Brian Lee: Okay. Thanks, guys. Appreciate all the color.
Kai Strohbecke: Thanks, Brian.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Pavel Molchanov with Raymond James. Your line is open.
Pavel Molchanov: Yeah, thanks for taking the question. Let me shift gears and ask about Europe. Given all the changes surrounding SunPower, is it fair to say that Europe will be more than half potentially a lot more than half of your sales in first half of ’24 or even all of ’24?
Bill Mulligan: No. I mean, keep in mind, the other huge segment for us is the US utility scale market. And right now, that’s becoming the major part of our shipments. So that’s going to be — and growing very nicely right now and moving into double-digit gross margins next year. So that is a primary growth for us. Europe is still going to be very important. And we expect that market is sort of flattish, though for this year and next year. We hope to expand share in various segments of that market. We always play in the premium segments or introducing our complete beyond the panel solution now with integrated storage and EV charging and panels and software and control software. So we think that product is exciting and getting some traction.
So — but I think overall, given the very high levels of inventory in the European channel right now, we have to be somewhat conservative on what the outlook is there. It’s — there’s a lot of inventory in the channel. So Europe is going to continue to be very important. But the US is — it continues to be our strongest market. And I think very quickly, we’ll recover in US DG to the point where it’s going to be comparable size or even bigger than Europe.
Pavel Molchanov: Okay. China will be, by far, the largest market of ’23 and indeed, probably the only market where new build estimates have actually increased since the year started. What’s the latest on the JV in China? How is it benefiting from the domestic installation boom?
Bill Mulligan: Yes. Our JV partners are driving their own domestic consumption. We use the JV primarily or exclusively for offtake in our international markets. So I don’t really want to comment too much on the domestic Chinese market. It’s extremely competitive, let’s just say, right now. There’s just not enough homes for all these panels worldwide based on the massive amount of production capacity that’s out there. For us, the JV has been very successful because we’re able to take off a residential format panel that has been a great product for us in Europe. We’re just introducing our seventh generation performance line panel. That’s a TOPCon client-based panel that’s really state-of-the-art. We expect that to have really strong competitiveness in Europe.
So that’s going to be one of our major growth products for Europe. So we’re benefiting from the joint venture in that regard. You’re right, the majority of the volume from the joint venture does go into the domestic Chinese market. That helps us from the standpoint that they have scale and a very attractive cost structure which we benefit for our foreign offtake.
Pavel Molchanov: Last question, deliberately zooming out here. Module pricing, when we look at the benchmarks is down 30% over the last six months, deepest drop since the global financial crisis. Do we have evidence to suggest whether this magnitude of price decline is starting to stimulate a bounce on the demand side, which sort of Econ 101 would suggest to be the case?
Peter Aschenbrenner: Hey, Pavel, this is Peter. I would say not yet. There have been a few folks talking about that possibility. Keep in mind that module pricing particularly in the DG segment is a fraction of the total installed cost to the homeowner. And in both in the Europe and the US, higher interest rates have — are kind of working against lower module prices in terms of end user payback periods. So I’d say we haven’t seen that — I don’t believe we’re seeing that yet. On the utility sales side, there’s a lag, of course, due to project cycle times and PPA cycle time. So maybe we’ll see that in the Rest of World PowerPoint business first. In the US, I think we’re also seeing the effects of higher interest rates being a counterbalance to a potentially lower module costs on the spot market here in the near term.
Pavel Molchanov: All right. Thank you guys.
Peter Aschenbrenner: Long winded. No, not yet. I think.
Pavel Molchanov: Yep. Appreciate it.
Peter Aschenbrenner: Thanks.
Operator: Thanks. Please stand by for our next question. Our next question comes from the line of Philip Shen with ROTH MKM. Your line is open.
