Good day. And welcome to the Daqo New Energy’s Fourth Quarter and Fiscal Year 2020 Results Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Alex Schwarz [ph] 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 fourth quarter of fiscal year 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 fourth quarter and fiscal year 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 industry growth, are forward-looking statements that are made under the safe harbor provisions of the U.S. 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 statement. 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 view 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 U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer these translations into U.S. dollars solely for the convenience for the audience. Without further ado, I now turn the call over to our CEO, Mr. Zhang.

Thank you, Kevin. Hello, everyone. Thank you for joining our conference call today. We are very pleased to report a strong quarter in terms of operational and financial results to bring a successful close of the year 2020. I would like to thank all our entire team for their hard work, commitment and dedication in achieving these excellent results. During the quarter, we produced 21,008 metric tons of polysilicon, a record high in our company's history. Our production cost was reduced by 2.7% in Renminbi terms, primarily due to our efforts in additional energy savings, offset by a higher than expected rise in the cost of silicon raw material in the fourth quarter. The increase in our cost in US dollar terms compared to the third quarter was the result of exchange rate fluctuations due to RMB appreciation. In 2021, we will continue our efforts to reduce cost, as we begin to benefit from our newly implemented digital manufacturing system to maximize our output, optimize our production process and further improve our operational stability and product quality. During the months of November and December 2020, we saw significant pick-up in polysilicon demand from our customers to meet their increasing production needs to serve the growing solar end-market. During the fourth quarter, we sold 23,186 metric tons of polysilicon, which is the highest quarterly sales volume the company ever achieved. Since the beginning of 2021, we continue to see rising polysilicon market prices, and most recently market poly ASP has reached a range of $15 per kg to $16 per kg. As our mono-wafer customers continue their capacity expansion plans supported by robust downstream market demand, we believe that the supply of polysilicon will continue to be very tight throughout the year given very limited additional polysilicon supply this year. Regarding…

Thank you, Longgen. And hello, everyone. Thank you for joining our call today. Now I will discuss our Company's financial performance for the fourth quarter of 2020. Revenues were $247.7 million, compared to $125.5 million in the third quarter of 2020 and $118.9 million in the fourth quarter of 2019. The 97% increase in revenue in the fourth quarter compared to the third quarter was primarily due to higher polysilicon sales volume and higher polysilicon average selling prices. Gross profit for the fourth quarter was $109.5 million, compared to $45.3 million in the third quarter of 2020 and $35.1 million in the fourth quarter of 2019. Gross margin was 44.2%, compared to 36% in the third quarter of 2020 and 29.5% in the fourth quarter of 2019. The increase in gross margin was primarily due to higher ASPs. Our polysilicon average production costs was $5.92 per kilogram in the fourth quarter, compared to $5.82 per kilogram in the third quarter. The slight increase in ASP was primarily the result of RMB appreciation versus the US dollar during the quarter. In RMB terms, our production costs in Q4 was reduced by 2.7%, as compared to Q3, primarily as a result of improvements in energy and operational efficiencies, despite a higher than expected rise in silicon metal [ph] raw material costs in the fourth quarter. Selling, general and administrative expenses were $11.2 million, compared to $9.2 million in the third quarter of 2020 and $9 million in the fourth quarter of 2019. The increase in SG&A cost was primarily due to a increase in shipping costs as a result of higher sales volume for the fourth quarter, as well as a increase in personnel cost. SG&A expenses during the quarter included $4.5 million in non-cash share-based compensation costs related to the Company’s…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Gary Zhou with Credit Suisse. Please go ahead.

Thank you. Thanks for taking my questions. And congratulations on the strong results. I have two questions. So firstly is on the polysilicon price outlook. So we noticed that there has been a significant polysilicon price hike after Chinese New Year, so from around RMB90 to around RMB100 last week. So can management share with us your latest view on the near term polysilicon price outlook for the next few weeks? And if you can also share your estimate for the second quarter this year and also the second half of this year? And the second question is on inventory. So wondering if management can share with us the company's latest polysilicon inventory, and if you have also some information, the inventory level add to your competitors and also add to the wafer companies? Thank you.

Hello, Gary. I think first of all, I think you know the price, basically, I think, you know, January our average, including the value adding tax, I think our selling ASP is around the RMB80 per kg, February was around RMB81, but now I think in March, I think we're selling around 100 - higher than 100, okay. Basically, I think we see the selling price go up. And especially this week, I think we are selling our products around RMB120 per kg. So equivalent I think if you [ph] without value adding text is more than - high than $16 per kg. We see the reasons because we see this year didn't have any capacity adding to the polysilicon supply side. But the demand side really we see a lot of, I think the wafer expansion projects is under– on the road. As you see that, recently, we just announced the two long-term contracts, one is with Zhonghuan another one is with Wuxi Shangji. Basically, those two long-term contracts is most - I think majority 90% quantity is forecast 2022, 2023, 2024. This year actually is not too much. So you can see right now people is more even in a concern, even to next year, middle of next year, a possible demand is still higher than the supply. So as always we see the polysilicon price continue every week go up. And we believe I think second quarter the ASP should be around 120 - to RMB120 to RMB130 per kg it's possible and for the second half of the year, I think definitely we believe should it be above RMB120 per kg. And I can't you know project how far away, but as we say today polysilicon cost account for in module, okay, far in module only…

Okay. Hi, Gary. So let me discuss quickly about our inventory level. So I think you remember, at the end of Q3 because of a delay of order from a particular [ph] customer, I think our inventory was a bit harder than normal. So it was running more than three weeks of inventory at that time. I think during Q4 as demand improved and orders normalized, especially in December with very strong orders from our customers. So inventory has reduced to less than two weeks, approximately 10 days or so. So that's already a normalized level of inventory. And then by now our inventory is running at very lean levels. So it's less than a week of inventory right now, which is really the minimum level that we need to prepare products for the different grades and to ship to different customers. So we're running, at basically on minimum level of inventory right now of less than a week. And I think across the industry and also our customers, we're also seeing very lean inventory levels currently.

Okay. Thanks very much. This is very helpful. Thank you. This is very helpful. And I’ll pass on. Thank you.

Great. Thank you.

Thank you.

Next question is from Karl Liu of CICC. Please go ahead.

Hi. Thanks, management for taking my question. I only got two question. The first, yeah, I think we have no doubt about the potential price of trend [ph] this year. But we are seeing some current change on the demand weakness, especially in March. I think we have some channel checks showing the modules company has already cut their capacity utilization recently, so could you please give us some colors on the current market dynamic? And do we think the current price growth trend will be slow down? Or, do we expect price to stabilize reasonably? I mean, we have no doubt about the whole price trend this year, but how about the reason to be? So do we expect that changing the modules will have some pressures on us? And the second question is about the prepayment. So we know we have some prepayment we signed with the customer. So could you please share that prepayment percentage we have signed with the customer or maybe just some colors that we can - for example, how much money we can – a bump [ph] payment we can receive when we sign a contract with our customers? That's all my question.

Karl I think first question, I think, you know, today basically - okay, module market, I think the European - Europe and the US market is still is very hot.

Yeah.

Like I said and I think, you know, obviously you’re selling around $0.25 I think per watt feels good. The only thing so I know, China, I think right now is…

Yeah.

Increased to 1.65, 1.7 and it looks a little slight, the reason is because everybody waiting for NEA, the two conference meeting, you know, the new policy. But definitely, I think after mid of April, definitely, I think China demand will be quickly come back. That’s I think for certain. But to answer your question, yes. I think the module selling maybe was sold out in China, within one month. But if you look at the inventory, maybe some inventories type sale. And the reason is why because I think right now, we were today, almost mono-wafer no inventory, as we told.

Okay.

I think then also some - I think some company, okay, I think keep a high - in order to keep a high gross margin, basically they continue to increase the wafer prices. I'm not sure you know, how long they can continue doing that, okay, basically what I say in some segments because unbalanced gross margin and kind of pass-through through the middle industry, what I say is the wafer sale and module, and a cost may be temporary, the module, I think selling maybe a little slow down. But for further - for the future, you see, I think a module just like the building, as you build up, you always can sellable [ph] okay, only is the price.

Yeah.

So finally, you were selling the module, maybe at lower price, right? The only thing is, who is going to lose money, or not say lose money, maybe adjusted the gross margin in certain areas, to lower down their gross margin. So what I think is in the future, wafer gross margin should be good and, you know, should be - the module should be - gross margin should be reasonable to reach a reasonable margin to push the you know, the module continue to sell it. So I'm not worried about just ourselves, you see, even polysilicon prices continue to go up 10, 20 per kg. But that factor, you know, the final products only little. If we increase $10 - RMB10 per kg, maybe only increase the module price, you know, 0.5%, 3%, 0.3% this will not affect too much. The effect is less than the glasses prices right now affect the module. So what I think is because of demand and supply, the market mechanism, you know, for us, because we are chemistry industry, it's hard, long term investments, you know, it's intensive capital investments. So it's hard to - in time to one time, you know, to increase the capacity. So, as you know that the demand supply is there. So even this year, all the polysilicon produced only maybe can support I think, around 150 gigawatts. So - but as you can see, the wafer capacity continued expansion by the end of this year in China maybe reached to more than 400 gigawatts. So we don't know, basically, you know, but I can tell you is, the market is there, China will continue to go up. Even NEA today, the head of the NEA just said, we will detail lay down the policy and to…

Yeah. Thanks for taking the - thanks for your answer. I actually have a follow-up question on your outlook. So, it's interesting we have noticed that the wafer price has always like banding with the polysilicon price, while the polysilicon price go up, the wafer price always follow-up and go up. And - but if we look at the capacity, should see some, like, yeah, the overcapacity, or the competition on the wafer side, but actually in the price level, we didn't see that. And so could you give us some color on that? Do you think it's just something will definitely happen, but it's just not happen though? Or do you think it's because currently the sales diversity is not big enough. So, we still have – I mean, the whole industry, the polysilicon industry do have the sales or contract with the leading player. So actually, the second tier players cannot get enough the polysilicon, so even they have planning to build up more capacity, but actually they cannot produce more wafer. What do you think about it?

Yeah. I think, you know, as the module assembling growth module right now is lower. So it's not discouraged, I think of the module sales in China temporary. But if we look at the sale, I think inventory is there. I think some company, maybe the big - in the history, they almost manipulate the wafer capacity. But in the future, right now, they're vertically integrated. If they kind of selling wafer, you know, all in the module, I think it's okay. But if they continue to increase the price of the wafer, you know, if they kind of selling the module, you know, what's the next step? They have to reduce the module, wafer price? All right. So I think that's the time, only the time can tell you. So I'm not going to do any comments. I think the stock price tell everybody, right?

Okay. Yeah. Thank you very much. That's all my question.

Thank you.

Thank you.

Next question is from Philip Shen with ROTH Capital Partners. Please go ahead.

Hi, everybody. Thank you for taking my questions. The first one is just a follow-up on the outlook for China's demand. Can you share what you think the overall demand will be this year? Do you think it will be 60 gigawatts? Or do you think its 80 gigawatts for example? And perhaps some talk about what that split might be by quarter?

Philip, I think, you know, I'm very optimistic about the China, even though the – I think the dropped didn't say any target for national level, but I think it's encouraged, I think the each provincial to develop, I think their own targets. Then today, in the two conferences in Beijing today, the head of the NEA, basically, you know, sets the targets there, I think around - I think 1200 gigawatts in next 10 years. So, as you can see that, I'm pretty sure especially the distributed, you know, the roof top and the distributed I think power - solar power plants in China is continued to develop. I think this year definitely should be above 60, even about 80 gigawatts.

Great. Thank you, Longgen. And I think you guys are very - I mean, fully booked for 2021 for 2022, I believe with the new contracts you might be fully booked as well. So would love to get some additional color on how you're thinking about capacity expansion. And clearly with the China listing, you're going to raise money for the - for Phase 4B expansion. Can you talk about the expectations for CapEx for Phase 4B? I believe it's maybe $13,000 or sorry, 13,000 per metric ton…

RMB3.5, yeah…

Feel free to give in renminbi, but do you expect the Phase 4B to be similar? Or do we have the unit CapEx, right for Phase 4B? And then beyond 4B, what are you thinking about now? Where do you think the location could be for the expansion? And what kind of CapEx could that be? Thanks.

Okay. I think, Philip, I think, you know, the only things I can tell you is, we are continuing to expansion. As you say see right now, the information, even right now, we're still not listing IPO, but we use our own money already starting 4B. 4B design capacity is 35,000 tons. But that is integrated to our existing I think plants. So we think the extra output should be 40,000 tons. Basically, this year, we already given guidance, 80,000 to 81,000 metric tons. So next year, I think it's not the final, I think, we can see, if we can, you know, climb the - ramp the 4B capacity quickly, I think next year, our plan, okay, is going to increase capacity 50% reach to 120,000 tons for next year. So that's, I think two years plan. For the - you know, beyond the two years, we also, and as you see that, we are planning right now the IPO in China stock market. So far we don't know the valuation. But we're very optimistic, and we can raise – I think right now the estimate is RMB5 billion. I think if we can raise more than that, definitely, I think, you know, use our own current, you know, free cash, then you know, this year, I think net profit plus, I think the depreciation or EBITDA or whatever, we think we can continue to planning expansion. That we cannot tell you how much, and we are looking - beyond Xinjiang, we are looking at other places right now. And maybe we are looking, another 40, or even 80, or even 1000 tons new plant. So, I think that's what we're waiting for, basically based on the proceeds of the IPO, the timing, and also the market situation.

Great, thank you. Can you give us a little bit more color on the China listing in terms of timing? When do you expect that to be - the CSRC to give you the final approval? And then one last question, as it relates to your cost structure, I think you mentioned that, it went up a little bit in Q4, because of currency. What's your expectation for cost per watt in Q1? And then what does that - how does that trend in 2021?

Okay, I'll leave that cost, I think, to our CFO, Ming. Basically, I think the IPO, I think, the processing status in the - you know, maybe, you know, already, I think mentioned that. So far, we already I think, go through the February 2nd, I think the STAR Market Review Committee already approved. We are, I think meet all the requirements for the listing and all the requirments. Right now we are doing the registration. I think we are the first one, I think, you know, the US company, I think right now, listing the subsidies in China. So we believe, I think we maybe can quickly registration by the end of this month, then, you know, hopefully we can, you know, listing in China stock market by the end of April or beginning of May, that's right now the status. Then also, I think I forget, the first question about the 4B total investments. The 4B total investments, because we are integrated to existing plans, so total investment is around a RMB3.5 billion. Our 4A total investment is around the RMB2.9 billion. So it's almost I think, you know, RMB500 million, RMB600 million increase, the increase because the capacity is some area, we are, you know, the capacity is higher than 35,000 tons, okay. So basically why we are integrated with the existing system. So we were syndicated, I think, after putting down [ph] insurance, the plant should be more 120,000 tons the capacity, the actual output mean.

Okay. Hi, Phil. In terms of our cost structure, so for Q1, we're expecting our costs in terms of RMB to be roughly similar to our costs in Q4, maybe just slightly higher because of high silicon metal costs. And I think in terms of movements in the US dollar, I think because of the current continued appreciation of RMB, I think we could see maybe a 3% to 4% increase in costs in US dollar terms in Q1 relative to Q4 of last year. So that's what we're seeing right now.

Maybe because the US government continues to issue like a US$1.9 trillion. So cost renminbi continue appreciation.

Right. So that's for Q1 and Ming, what do you think about Q2, 3 and 4? What is the trend of the cost structure? Thanks.

Okay. We think costs for the remaining of the year should be similar, at least for Q2 and Q3 should be similar to Q1, and then costs should come down by Q4, assuming constant US currency exchange rate.

Okay…

But 4B, its for the 4B totally ramp up, our costs will continue to at least cutting 5%.

Yeah. 5% plus type of reduction from current cost.

Okay. Great. Appreciate it. Thank you. And I'll pass it on.

Great. Thank you.

Next question is from Colin Yang with Daiwa Securities. Please go ahead.

Good evening, investors. This is Colin from Daiwa. My first question is a bit similar to Philip’s, because you know, the Street, I think, has no concerns for another stellar earnings in 2021 because very limited operations from the industry wide, but people start to worry about reports to 2022, especially with all the major competitors, including Tongwei and Suntan, they both announced a very aggressive capacity expansion plan. So real worry about losing market share if we didn't expanding [indiscernible] minor. So if we expect you to announce another expansion plan, do we plan to, you know, aided by another share placement by equity or debt financing? So this is my first question. My second question is regarding the FBR my side [ph] because as you may notice that there is a quite a different reviews on FBR from Tongwei and and GCL-Poly. So what is our view on FBR, including security costs extra? Thank you.

Colin, I think for the first question, I'm going to compare to Tongwei. I know Tongwei right now currently have I think, at least the two places or no expansion, around 80,000 tons, but you have to consider Tongwei also, I think, you know, closed equity investments with I think other company, for example, LONGi, I think Trina Solar. So basically, even by the year 2023, just like they claimed their capacity because 290,000 tons, how much is sellable, we don't know. Because you know, I think of which may be more than 1000 tons they will use their own vertically integrated, because they are going to do the wafer sale and even module, right. So we – I think around their focus, our expansion we think is reasonable. And we’re based on our, you know, capital, I think our status, our cash status. And I think we're going to do the 4B expansion. So by the end of this year, we are going to I think put into production. Hopefully we can ramp up production by the end of this year. So I think next year, our capacity, almost a 50% increase to 120,000 tons, we think is bigger, I think, you know, increase to meet our clients needs. As you can see right now, today, almost all big wafer producer, sign long-term contracts with us. For example, LONGi, Jinko, Trina, Canadian Solar, I think Jinko, even Shangji, Zhonghuan I think we would announce another company pretty soon. So we right now almost sign those bigger clients, you know, next two to three years. So I think the relation - strong relationship with the clients is not only the quantity, how much you can produce, but also the quality of the product. So as you can see our quality,…

[indiscernible] Thank you, Longgen.

Great, thank you.

The next question is from Alan Han with JPMorgan. Please go ahead.

Hi. I guess like, I’ve two minor questions here, as most of the question is already answered. I noticed that in the fourth quarter last year, I mean, the realized price is around US$10.8. If we are to like, take the average from say PV and pooling [ph] or silicon China, it seems to us - it seems to me that the average price would be slightly higher. Just want to understand why, is it due to like, we have a slightly higher sales volume in December when price was relatively lower?

I think Alan, I think mostly important. If you'd look at our you know, the structure of our product sale in Q4, we're selling I think our products is around the 20, I guess, 23,186 metric tons, almost 100% we are more on that product. If we compare our Q3, we - our product you see the modular product still is 98%. So basically, we selling most is right now that I think on a mono-silicon. Then also, of which, we certainly mostly is the high-quality mono-grade, I think, polysilicon. As you can see that even mono-silicon classified, I think, right now is 4, I think, products. So we have - majority right now is selling the highest price. So that's why our ASP is higher, I think around like a $10.80. So I think that's my answer. Basically, I think we will continue to enjoy that. The reason is I said, I think last year, mid of last year, we adopted I think a major - digital management, even let's say in the deposit processing, we use, you know, a single box to do the AI calculation. Okay, I think the technology. So right now, our mono-silicon product, I think every month we’ll produced is about 99%.

And just follow-up to what Longgen said, I think Alan, I think you're right in Q4 was a little bit unique. And we did sell more volumes in December than during the month of October or November. I think part of the reason was one, some of our customers were taking advantage of very attractive pricing at the time, and they also they were preparing for a building of additional volumes for production during the Chinese New Year. Yeah, so that's where the ASP came in.

Got you. And my second question, and also my last one, is that, I noticed in your other operating income have declined from US$5.5 million in 2019 to US$0.2. I mean, looking at periods like years how trends, it usually doesn't trend to almost zero. So just want to get a sense of why over there.

Okay, so other operating income historically is most of, for example, R&D grants and technology grants from various government agencies, okay, and for this year, it just so happened that these were less than previous years, okay. And actually, I think for future periods, we would expect levels that actually would be more similar to the - our current year, the lower levels than previous years.

Well, limited to the current year, but not the previous years?

And other previous years, yeah.

Got you. I guess, I will pass it on. Thanks.

Great. Thank you.

Thank you.

The next question is from Chao Ji with Goldman Sachs. Please go ahead.

Hi. Thank you for taking my question. I remember you said that a part of your R&D in 2020 was spent on the research of anti-product. So can you please share with some color in terms of progress or anti-poly? Thank you.

Okay. So basically, we are doing R&D to improve purity levels. The N-type requirements are much more stringent than the standard monotype levels. And right now, because of the strong demand from our customers, so we are optimizing our overall production for the monotype polysilicon, but we do expect starting - effectively starting this year, and through the next, say two years that the demand for anti-wafer and translating to anti-poly will increase in over this time. So we are doing R&D efforts to increase the share of anti-poly from our production. And one of the key goal is to increase the level of production in terms of percentage and the same time with our significant impact to our production costs. So that's our current target right now.

Sure. Thank you so much.

Great. Thank you.

Your next question is from Tony Fei with BOCI Research. Please go ahead.

Hi, management. Thanks for your time. My first question is regarding your 1000 tons semi [ph] grade capacity, I understand its at a very early stage right now, but do you can share what is your expectation regarding the quality and ASP maybe addressable market regarding this project? And will it be commissioned at the same time with Phase 4B? Second question IS regarding your maintenance schedule this year, which quarter will take place and how much production volume would it have impact on that specific quarter? Thank you.

Okay. I think first question about to the 1000 metric tons of semiconductor grade polysilicon. This is also in our IPO proceeds. It's based on the IPO success. I think it's a time we think you know, it's time we are going to starting doing that production line. Basically we will joint venture with one of the - I think, you know, I can’t announce the name, okay. That is famous. I think it's downstream semiconductor wafer, I think continue together to do the I think the projects. And our I think angle is from the highest quality I think you know, the polysilicon is tuned. I think the polysilicon should be the highest, I think basically right now is I think you know, about 12 inches wafer - semiconductor wafer quality. So, we want from top to down rather than our competitor, I think Xinhua, but not [indiscernible] they have failed because they are starting from bottom, I think lower quality semi conductor. So basically, I think we have the planning and depends on right now the – I think it proceeds from the IPO and when we're going to successfully listing. Definitely, we will announce that at that time. Secondly, is the annual maintenance. Annual maintenance mostly what will happen I think in the third quarter, and just a regular I think, you know, that will not affect right now, I think in our guidance for this year, 80,000 to 81,000 I think you know, the output is only considering the annual maintenance.

Okay. Thank you, Longgen.

Okay. Thank you.

The next question is from Dora Lu with JPMorgan. Please go ahead.

Hi. I guess most my most of my questions have been asked, so I just follow up with two minor questions. And the first one is related to our long-term contracts. So could you share with us what is the percentage of our 2021 production volume which has been secured by the long-term contracts? And the second one is more related to the financial statements? I noticed that note receivables in 2020 has dropped significantly? So could you share with us the reason? Thank you.

Okay. Dora, I think I answer your first question, basically right now we signed, I think two clients with [indiscernible] I think then another long-term contract with another five I think a major wafer producer. I think we booked almost 100% I think 2021 capacity. The only think that we can you know continue maybe - we will sign another contract I think as soon as, just you know maybe second half of the year you know, we can squeeze some little quality for the contract then to book, the year 2022, ’23, ’24. So basically, my answer is 2021 the output 80,000 tons, almost 100% of book. The second question, I think - I think our CFO, Ming will answer that.

Okay, so especially the note receivables number came down, so during the end of the year, we actually paid down a number of our Chinese bank loans as the one source of the funding is from the notes receivables, we converted it to pay down Chinese bank loan, so that's why you saw the balance came down.

Yeah, thank you so much. That's very clear.

Great. Thank you.

The next question is from Robin South with CNBM [ph] Please go ahead.

Thank you management for taking my question. I would like to ask about the customers' inventory level for polysilicon. Do you think thing that your clients are building up inventory in build up coming supply shortage? This is my first question.

Okay. First of all, I'm not sure you know our clients build inventory or not. But basically you see all kinds of major player right now in the wafer industry. As you can see LONGi, Xinjiang [ph] Jinko, I think, I believe I don't think they build inventory on the wafer settlements. I believe they selling I think all - either sell the - even Shangji sell the all products or they integrated to I think sale module to selling the module. So basically to me, as I just said, right now this year total polysilicon capacity only can support 150 or 160, maybe, you know, gigawatts, I think final products. So we're maybe making some efforts to import some polysilicon, I think that's there. So maybe, you know, last year some inventory come up - come up this year, the ending products. So what I say is today, I'm not - even today, I think we don't think any inventory in us polysilicon producer, like Daqo, Tongwei, I don't think any inventory, but besides Tongwei, okay. I don't know, because Tongwei is vertically integrated. So I don't think you know, Terbium [ph] or other company have inventory silicon right now is sitting there. Then also, I don't think, you know, the wafer producer, even today like Jinko or Xinjiang they are pipeline - you know, they wafer in the inventory, I don't think so.

Okay, thank you. Very clear. My second question is about the payment terms. So given that the supply is quite tight and downstream is running short of polysilicon, so do we getting better payment terms for polysilicon sales?

We're still I think, like the usual, you know, to us, I think if you can see most all deliveries upon you paid. So most right now, yes, we accept their banking notes. And when we accept banking notes, plus, I think of the cash, okay, the remittance. So basically, we upon that. So right now, because of the supply and demand, so we maybe, you know, in each and in quarter month, we will be asking for more remittance cash, rather than the banking, I think dropped. So, I think that's what I'm doing. But basically, I think our delivery is upon the cash received. I think as you know that, banking notes also is very - just like cash.

So basically, right now, what happens is - so one is. customers are willing to sign long term contracts and pay a higher prepayment, per kilogram or a higher percentage of prepayment for the contract. So I think that's really a sign of customers are really willing to pay upfront, you know, to secure supply. And then another situation we're seeing right now is that, actually we usually contract around the end of the month or next month volume. And actually customers now are eager to pay us ahead, after the contract is signed, so that you know they could get on the delivery list. So that they could get earlier delivery of polysilicon for their order as well.

So, basically, you know, Ming just said, I think the first one most important, we right now, I think take the advantage of that you know, the supply, tide supply. So, we are going to sign some contracts, basically, I think a majority of quantity is forecast, I think next three years. So we collect high percentage of down payments, I feel that's what are we doing right now, to lock in the future.

Okay. I have one more question regarding the competition landscape. So, what do you see in the relatively longer term development for this polysilicon supply business? So, do you think that there will be a big player and several smaller ones with roughly equal capacity or you expect will have four to five manufacturer with similar scale? And the second following question about is this, what would be Daqo’s long term market share target in this supply?

I think basically you know, the silicon industry is different from the middle, I think the same the solar industry, like wafer sale and module. We are chemical industry, you know, first of all we need to have a capital investments, capacity as you can see our balance sheet. Secondly is long term investment you know, circle, third, is you know, requirements for environmental, for the safety, you know, all these. I think this industry, if you look at last year, Q2, our selling price, almost - you know, this industry only I think we make a little money, I think all the industrial other players lose money. So basically this industry is not just like you see the glasses, glasses is even less technologies than the polysilicon. Then also you have to remember that in this industry, one of the player, you can know that they have the money, right in Jinko [ph] But they take away five years, they still didn't, you know, keep up the quality, like first year player. So, basically, I think in the future, maybe in this industry, maybe you know, where we survived only four to five player there, and those four or five player will forecast I think, continue on the investments and the capacity, I think expansion, I think definitely, I think Tongwei is one of the bigger player, as you can see that, but they also continue to vertically integrated. And we don't know the future, what's going on, okay, how much percentage of the polysilicon where we go to vertical integration? How much will go to the market? But definitely, I think Daqo is one of I pure, think, a silicon producer player, and we will not touch you know, I think the downstream, we do whatever we expert on. So I think we definitely will be one-off player. And then maybe, I think Tongwei is one of player. Then also I think, Asian polysilicon is going to IPO. We don't know the future, whether they can successfully IPO or not, raise enough money to keep up you know, pay with us, compete with us. Then another is a new horizon. I think that's you see the only thing left for right now, the major player there.

Okay. Thank you, I will pass on the question.

Great, thank you.

Thank you, Robin.

This concludes our question-and-answer session. I would like to turn the conference back over to Alex Schwarz [ph] for any closing remarks.

Thank you, everyone again for participating to this conference call. Should you have any further questions please don't hesitate to contact us. Thank you. And Bye-bye.

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.+