believe that the distribution — distributed generation, which is the distribution channel price will bounce back and actually we’re going to have a better margin moving forward. But the contracts for that channel always signed, like, a few weeks before shipment. But we have a very loyal channel, right, worldwide in that channel.
So we have a very high confidence volume from the distributors and leading sellers around the world. So for — and also for U.S. market, which is right now the highest priced and market with the highest margin, we have a very high proportion of our capacity signed up already, and especially for the more profitable, even more profitable US factory volume. So for other markets, it really depends. So, for example, in Japan and some higher price market we have a higher proportion of signed order, if it is low priced market, we try to manage the pace. However, we do see some markets demand really coming up very strong even now, as early as March, which is Pakistan. So we’re locking up volume at a pretty healthy price right now.
Vikram Bagri: Thanks for that.
Shawn Qu: Right. So I’ll add few comments. I will add a few comments on Yan’s comment. You asked us how much of a guided volume — annual volume of contracted. As I mentioned in the guidance section, for Q1, we strategically decided to control the volume in order to protect the margin. Therefore, with this strategy, this moment, we strategically try not to contract too much of the 2024 annual volume into long-term contract. Because we believe, as Yan said, the pricing will improve. We think the module pricing in some of the market is very — too depressed which is — which will improve. It has to improve. So Yan would rather want our sales team to control the volume so that we can pick up better priced contract later in the year. But we do believe that both the volume and the price, well, actually the volume is there, but we want a better price before we commit into the volume.
Vikram Bagri: Thanks, everyone.
Operator: Thank you. Our next question comes from the line of Philip Shen with ROTH MKM. Please proceed with your question.
Philip Shen: Hi, everyone. Thanks for taking my questions. As a follow-up on that last thread in terms of pricing, I think Shawn and Yan, you guys have talked about, you expect pricing to improve — it has to improve, Shawn, you just said. Can you quantify this in any way, specifically, I think our rough estimate for your module ASP in Q4, and it could be wrong, but we have roughly $0.15 a watt. What do you think that module ASP on an actual basis could be for you in Q1, Q2 and Q3? Thanks.
Shawn Qu: Well, we are not guiding the Q1 ASP, but we give you the gross margin guidance, which is 17% to 19%. But in order to get this gross margin, we sacrificed on volume. So Yan said, we control volume. We only plan to ship 6.1 gigawatt to 6.4 gigawatt. As you notice that we shipped over 8 gigawatt in Q4. So obviously we have the capacity to ship at least 8 gigawatt, if not more, but we decided to control the volume. And now moving forward, we think the modules ASP in later quarters should be in part, if not better than the Q4 ASP. Let’s put it that way, that’s — Yan and I have this view. Let’s see whether we are right or not.
Philip Shen: Got it. Okay. And what do you think are the dynamics that result in the better pricing? You said it has to improve. So what are the assumptions in your conclusion that it has to improve? We’ve heard that the channel inventory in Europe has cleared for DG. We’ve heard now if you — if the customers in Europe want to order modules, they have to get a production slot. So can you talk about the utilization rates for the manufacturers in Asia, in China and Southeast Asia? Is it substantially lower now to control the supply? So can you elaborate, Shawn, on why things have to improve? Thanks.
Yan Zhuang: Okay. So Philip, well, I think, first of all, if you look at China and overseas market, China market, actually we believe this year’s growth is going to be some moderate growth because last year it just grew too much. But this year we still believe it’s going to be growth, but it’s going to be moderate. Overseas, we’re going to see strong shipment into the channel, in distribution channel because that channel was blocked since Q3 last year and the destocking actually has completed mostly. So we’re seeing the demand is bouncing back with the pricing improvement already in both U.S. and Europe and Australia. And we also see new markets like Pakistan is growing pretty rapidly as a very strong demand in Q2 already starting.
So utility market will have growth, may not be a revolution of growth, but it will grow. So we expect this year’s total installation, it’s going to be like 20% growth comparing to last year. If that is the assumption, then we see that — moving into second half of the year, we should see the ones with TOPCon capacity will actually have much better pricing. And we also see the capacity, as we mentioned already, Shawn mentioned that already, capacity versus oversupply because bankable capacity is actually comparing to the seasonal high demand in second half. Remember, the second half demand is going to be much higher than first half. So in few months’ time, you’re going to see a very high demand versus the effective capacity. Effective capacity means bankable, meaning with the right cost and features and also some — the capacity that can over kind of maneuver around the trade barriers and traceability and ESG issues.
