Pan Li: You’re right. We did have some kind of special one-time items in the fourth quarter last year. One is some kind of customer dispute. It’s around $30 million, which is we have some impairment for the equipment around $10 million. So we did have $40 million, I think one-off items you can excuse. Non-recurring items.
Unidentified Analyst: Okay. And comparing your cost structure to the Tier 2 manufacturers, can you give us an idea — my calculation is that your cost structure in the fourth quarter was about 10 percentage points better than the Tier 2 and Tier 3 manufacturers. So for example, if you did 12.5% gross margin, the Tier 2 and Tier 3 were operating at 2% to 3% gross margins. Can you comment on that?
Gener Miao: We are confident that our cost structure is leading and we have advantage. By the way, we don’t comment on detail numbers and different company has different situations. But you’re right, if we are, let’s say, making low profit levels, I think a lot of companies doing a similar business will lose the money. That is we’re very confident. And again, I think it takes time to face out the Tier 2, Tier 3 companies. And after the consolidation and the face off, then we think we can get more market share and make decent probabilities. But it takes time.
Unidentified Analyst: Do you think at this point your cost structure is better than other Tier 1 manufacturers?
Gener Miao: I don’t do 100% guarantee but we are confident.
Unidentified Analyst: So you’re confident that your cost structure is already equal to or better than other Tier 1 manufacturers?
Gener Miao: Yeah, we are confident that our cost structure, capacity, technology is leading.
Unidentified Analyst: Can you elaborate on the expected cost improvements that are likely to happen as a result of the integrated production that you are going to roll out next year of the Shanxi plant? How much of a cost advantage are you going to create as a result of the integration and everything happening in one location?
Gener Miao: It’s not purely cost advantage. It’s — the Shanxi super factories, it’s digitalized and automated and the ESG traceability is low carbon, everything and we integrated a lot of advanced equipment and streamlined a lot of the even phase out some production phase stage and have significant workforce efficiency and very high turnover ratios and very good locations to serve the customers in the West China as well as the global market customers. So the cost structure is reflecting the advantage and it’s a big amount, we believe, but we don’t disclose. We think it’s a big advantage with its existing production structures for the industry.
Unidentified Analyst: And finally, I want to confirm a number that I think Gener gave. The total volume of shipments of N-type in the fourth quarter, was it 70% of total shipments?
Pan Li: That’s 70%, yes. 70%.
Unidentified Analyst: And did he say that in the first quarter it will be 85%?
Pan Li: Full year. Let’s say it’s full year, it’s around 90%. So gradually from 70% to 95% quarter by quarter, and this year. So Q1, this year I think is roughly 80%.
Unidentified Analyst: Okay. So in terms, going back to the gross margin, so you are suggesting that the first quarter gross margin should be slightly lower than the fourth quarter. So are we still looking at a number around 12%?
Charlie Cao: You mean the absolute number?
Unidentified Analyst: Yeah, the actual gross margin.
Charlie Cao: Yeah, we don’t disclose that, but I said [indiscernible] slightly downwards, but not dramatically. But we think it’s bottom and it’s reaching the bottom for the first half of the year.
Unidentified Analyst: So if the gross margin is around 12% in the first quarter, and the prices stabilize from March, April onwards, is it reasonable to think that gross margin could improve in the second quarter because your costs will keep on coming down and also your shipments to the US which are higher ASP will go up?
Charlie Cao: We think we have more likelihood to improve in the second half year. The improved outlook, the demand outlook, and you are talking about US shipments in the second half year, low risk. And I think roughly maybe let’s say 60%, 65% shipments in the US in the second half year as well as the Shanxi super factory is doing the highest production in the first half year. That will be 100% operational by the end of the third quarter. So everything, together, we think the margin expansion is likely to — in the second half year.
Unidentified Analyst: And what do you think the impact of, you mentioned that in the fourth — by the fourth quarter, you expect that Tier 1 companies or top 10 manufacturers will have as much as 90% of the market. That basically means Tier 3 will have shut down and Tier 2 will be selling much lower output than they are selling right now. What do you think that does to pricing by the fourth quarter?
Charlie Cao: The fourth quarter this year, right?
