Deye Holdings, owned by Ningbo's richest man, urgently responded to the suspicion of "cutting corners" by Weixin

Deye Co., Ltd., a dark horse in the inverter industry that achieved an inverter performance increase from 0 to nearly 4 billion yuan in just 2 years and is owned by Ningbo's richest man Zhang Hejun, has recently been the subject of related public opinion.

The company was exposed by an overseas review blogger that the micro-inverter products sold in Germany lacked the "relay" device, which was inconsistent with local grid-connected certification and regulatory requirements.

Last weekend, the incident continued to spread in the domestic media. Because of the wide spread, Deye Co., Ltd. held an emergency investor briefing last night, and many senior executives of the company attended and responded to the incident. From the response information, it can be seen that Deye did not install relays in micro-inverters, and is currently taking measures to upgrade the product and provide it to customers.

A relay is an electrical control device. When the change of the input quantity (excitation quantity) reaches the specified requirement, it causes the controlled quantity to undergo a predetermined step change in the electrical output circuit. It has an interactive relationship between the control system (also known as the input circuit) and the controlled system (also known as the output circuit). It is usually used in automated control circuits. It is actually an "automatic switch" that uses a small current to control the operation of a large current. Therefore, it plays the role of automatic adjustment, safety protection, and circuit conversion in the circuit.

"Deye always puts product quality and consumer interests first. We will not cut corners by reducing the number of relays as people say on the Internet, because the cost of relays is not high, not exceeding RMB 4, and accounts for a very low proportion of the cost of a microinverter. Deye's R&D department has been actively optimizing design solutions and upgrading products, hoping to improve the impact of built-in relays on product life." Deye said.

(Micro inverter products displayed on Deye’s official website)

According to information from multiple securities firms and investors, the reason why some products are not equipped with inverters is mainly due to the difference between German regulations and the company's product switching progress.

The German regulation is the "Regulations on the Operation and Management of Distributed Generation Intervention in Low-voltage Distribution Networks" VDE-AR-N 4105, which was promulgated in August 2011. This regulation stipulates that micro-inverters need to be equipped with relays. However, in North America, this requirement does not exist. When the German regulation was promulgated, the use of micro-inverters was relatively small, and various manufacturers did not configure related products at the beginning. After the micro-inverter market gradually expanded, major companies have been switching products.

Considering that relays would affect the service life of products, Deye Co., Ltd. chose to place relays externally, thereby optimizing the life of micro inverters and making external solutions easier to maintain. However, the company was slow in switching solutions, which led to public opinion events such as complaints from overseas bloggers and exposure by domestic media.

Some analysts pointed out that after reviewing relevant regulations, they found that the requirements of North America and Germany are different: North America only requires the detection and disconnection of fault current when a ground fault occurs in the inverter system, and the micro-inverter itself already has this function, so there is no need to install a relay; Germany's requirements clearly state that all inverters that need to be connected to the grid must be equipped with relays, and the relays must automatically close and open for self-test before each inverter is started. Therefore, from the perspective of regulatory requirements, the micro-inverter products sold in Germany that were previously reported by the company to have no relays do not meet current regulatory requirements.

The upgrade solution that Deye Co., Ltd. is now offering is to place the relay externally. When the power grid and equipment are abnormal, the automatic disconnection device will be activated. In this way, the relay has the same effect as the built-in one, and it is easier to maintain after sales. The relevant optimization plan will be completed within one month, and three certification agencies will be invited to certify it.

Some analysts pointed out that the main reason for launching the external relay solution is that the micro-inverter is a sealed package, and the heat dissipation efficiency is weaker than that of the string, so the service life of the relay may be only 5-7 years, and it is not easy to disassemble and repair after damage (it can only be replaced as a whole), which will lead to poor subsequent after-sales maintenance. If Deye shares change to an external relay solution, it can better meet regulatory requirements while improving the overall service life of the product. Deye shares promised to increase the warranty from 10 years to 15 years free of charge. The company provides free upgrades.

Deye said that currently 400,000 sets of this product have been sold in Germany. Among similar products, the company has a high market share in Germany, and the relevant German departments have not taken corresponding measures against the company. The author learned that Deye's micro-inverter sales volume in 2022 was 800,000 units.

In 2023, Zhang Hejun, the founder, chairman and actual controller of Deye Co., Ltd., topped the New Fortune Top Ten Ningbo Rich List. The reason why his wealth value has attracted attention is directly related to Deye Co., Ltd.'s transformation into a photovoltaic inverter. It is precisely because of this transformation that the company's stock price has exceeded 60 billion, making it a strong "dark horse" among new energy listed companies.

As of the end of 2022, Zhang Hejun was the actual controller of Deye Co., Ltd.

In fact, under the leadership of founder and chairman Zhang Hejun and his son Zhang Dongye (general manager), this Ningbo company has experienced explosive growth in the development of the inverter industry. Its "emergence" and rapid rise are indeed very astonishing. This is also related to the company's strategy of seizing the huge new energy outlet and quickly entering the inverter industry.

Deye Co., Ltd. has been providing supporting services to home appliance companies for more than 20 years since its establishment. Its largest customer is Midea, to which it sells heat exchangers and frequency conversion control chips. The revenue brought to Deye by Midea Group once accounted for more than 70% of the company's revenue.

Under the background of global green emission reduction of carbon peak and carbon neutrality, the world's new energy market is also expanding rapidly. Zhang Hejun and others quickly seized the major new market opportunities and acquired an inverter startup team from Ningbo University in 2016, and suddenly owned patents and trademarks at the same time. After that, the "inverter" market segment appeared in Deye Co., Ltd.'s revenue structure. This is also a rare development opportunity for Deye. The company no longer needs to rely on Midea and is no longer controlled by home appliance companies. This has achieved a huge business breakthrough for Deye.

The author found that the company's inverter revenue was zero in 2020. In 2021 and 2022, Deye's inverter business achieved revenue of 1.198 billion yuan and 3.957 billion yuan respectively (of which inverter revenue accounted for more than 66% of the company's revenue in 2022).

Last year, the company's inverter profits accounted for 84.17% of the company's profits. It can be seen that this industry line has become the dual pillar of Deye Co., Ltd.'s existing business shipments and profits.

Meanwhile, last year, Deye’s micro-inverter sales reached 802,000 units, with revenue of 807 million yuan, a year-on-year increase of 658%. In terms of micro-inverter segment, the company’s main markets are concentrated in Germany and Austria. Customers have started to order 800W products, and previously they were 600W balcony projects. The local market competition is quite fierce. In France and Spain, the company is still developing the local market.

The author believes that the above events may have several impacts on enterprises and industries:

1. Deye Co., Ltd. is a listed company with great vision, strategic thinking and execution. In the photovoltaic market, it has achieved an "accelerated" development that exceeds expectations. As the company responded to the public yesterday, it is impossible for the company to "shortchange" customers for a few dollars. The company is optimizing its supporting products to ensure that it can provide complete micro-inverters with a long life.

In the future, it may need to be more cautious about matching standards and product matching. If it is found that there is a discrepancy between the certification standards and the actual products shipped, a solution must be found as soon as possible to avoid the recurrence of the overseas review blogger incident and to avoid further fermentation of domestic public opinion.

On the other hand, Deye was able to achieve a market breakthrough and quickly occupy overseas markets in a short period of time. It has a strong scientific research foundation and sales capabilities. It must have solved many difficulties and problems in the process of breaking through in the past few years. In the future, there may be more and newer problems, and it is necessary to prepare plans in advance.

2. Currently, overseas shipments account for the majority of China's photovoltaic manufacturing. Therefore, how to better comply with and better debug products that are suitable for local policy environments and regulations, as well as improve after-sales services, is also something that all industry professionals need to consider. Some problems are not only or entirely the business of the R&D department, but also require comprehensive cooperation from various business links such as production and manufacturing, procurement, quality management, sales, and marketing. Each link has the responsibility to supervise and control it, and also has the responsibility to escort the company in the process of overseas marketing. The improvement of preventive measures and the perfection of the management system are very important.