Good day. And welcome to the Daqo Energy First Quarter 2020 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. 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 Kevin 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 first quarter of 2020, which can be found on our website at www.dqsolar.com. To facilitate today's conference call, we have also 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 first quarter of 2020. After that, we will open the floor to Q&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 the industry growth, are forward-looking statements that are made under the Safe Harbor provisions of the US 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 views 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 no duty to update such information except as required under applicable law. Also, during the call, we will occasionally reference monetary amounts in US dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into US dollars solely for the convenience of the audience. Without further ado, I now turn the call over to our CEO, Mr. Zhang. Please, Longgen.

Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. We are pleased to report an outstanding quarter with excellent financial and operational results. I would like to thank our entire team for their hard work and dedication to make these outstanding results possible despite the outbreak of COVID-19 in China in January and the subsequent domestic lockdown and travel restrictions that created a particular difficult environment for securing raw materials, managing onsite operations, and facilitating product shipments and logistics. We overcame these challenges successfully and operated at full capacity during the quarter. The company produced record volume of 19,777 metric tonnes for the quarter and sold 19,101 metric tonnes of polysilicon. Thanks to growing economies of scale, significant savings on energy consumption and improved operational efficiency, our total production cost decreased to $5.86/kg during the quarter, a decrease of 8% from $6.38/kg in Q4 2019. Our cash cost during the quarter also decreased to $5.01/kg, down from $5.47/kg in Q4 2019. In addition, we continued to make improvements in quality and were able to sell approximately 95% of our products to mono wafer customers. All in all, we are very proud of the achievements we made in expanding production volume, optimizing our cost structure and enhancing quality within only two quarters following the start of Phase 4A pilot production. Our exceptional results this quarter reflect the strong capabilities of our Xinjiang facilities at full production following the completion of the Phase 4A expansion project. We believe this also demonstrates our extensive experience and expertise in polysilicon manufacturing, and further solidifies our position as a global leader in the industry. Despite the challenging market environment, we successfully expanded our gross margin by further optimizing our cost structure during the quarter. Gross margin during the quarter was 33.5%…

Thank you, Longgen. And hello, everyone. Thank you for joining our call today. I will now discuss the company's financial performance for the first quarter of 2020. Revenues were $168.8 million compared to $118.9 million in the fourth quarter of 2019 and $81.2 million in the first quarter of 2019. The increase in revenue was primarily due to higher polysilicon sales volume. Gross profit was $56.6 million compared to $35.1 million in the fourth quarter of 2019 and $18.3 million in the first quarter of 2019. Gross margin was 33.5% compared to 29.5% in the fourth quarter of 2019 and 22.6% in the first quarter of 2019. The increase in gross margin was primarily due to lower production costs. For the first quarter, our average total production cost was $5.86/kg, a decline of 8% as compared to the fourth quarter of 2019 production costs of $6.38/kg. With full production of Phase 4A project and an optimized production process, we were able to achieve a cost structure that was better than our original plan. In particular, we achieved per unit electricity usage reduction of approximately 7% compared to the previous quarter and a reduction of approximately 10% as compared to Q1 last year. Cost reduction also benefited significantly from economies of scale. Selling, general and administrative expenses were $8.9 million for the quarter compared to $8.5 million in the fourth quarter of 2019 and $7.9 million in the first quarter of 2019. SG&A expenses during the quarter included $4 million in non-cash share-based compensation costs related to the company's share incentive plan. R&D expenses were $1.7 million compared to $1.7 million in the fourth quarter of 2019 and 1.3 million in the first quarter of 2019. R&D expenses can vary from period to period and reflect R&D activities that take place…

Thank you. [Operator Instructions]. The first question today comes from Phil Shen of ROTH Capital Partners. Please go ahead.

Hi, everyone. Thanks for the questions. The first one is on pricing. I was wondering if you could comment on for monos poly pricing, what you see for Q2 and also Q3. Pricing has, obviously, come down this year due to COVID demand destruction. A couple of months ago, on the Q4 call, you suggested that pricing could dip in Q2 and then there could be a rebound in pricing as high as $11 to $12 a kilogram, I believe, in Q3 and Q4. But what's your latest view? And do you see – what's your latest view by quarter in Q2, Q3 and Q4? Thank you.

Thank you, Philip from ROTH Capital. This is Longgen. I think if you look at our Q1 ASP, it's $8.79. Compared to Q4 last year's $8.70, it's slightly increased. The reason is because, you see, I think in Q1, even though China hit by the COVID-19 in January and February, but most of the factory still is running. So, I think the order still is – essentially, I think, the order to downstream clients, especially LONGi, Jinko, still our Singapore factory are running. So, we overcame all the challenges and continued shipping good to them. I think starting end of the March, especially beginning in last month and this month, I think the reason is because the US, the Europe, I think the COVID-19 caused the whole market or restrictions – travel restrictions and shutdown working factory. I think all the downstream, I think any market demand suddenly stopped. So, pushed back to wafer, cell, even silicon demand is dramatic go down. Today, we also face a lot of challenge. But we strategically signed long-term contracts with, I think, LONGi and Jinko, especially LONGi. During the Q1, difficult time, we still – all the supply to our big clients. So, they also were very supportive in the second quarter. But the price we see in Q4 is around $7.20 to $7.50. And in May, we see the price continue go down to $7 to $7.20. So, we think this price, basically, a lot of polysilicon company is losing money. And all the competitors, even tier one competitors, I think they maybe, I think, shut down due to the annual maintenance or reduce their capacity, running the capacity by discount. So we believe, I think May and June is the most lowest quarter on the silicon price. And the silicon price on the Q3, we're back to $7 to – $7.50 to $7.80. Then on the fourth quarter, I think we're back to normal at $8.50 to $9 because that's the industry average gross margin, I think around 25%. The ASP is around, I think, $9 – or $8.50 to $9. Just want to remind you, in Q1, our monosilicon almost account for 95%. So, that's why our ASP is $8.79. If you look at detail, monosilicon price, Q1 is actually is $8.97. Compared last quarter is $8.99. It slightly go down. Our ASP go up. The major things is because our monosilicon percentage from Q4 2020, 89% to 95% in Q1. So, we'll continue to keep such high monosilicon percentage to keep the ASP as leading in the industry.

Great. Thank you, Longgen. I think on the Q4 call, you talked about being 72% booked for 2020 production and perhaps leaving 10% to 15% for the spot market. Where are you now after being done with Q1 and through much of May?

Okay. Our sales pipeline still is very good. Today, our sales contract – if I count our sales book, our inventory is a negative 3,000 tonnes. Okay? basically, this month almost – the big clients like LONGi is shipping over our original long-term contract. So, sales is not – to us is not a big issue, okay? The big issue is the price. We also under annual maintenance one by one, by rotating on the production line. We have five production lines. So, basically, if you look our guideline, we still full capacity running besides the maintenance production line. And we still sell everything. So, we're making efforts to make the ending inventory by the Q4 to zero.

Okay, got it. And can you comment about the inventory in the downstream? How much polysilicon inventory is with your clients? I know it sounds like you're selling everything, but is there oversupply from – or too much inventory in the channel or at your customers from other suppliers, for example?

Basically, Philip, I'm a little maybe different opinion from you. The reason is because, you see, I think the end market demand for module suddenly stopped. So, LONGi take advantage, along with Jinko basically, okay? I think maybe sometimes together. They go into actually – their inventory is their silicon product. We call it raw materials. So, that's why, let's say, suppose for April contracts – we're supposed to sign contracts in March 20. So, they delayed signing contracts to make zero inventory. So, that's delayed the contract. So, if you look at our operating cash flow, why did the operating cash flow go down? Because the advanced cash from our clients, especially LONGi, the contract, you see, delayed to – from March 20, delayed to April 15. So, we think, right now, the downstream, especially our clients, the raw materials, especially silicon materials, almost it's only one day or two days. Like Jinko, almost three days ordered from us. Three days order from us. So, basically, they will now keep a low inventory. I understand that the reason is because silicon price continue to go down and also the downstream demand is weak. When they come – the market come back is uncertainty. So, I think, at this moment, I think silicon price, essentially, I think we're hit by the demand side. We are a chemical company, continued production, you see. So, we see our competitors, some of our competitors have inventory, but most of the inventory is multisilicon. So, it's unsellable. For monosilicon, there's not too much there. We know that. So, we're very confident, I think, in third quarter, the silicon price, monosilicon price, will come back.

Great, that's really helpful color. Thank you, Longgen. One other one if you don't mind. What's your outlook for your cost structure? You delivered a very strong Q1 cost structure. How much more can that come down in Q2? What do you expect it to be relative to Q1 and Q2 as well as Q3?

Okay. Basically, if you look our Q1 cost of goods sold, almost dropped down $0.50, right? $0.51. I think a majority of cost go down is the utility and electricity. It's almost $0.31 go down. Then also the accessory materials, like package, like the core is $0.13/kg. Then also the salary and wages, $0.08/kg. So, you add up together. I think you have to remind you, Q1 is our full capacity running. The production almost 19,777 tonnes. And Q2, because of maintenance, we don't think the cost will continue to go down. Basically, the only item will go down in the Q2 is the – I think the silicon metal powder. Yeah, will go down. I think the rest of them, I don't think it will go down. So, basically, I think Q2, the cost maybe keep the same or even slightly go up.

Great. Thank you very much. I'll pass it on. Thank you, Longgen.

Okay. Thanks, Phil.

The next question comes from Gary Zhou of Credit Suisse. Please go ahead.

Hello, management. Thank you for taking my questions. So, my first question is on the demand side. So, what does management expect for the China demand this year and how much for the ex-China demand and whether the management have any expectation for next year? Thank you.

Okay. We are very prospect – I think in the solar industry, I think I feel very optimism on the Chinese market. The reason is because China may be hurt by COVID-19 in January and February and March, at the end of March, almost all of the factories is come back. I think to connect the grid, I think by the end of June, rush to connect it, I think – for China market, I think this year definitely will be around 40 gigawatt, 45 gigawatts. Even I think it will be higher. The reason is because, I think, distributed, I think, solar power improvement. I think it will go up. For the rest of the world, the reason is because I think this COVID-19, if you like, US, European, when they come back, I think, is uncertainty. Let's say, if the US, European, all the market come back in May – end of this month or June, then I think the industrial will come back in the third quarter. But I think for the rest of the world, besides China, I think this year may be around 70 gigawatts. So, for overall, I think – for globally, I think this year may be around 105 gigawatts to 115 gigawatts. That's my range. I think next year, definitely, I'm very confident. The reason is because for all this, I think, virus, the module price continue to go down. If you see China right now selling module per watt, it's RMB 1.4 to RMB 1.6/W. And overseas, even cheaper, below $0.20 per watt. The demand and the grid parity is there. So, next year, I think definitely, globally, I think will be about 115 gigawatts. Gary, I think that's my projection.

Yeah. Okay. Yeah, thank you very much. And my second question is on the finance cost. I noticed that, in the first quarter, your company's interest expense was relatively higher on a quarterly basis. So, is there any reason behind that and what is our expectation for the full year? Thank you.

Okay. So, there were two parts related to it. So, one is from a higher debt balance and also with higher bank fees related to notes payables and notes receivables, Chinese bank notes. And also, in the fourth quarter, because we were at the end of our construction period, so during construction, interest costs related to new construction projects, we could capitalize part of it. But I think, in Q1, the project's been finished. So, there's been no capitalization of interest in Q1. So, that's the main difference. I think, going forward, interest expense will be approximately $5.5 million to $6 million per quarter run rate.

Okay, thank you. So, my last question is around the capacity expansion. So, can management share with us whether there's any current plan for further expansion and when we can expect to have further kind of clarity on that? Thank you.

I think for the 4A, even though we will now run smoothly, I think still have some CapEx, I think, it didn't pay. I think around like – I think we still have like – renminbi is around like RMB 1 billion, right? RMB. Sorry, I think around RMB 600 million to RMB 700 million unpaid. So, basically, our – also we face that – in Q2, the ASPs continue go down. We want to keep it in our balance sheet healthily. So, we will not consider any expansion for this year. But as our financial statements continue improve, yes, we were to revaluation to see whether we have to expansion in the 4B.

Okay, yeah. Thank you very much. That's all my questions. And I will pass on. Thank you.

Great. Thank you, Gary.

The next question is from Jeffrey Campbell of Tuohy Brothers. Please go ahead.

Good morning. Well, I guess, good evening. At a high level, your forecast for 2020 volumes was 73,000 to 75,000 million tons. I was just wondering, first, how does this compare to your pre-COVID expectations? And second, do you have any sense of preliminary 2021 outlook? Again, relative to pre-COVID expectations and the world we're in now. Thanks.

Okay. So, actually, the production forecast has not changed before or after COVID in terms of total volume. I think what we're doing is because a lot of the impact to our market for polysilicon is very much in the near term, and we think the market will recover towards the end of this year, in second half this year. So, we actually are conducting annual maintenance a little bit ahead of our original plan, so that we're shifting production volume between quarters, so that in Q2 we'll be producing slightly less and then we'll produce more in the second half of this year. And so, that's for this year. And our total sales volume we think will be similar to our production volume because of the strong demand for our products in particular for our customer. And then, right now, for 2021, our outlook is, overall, the end market demand is likely to improve significantly compared to this year with market recovery. And so, I think we don't have a concrete guidance for production. But, right now, based on our process optimization effort, so it should be higher than the production volume this year.

Also, I just want to add a comment, okay? Because, at this moment, we want – their inventory by the end of Q2, even though the ASP continue go down, we don't want to accumulate any inventory. So, that's why we'll move the annual maintenance ahead. So, basically, on Q3, Q4, the production capacity output will come back to Q1. So, that's why we keep a whole year guidance there.

Okay. That's very helpful.

Because we believe Q3, Q4, the ASP will come back.

No, that's helpful. And kind of thinking toward that recovery and demand, we're hearing both at the utility level and at the residential level that there's been – some stress is showing up in financing, particularly in the US financing related to the various safe harbor and tax benefits. Just wondering, are you seeing that? Is this something that you're watching closely? And your view for solar coming back in the second half of the year, does this also include an expectation that there's not going to be major financing problems?

No, I think the US – we consider US as a big market. Potentially, I think, grid parity and also, potentially, I think the market is so big. But also, you have to consider, last year, over 1 gigawatts, almost 19 countries. So, basically, right now, these industries hit by the virus, the COVID-19 virus. So, we believe if this virus is gone, so the market will come back. If without this COVID-19, we think this year should be around like 140 gigawatts, even 145 gigawatts. So, basically, we're very optimized in the whole market because module is so cheaper and so easy to install and to use. So, basically, we're very confident, I think, the market demand for the – starting from Q3 to Q4, even next year because mono price also dramatically down.

So, let me follow-up on your point. I think if you look at end markets like Europe or Japan or China, so for these markets, the cost of credit or interest rate for debt financing for the projects are coming down. So, there's excess liquidity in the market. So, it's actually improved. And then, with the cost of solar modules and solar products coming down as well, the yield for the solar projects are becoming more attractive. I think the issue you raised about – especially about, I guess, the tax credit market in the US, I think we don't have too much color on that. But just very general, I think, because this year, with the economy, a lot of the companies will have a reduction in profits and reduction in taxes that they will need to pay, so generating this kind of market environment that the cost of tax credit will go up. So, this actually would make monetizing these tax credits more expensive for the solar projects. I think the flip side is that because – and then you have the US Fed with the monetary stimulus that's keeping interest rates very low, so that could potentially offset some of this impact. But I think that's a very specific issue to the US end market.

Okay, great. I appreciate the color. Thank you.

Great. Thank you.

The next question comes from Alan Hon of J.P. Morgan. Please go ahead.

Hi. I have a question – follow-up questions on costs. Firstly, congrats on very stellar cost control in first quarter. Understand that the second quarter production costs may go up a little bit as you're scaling down production. But in assuming like we ramp up to full capacity in third and fourth quarter this year, how much more room do we have on cash costs going down or further cost improvement on the cash costs versus that of the first quarter level?

I think to answer your question, if you look at our Q1, cash cost is $5. I think the renminbi is around $35. Basically, we believe, for the materials, for the silicon metal powder, we are in long-term contracts. So, we still have some room continue to improve, especially, I think, silicon powder, the price we see is continuing to go down. But for the utilities, we don't think any more room to improve. The only thing I think we can improve is the salary and wages. So, basically, $5 if we continue in Q3, Q4, we continue to improve, maybe I think I have like a 5% room to improve basically, frankly speaking. It all depends on silicon powder continue go down. Silicon powder today, I think, account for almost 4.45 – RMB 13.32 per kg, around $1.91 out of my cash cost of $5. So, it is number one cash cost. It accounted for 32.6%. It actually only accounted for 28.7%.

Got you. And thank you for the color. Thank you.

Great. Thanks, Alan.

The next question comes from John Segrich of Luminus. Please go ahead.

Hey, guys. I want to just make sure I've got the housekeeping things right. So, what is the total CapEx that you're expecting for 2020? And how much of that is maintenance CapEx? And then, is there any remaining CapEx that has to be paid for the expansion in 2021 that we should be modeling? And then, I've got two more follow-ups, if I can.

Okay. Actually, I think due to the COVID-19 situation and the impact to the market, so we're actually controlling our finances very carefully and strictly. And we're actually extending the payment schedule for a lot of our suppliers, particularly related to CapEx. So, for this year, the total CapEx is expected to be approximately $75 million to $85 million total. And of that, about $15 million to $20 million is for, you can call it, maintenance CapEx, but a lot of is for project upgrades. And then, the rest is mostly for Project 4A. And for next year, there's another about $50 million to $60 million of CapEx related to Project 4A.

Okay. And is that on top of any amounts that are included as payables for PP&E, just to be clear.

This is inclusive. It's within the payables.

Within the payables.

So, the payables are actually are contractual payment obligations. But we are able to negotiate with our equipment suppliers due to the current market situation.

Okay. And then, I know you gave a lot of figures kind of around percentages of everything, but I think you said electricity usage per kg was down about 7%. So, what are you kind of down to about per kg now?

So, we're around 66 kilowatt hour per kilogram today.

Okay. Was there anything in particular that allowed you to make that big sequential reduction? That's quite a big improvement.

Yeah. So, it's really a process optimization where we've optimized our process, so that we could reduce our electricity usage relative to that we've done in the past. Also, the equipment. So, I think if you remember the Phase 4A projects, now have either 72 or 80 [indiscernible] reactors versus our older reactors were maybe [indiscernible] in the past. Because these larger reactors also have more efficient usage of electricity and for our front-end process as well with our new capital equipment. So, that allows [indiscernible] reduction. And also, our electricity costs came down as well.

Okay. So, where is that now?

We cannot disclose specific numbers. But, overall, it's declined approximately 10% Q-over-Q.

Okay.

We can tell him the total per kg. The average is – electric, I think, consumption is 66 kWh and our cost is RMB 11.75 per kg. So, calculation by yourself, the unit cost.

Okay. And then, last one. I know at the end of 2018, you guys acquired a subsidiary company, Daqo Investment, I guess. And I think you have $18 million or $16 million or had $16 million to pay for that. What does that company do? And what was the point of the acquisition?

Okay, let me just refresh you, okay? The Daqo Investment company, already you know, is owned by the group. The reason is because the company buy a piece of land, built, I think, one dormitory for our employees to lodging. Okay? A building actually like the employee lodging facilities. So, at that time, we need investment, we need constructing the building. So, we don't want touching the business. So, Daqo Group, I think, invest the money in the investment company. Then, I think in 2019, because we want to go, I think, domestic – we call, user exchange board. So, we have to change the Xinjiang company, limited company – energy limited company, 1% is selling to this company. So, this company also own 1% of the Xinjiang – our facilities, okay? So, then later because we withdraw from the [indiscernible] board, so we buy back this company with the 1% ownership, plus the building, the employee building. So, that's why the total evaluation, you see the 60 million you're talking.

Okay. Great, great. That's helpful. Thank you. Okay, that's great. Thanks, guys.

Thank you.

The next question comes from Colin Yang of Daiwa. Please go ahead.

Hi. Thank you, management. This is Colin from Daiwa. I've got a follow-up question on polysilicon price. Understood Mr. Zhang said about, we expect a recover in price in the third and fourth quarter this year probably due to the recovering of global demand. But on the other hand, our major clients, the wafer producers, including LONGi, [indiscernible], they were still in the middle of the price war of wafer. So, wafer prices [indiscernible] keep chopping in the second half beside a recovery in global demand. So, do you think it's still likely to see the polysilicon price goes up even though wafer price will keep chopping? And do you see a lot of price cutting pressures from the wafer producers? Thank you.

Okay. My concern is because, I think, LONGi, Jinko, the downstream major player take advantage of that virus situation to zero their inventory. Then beside that, they may be on supply side, demand side, on the wafer side, the price continue to go down. So, I think the silicon prices continue to go down because silicon – we manufacture silicon as proprietary. It's a chemical company. For example, if LONGi supposed to sign contract with us for April, it should be signing the contract in March 20. If they move to April 15, so almost a one month delay, so cause the demand and supply totally change the situation. So, that's why I think today, the monosilicon price go down. But you have to consider that. If, let's say, the imported silicon from OCI, from Wacker almost become zero, then the domestic monosilicon supply is there, it's not too much there, okay, even though some player have inventory. The majority of the inventory is the multisilicon. It's not unsellable, multipolar, okay? So, we believe as soon as the demand come back, the downstream module, majority right now, even I think 90% is module. So, then the wafer capacity continue full capacity running, also extension. We believe silicon price definitely will go up. Today, if on today it is $7.20, how many silicon company can make a profit? Because, you see, our ASP is a little higher. The reason is because we're 95% our product is monosilicon. Only 5% is multi-silicon. We even use partial, 50% of multi-silicon to produce our own core. So, basically, if you look at today's price, a lot of company, most of the company is lose money. Even Daqo maybe, Q2 – you can calculation, our gross margin may be deteriorated, you see, and the bottom line maybe, I think, maybe above [Technical Difficulty].

Understood. Understood. Okay. The second follow-up question is still about our financing expense because our current interest-bearing debt was just up like 38% year-on-year from 1Q 2019 to 1Q 2020. However, our interest expense was like up by over 200%. Understood Mr. Yang was explained [indiscernible] partially because of a higher banking fees. So I want to learn if we can share exactly the interest rate from 1Q 2019 to 1Q 2020. Thank you.

So, the interest rate currently is roughly 6% per annum on our debt balance. And actually, for last year, I believe it was similar as well. So, the interest rates haven't really changed. Well, maybe came up slightly because we have higher amounts of longer-term duration debt for our capital projects, which carries a higher interest rate.

Yeah, the second banking loan average cost is 5.5%. The long term fixed assets loan is around 5.6% annually.

All right. Thank you, management. That's all my questions.

Yeah, the banking loan probably is around is $265 million. I think a temporary reason because, you see, we made rush payments on the Q4 4A projects. But step by step, as the cash continue from operating side, I think the interest expenses should keep around like $5.2 million – $5.5 million, I think, in the first quarter.

I see. I see. Thank you.

Great, thank you.

Thank you. The next question is from Satyan Shah, a private investor. Please go ahead.

Gentlemen, how are you? The question I have is more due to the political tensions between the United States and China currently. I'm not sure if you're aware, but there is a new legislation going into the Senate today that basically would require Chinese companies to establish that they're not owned or controlled by the government, and that they would be required to submit to an audit that could be reviewed by the Public Company Accounting Oversight Board. How would that – if that legislation was to pass, how would that affect US investors' ability to still invest with you guys here? And what are your views?

I think, first of all, I'm not comment PCAOB what are they doing? But in the history, I think, in 2010 – if you look back, in 2010, I think also some crisis, a lot of Chinese company, I think from OTC up list to main exchange, also I think PCAOB also looking for worksheet from auditor. I think Chinese government at that time opened certain number of public company to let PCAOB review. I think, today, for example, like Daqo, is almost listed in the United States' New York Stock Exchange 10 years. So, our book is, I think, thoroughly, I think, auditable and transparency. So, we're not afraid of that basically. And we support any, I think, any transparency because we are a public company and we have to follow the law. So, no more comments on your question.

Okay. No, that's fine. And then, my bigger question is for the company in general. Over the next year or two, as the solar industry sort of recovers, as you elaborated on, what does Daqo look like a year from now in your estimation as a company?

I think we – okay, basically, today, we almost account for the market share 15% on the silicon supply, on the PV industry segments. So, we definitely is a key player right now in this industry. As you can see, the silicon import from overseas, I think, from this year almost gradually, I think, to zero. So, basically, the Chinese silicon will substitute for the import. The first. Second is, if you look at the PV industry in the future, definitely, I think, it's very optimistic. So, we believe this industry will continue to grow. And definitely, we also see all player – for example, the Asia company continue to expansion. But we will watch the market and we will do our – because we believe – we were, I think, saving our efforts. So, basically, we will look to market to see whether we will continue to expansion or not on the polysilicon side. Meantime, we're also looking for both domestic or overseas opportunities. So, basically, we also doing other – for example, the special gas, other projects, to see continue to increase our revenue avenues, you see, and strategically to make Daqo more strong. To continue to grow on the revenue side and also on the cash payments.

Okay, great. Thank you, gentlemen.

Great, thank you.

The next question is from Robin Chow [ph] of BMDI [ph]. Please go ahead.

Thank you, management, for taking my questions. My question is regarding about the capacity from the industry. So, basically, a lot of factory is making same margin for the current price. We didn't observe lots of maintenance from May. So, what do you see your competitors' maintenance schedule? Would they focusing July or April or August? So, what's the color for this peer's capacity plan?

Okay. Basically, if you look at today, especially during the Q2, a lot of companies – even Q1, you see the ASP continue to go down. This industry already consolidation. So, in China, basically, right now, is major five companies is there. Besides Daqo, Tongwei, TBEA, New Horizon and also GCL, I think that's the major player there. So, if you look, those five players – I think, New Horizon because of the quality issues and also the capacity, only it can achieve around 40,000 tonnes to 50,000 tonnes. And also, they're going to go downstream vertically integrated. So, basically, in the future, I don't think they are the competitors in the polysilicon segments. Then, GCL basically is a joint venture with Zhongneng [ph]. I don't think they will continue to expansion that facilities around the 40,000 tonnes right now running. And basically, they majority supply to Zhongneng. Zhongneng also buys some from us. So, the only major three player is TBEA, Daqo and Tongwei. So, today, on the quality side, we are almost 95% is monosilicon and our competitors – I'm not mentioning, okay? – essentially, other two, they also have new facilities just open last year. The production is not stable. And also, quality is not stable. I'm not going to go ahead. You can call them to dig on the inventory. Basically, we are now the inventory almost is zero. Okay? We sell whatever we produce. So, basically, in this market, today's price is opportunity for consolidation. And I think also the opportunity for our future. So, after maybe Q2, even half of Q3, I think the survivors will enjoy the market.

So, for maintenance, do you see a lot of factories would choose to have their maintenance plans in July?

No, I think that some plants, we know that they also move to second quarter because second quarter right now the selling price is so weak. So, I believe some of these move. Some still will be in September, October. The reason is because they maintenance for the winter. So, I only can say, maybe right now, 50% of the company is any maintenance right now, happened in Q2, then 50% already occurred in Q3, Q4, early Q4.

Okay. Thanks. My final question is regarding about the monthly supply/demand balance. So, from the monosilicon products perspective, what do you see? What's the monthly supply and demand balance in the market? If you can, would you please share in a gigawatts basis?

I think, basically, as the technology continues to improve, you have to remember – reminding you that per gigawatt wafer basically – per gigawatt whatever the downstream project, the consumed silicon is continuing to go down. Okay? If, let's say, two years ago, maybe consumed 4.5 grams in our silicon per watt. So, that's why the module cost is not number one cost right now. The number one cost is gases. Okay? So, basically, we believe on a module right now per watt cost for silicon is around right now like 3 grams to 3.2 grams. So, if you calculation, let's say, this year is around, let's say – I think if you calculation based on the wafer capacity, this year, I think, around like 135 gigawatts. Okay? So, that's were consumed. I think around 400,000 tonnes of silicon. So, for a month, I think it's a lot like 35,000 tonnes to 36,000 tonnes average speaking. But, right now, I think it may be around 30,000 tonnes to 32,000 tonnes per month. That's the demand side. The supply side, basically because of the – I think Q1, the COVID virus caused some small wafer plants shut down. So, then, we are a chemical company, continued to run in. So, beside Daqo, maybe other silicon producer have some even poly there, then LONGi, Jinko, when they – March come back, they want zero inventory. The wafer price go down, reduce – go down. So, that's why they push the demand, go down. Then supply still is there. Then push the price, ASP go down today. basically, I think a solar wafer is around 55 to 58. But I think this is the – I think almost a bottom. I don't believe we'll continue to go down further.

Thanks. I have one follow-up question about the inventory strategy from downstream. You've mentioned that about Jinko and LONGi. They're trying to maintain very low inventory level for now. So, they keep ordering for maybe two to three days. So, at what time point you think they will change their strategy? Could you please share any color on this?

I think maybe by the Q3, when the module – the end market come back, and I think the cell and wafer demand is come back to normal – and it's not only beside LONGi and Jinko, because also other company like Shanxi, Tingtong [ph], Zhongyuan [ph], all the companies running and the demand will be, I'll say, more. So, definitely, they have to keep accumulating some inventory. Otherwise, their supply will be interrupted. I don't think they can keep like this way. The reason right now is not too much other players is doing – small maybe players right now cut their capacity, but when all capacity is running, then also the wafer capacity expansion continues to going on for the next year because people will see next year the potential market is there. So, I think it will come back at least in one week inventory. So, the demand therefore will come back.

Okay. Thank you, management. I will pass on.

Okay, thank you.

The next question is a follow-up from Gary Zhou of Credit Suisse. Please go ahead.

Hello, management. Just a quick follow-up question. So, I notice that some of your key foreign polysilicon competitors are currently under suspension. So, just wondering when do you expect we may heard further kind of – final kind of exit – potential exits on those companies.

We'll, Gary, come back the question. Basically, I think Wacker, you already hear that. I don't think – the major – actually, they focus on the semiconductor polysilicon, maybe have some byproduct, continue to provide to the solar industry, but it's not too much. It's not – number is not accountable. The only thing is I think maybe OCI. I think Malaysia or Indonesia – Malaysia, I think, their plants because we know that. Malaysia, right now, today, we supply to LONGi the selling price around 720. We believe, okay, the Malaysia plant also is not comparable. So, their capacity right now is around 30,000 tonnes. So, that's only right now the overseas, I think, capacity is there. Gary, does that answer your question? I think the silicon association, they have every month the important figure, China import silicon figure. We can give to you if you want.

Okay, that's quite helpful. Thank you very much.

Okay, thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Kevin He for any closing remarks.

Thank you, everyone, again for participating in today's conference call. Should you have any further questions, feel free to contact us. Thank you and bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.