Sihang New Energy’s Strategic Breakthrough in Energy Storage Amidst Globalization Challenges

Shihang New Energy: A Breakthrough in Solar Storage Amidst Anti-Globalization Trends!

As compared to companies that focus on solar photovoltaic (PV) materials, auxiliary materials, and equipment, inverter manufacturers are experiencing a rebound after hitting rock bottom. A strong example is Shihang New Energy, which recently completed its IPO, alongside Sunpower. Reports for 2024 and the first quarter of 2025 indicate that nearly all inverter companies are back to profitability. Shihang New Energy reported an operating income of 2.71 billion yuan for 2024, with a net profit attributable to shareholders of 259 million yuan and a non-recurring net profit of 236 million yuan, showing a slight decrease from last year’s peak. A key indicator of operational quality, the net cash flow from operations reached 340 million yuan, an impressive 160% increase year-on-year.

In the first quarter of this year, Shihang New Energy managed to withstand market pressures, achieving an operating revenue of 655 million yuan and a net profit attributable to shareholders of 52.48 million yuan, a 7% increase. The non-recurring net profit surged to 60.17 million yuan, marking a 41% increase year-on-year. These signs indicate that Shihang New Energy is leading the way out of the industry’s downturn and back onto a growth trajectory.

Despite lower revenues, Shihang New Energy has managed to increase profits through diligent operational management. The company stated in its 2024 annual report that the revenue decline was due to a continuous optimization of its customer structure and control over low-margin business scales. This optimization has effectively enhanced the company’s profitability. Even in a challenging market environment in 2024, the overall gross profit margin improved by 4.22% compared to the previous year. Notably, the gross profit margin for Shihang’s overseas operations has remained at a high level, especially with domestic operations seeing a significant increase of 12.36% percentage points to 19.58%.

Another aspect of Shihang New Energy’s profit retention strategy is cost control. In response to market changes, the company has adopted proactive and flexible management strategies, continuously strengthening expense control. In 2024, the total management and sales expenses dropped by more than 25% year-on-year.

In April 2025, Shihang New Energy outperformed its market competitors at the Hungary Energy Exhibition, demonstrating the increasing impact of geopolitical factors on Chinese enterprises engaged in globalization. The choice of market focus can often be more critical than sheer effort. For instance, while the U.S. solar and energy storage market is lucrative, not all companies can easily enter it due to numerous market-related challenges. Companies that did not concentrate their main efforts on the U.S. market managed to avoid significant pitfalls, such as the uncertainties posed by Trump’s tariffs. Shihang New Energy, for example, benefited from the European energy crisis that began in 2022, which led to rapid business growth. The company has strategically focused on the European market, effectively sidestepping risks associated with the U.S. market, showcasing robust market resilience.

According to Shihang’s annual report, the share of overseas revenue significantly exceeds the industry average, reaching 81.63%. However, the company’s primary market is steadily growing in Europe, with limited revenue coming from the U.S. Historically, this may have been seen as a weakness, but in hindsight, it has proved to be a sound strategy. As some competitors struggle to pivot to Europe due to high exposure to the North American market, Shihang New Energy does not face similar pressures. Looking ahead, as the trade war clarifies, the company’s approach to penetrating the North American market will become more strategic and flexible.

The European energy crisis, while it may seem detrimental, has actually sparked a significant surge in the region’s solar and energy storage market. While many perceive the current European market as sluggish, the overall market volume has not declined; rather, it is experiencing a slowdown in growth, returning to more normal levels. Even under moderate expectations, Europe is projected to achieve a growth rate of 6.9% in 2025. The European Solar Association anticipates that the EU will add 65.5GW of new PV installations in 2024, marking the eighth consecutive year of record annual additions. Although this growth rate has slowed to 4.4% compared to the robust 41%-53% growth of 2021-2023, this deceleration was anticipated due to the “abnormal” growth driven by soaring electricity prices during the energy crisis. Looking forward, the European Solar Association expects new PV installations in Europe to maintain a growth rate of around 7% in the coming years.

In the recent context of the European clean energy sector, two positive factors have emerged: the global trade war initiated by Trump and developments in the Ukraine conflict may prompt the EU to further reduce its dependence on expensive U.S. natural gas and commit more decisively to clean energy. Additionally, because the lifespan of inverter products is only half that of photovoltaic modules, and unlike PV components, inverters do not face significant risks of large-scale inventory due to technological updates, competition in the inverter market, although fierce, has not resulted in widespread industry losses as seen in other sectors.

Despite the different growth rates in the European market compared to previous years, this does not indicate a contraction; the market remains active, albeit with smaller incremental growth. In 2025, uncertainties surrounding international geopolitics are expected to lead to a slowdown in global and domestic photovoltaic installations in the latter half of the year. Meanwhile, China’s electricity market reforms are pushing the renewable energy sector to shift from the supply side to the application and demand sides, which presents significant market opportunities for all inverter and storage companies, including Shihang.

Recently, a 10-megawatt photovoltaic project along the Shijiazhuang-Baoding-Langfang segment of the Jinggang’ao Expressway officially commenced operation, with Shihang New Energy providing product support. Thanks to its expertise in power electronics and system integration, alongside the synergistic effects from existing PV customer resources, Chinese PV inverter manufacturers like Shihang New Energy hold a strong first-mover advantage in the storage sector. The overall solution for solar storage systems is set to become a new business growth point for PV inverter companies.

In its annual report, Shihang New Energy outlined that it will continue to consolidate its current market advantages while actively expanding into developed solar markets like Germany and France, as well as emerging markets in the Middle East and South America, taking into account the differentiated needs of various regions. The company is also committed to supporting national strategies to facilitate large-scale development and high-quality growth in China’s clean energy industry, while continuously enhancing its domestic sales scale and implementing national carbon peak action plans.

In terms of product strategy, Shihang New Energy aims to invest in ongoing research and development, technical breakthroughs, and industry-academic collaborations to deepen the application of new technologies in existing products while continuously developing high-power product lines. This strategy aims to expand from residential and small commercial PV and storage markets to large commercial ground station markets. Additionally, the company plans to invest in research and development related to digital energy applications in the solar storage sector, further enriching its product structure and technological reserves, thereby developing its second growth curve and preparing for a third growth curve, enhancing its sustainable development and profitability.

On the branding front, during the reporting period, the company continued to adopt an ODM product sales model for customers in certain countries and regions. It will further refine its global marketing organization and service system, strengthen the promotion of the “SOFAR” product and brand in global markets, enhance brand awareness, and gradually shift from product sales to brand marketing, establishing itself as a globally recognized provider of digital energy system solutions.

To combat competitive pressures, Shihang New Energy remains committed to investing in R&D. As of the end of 2024, the company had 500 technical R&D personnel, representing 31.99% of its total workforce. The total R&D expenditure in 2024 amounted to 270 million yuan, accounting for an impressive 104% of its revenue. In the past year, as the inverter and energy storage market transitioned into a phase of both incremental growth and competition for existing market share, Shihang New Energy has maintained a strong foothold in high-competition markets like Europe, thanks to its solid technological foundation.

Since the establishment of its R&D center in 2013, Shihang New Energy and its subsidiaries have developed 28 core technologies, registered 105 invention patents, 94 utility model patents, 51 design patents, and 80 software copyrights. The company’s technology matrix primarily focuses on three areas: power conversion, grid interaction, and fault diagnosis.

1) In the field of power conversion technology, Shihang New Energy continually explores innovative power conversion topologies and control technologies, leveraging the advantages of third-generation power semiconductor devices to enhance inverter performance metrics. The peak efficiency of the company’s inverter products ranks highly among comparable products in the industry.

2) For grid interaction technologies, which are crucial for inverter competitiveness, Shihang New Energy employs adaptive algorithms for grid-connected impedance in string inverters. Its main inverter products can handle over 30 types of grid voltage harmonics and support weak grids under an AC output short-circuit ratio of 1.09. The active regulation response time is less than 60 milliseconds, and the reactive support response time is under 30 milliseconds, with total harmonic distortion rates below 1%, effectively enhancing grid stability while ensuring stable power generation.

3) For rapid fault diagnosis technology, Shihang New Energy utilizes high-performance digital signal processors to collect electrical information from power semiconductor devices, magnetic components, and automatic switch relays, achieving voltage and current collection accuracies of 100mV and 10mA, respectively. This technology allows real-time monitoring and protection of key internal components, as well as recording critical information before and after faults, with time precision reaching 100 microseconds. The diagnostic coverage for key components can exceed 90%. Additionally, the company’s I-V scanning and intelligent diagnostic capabilities for PV strings have received Level 4 certification, the highest in the industry.

Shihang’s rapid fault diagnosis technology aids engineers in swiftly identifying faults, gradually enabling efficient human resource replacement while achieving partial fault prediction and recognition.

Shihang New Energy’s strategy of decentralizing its market presence offers valuable lessons for peers in the industry. The company lists its “global business layout advantage” as its top competitive edge, emphasizing that the global PV market is rapidly growing, driven by declining PV generation costs and the fast-paced development of clean energy. Shihang has consistently adhered to a global strategy, accumulating a wealth of high-quality customer resources across Europe, Asia-Pacific, South America, the Middle East, and Africa. During the reporting period, its export revenue accounted for a significant proportion of total sales.

Shihang’s approach includes a “core market deepening + emerging market breakthrough” strategy, establishing a “Europe-centric, multi-polar support” global layout. In 2024, its overseas revenue reached 2.213 billion yuan, accounting for 81.63% of total revenue, with an overseas gross profit margin of 39.36%, covering over 60 countries and regions. The European market is fundamental for Shihang, with 65% of its revenue in 2023 derived from Italy, Germany, and Poland. The company has deepened its partnerships with local leaders such as ZCS (Italy), CORAB (Poland), and EnergyNAT (Poland).

Additionally, Shihang New Energy is actively expanding into the Asia-Pacific market, strategically capturing policy advantages in different regions. In friendly policy areas like Japan and Australia, the company has developed tailored products. As early as 2018, it began collaborating with well-known Japanese companies to enter the PV storage application market. Recently, Shihang New Energy successfully implemented an industrial storage project in Osaka, Japan. This project not only addressed the challenges of providing electricity for continuous production scenarios but also pioneered an innovative model for commercial storage to participate in the JEPX electricity spot market. The industrial-grade storage system used in this project is a hybrid three-phase system with up to 6 operating modes and a 5-year warranty. This system supports zero-voltage operation, offering an efficient and flexible hybrid storage solution. Even low-capacity devices can output three-phase 200V and support remote monitoring and upgrades, greatly facilitating energy management for small and medium-sized enterprises.

With the deepening trend of “solar-storage integration,” Shihang’s storage business (including inverters and batteries) has become the fastest-growing sector in the past three years, with revenue share increasing from 35.10% in 2021 to 43.77% in 2023. The revenue from the storage business reached 1.635 billion yuan in 2023 (with 749 million yuan from storage inverters and 886 million yuan from storage batteries), reflecting a year-on-year growth of 18.9%.

In conclusion, the long-term value of a global layout in the photovoltaic industry reveals both opportunities and challenges. Chinese PV inverter manufacturers are actively adjusting their strategic layouts to respond to global market changes. On one hand, they are achieving cost reductions and efficiency improvements through continuous R&D investment and technological innovation; on the other hand, they are accelerating the advancement of their global strategies through overseas expansions and enhancing local service systems, thereby continuously boosting their international competitiveness. The dual-driven development model of technological innovation and global layout will help Chinese PV inverter manufacturers gain greater market share in the intense international competition.

The breakout path for Shihang New Energy is fundamentally driven by a combination of “technology adaptation + regional focus + model innovation.” By overcoming certification barriers in Europe’s high-end market through breakthroughs in power electronics technology, local distribution networks reduce dependency on a single market, while the storage business builds a second growth curve. The key to whether Shihang’s global layout can translate into sustained market share lies in the speed of technological iteration, localized production capabilities, and supply chain resilience. For investors, the company’s capacity to withstand trade frictions and the potential in the storage sector represent differentiated value observation points.