(Yicai Global) July 17 -- Canadian Solar, the world's fifth-biggest photovoltaic module supplier that just completed its secondary listing in Shanghai last month, intends to initially invest CNY18 billion (USD2.5 billion) to build a factory in China's Inner Mongolia Autonomous Region to stay relevant.

The company has penned an agreement with the municipal government of Hohhot, the capital city of Inner Mongolia, to construct a large-scale production base for various types of products to strengthen its industrial leadership, the Ontario-based firm’s Chinese listed arm said in a statement yesterday. The first phase of the project will cost CNY18 billion.

Canadian Solar, which used to focus more on downstream products such as cells and modules, is aiming to increase its production capacity across the industry chain. Its year-end capacity target is 20.4 gigawatts of silicon rods, 35 GW of wafers, and 50 GW of cells and modules, according to a plan released earlier.

The situation that PV companies are trapped in forces them to choose between two options: "expand or die," industry insiders told Yicai Global. Suppliers need to either keep expanding their capacity to keep up with the latest technologies or risk being left behind by rivals.

After the first phase is ready, Canadian Solar's new plant can make 30 GW of monocrystalline silicon rods per year, as well as 10 GW of monocrystalline wafers, 5 GW of PV modules, and 80 GW of crucibles, a key consumable used in making PV wafers, plus other ancillary products. 

The workshop to produce silicon rods is scheduled to begin construction this month and start operation in March 2024. The remaining facilities are slated to kick off construction in September and reach the planned capacity a year after that. The company also plans to invest in phases two and three of the project to further expand its capacity, but the final decision will be made based on the initial performance of the first phase and market conditions.

Shares of Canadian Solar [SHA: 688472], trading on the Star Market, closed down 1.3 percent at CNY16.15 (USD2.30) The firm's Nasdaq-listed equity [NASDAQ: CSIQ] was 0.9 percent up in after-hours following a 3.4 percent decline on July 14.

Editor: Emmi Laine