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JinkoSolar Holding Company (NYSE:JKS)
Q2 2021 Earnings Call
Sep 15, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by for JinkoSolar Holding Company Limited's second-quarter 2021 earnings conference call. [Operator instructions] As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Ms. Ripple Zhang, JinkoSolar's investor relations manager.

Please proceed, Ripple.

Ripple Zhang -- Investor Relations Manager

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's second-quarter 2021 earnings conference call. The company's results were released earlier today and are available on the company's IR website at www.jinkosolar.com as well as our Newswire services. We have also provided a supplemental presentation for today's earnings call, which can also be found on the IR website.

On the call today from JinkoSolar are Mr. Li Xiande, chairman of the board of directors and chief executive officer of JinkoSolar Holding Co. Limited. Mr.

Gener Miao, chief marketing officer of JinkoSolar Company Limited; Mr. Pan Li, chief financial officer of JinkoSolar Holding Co. Limited; and Mr. Charlie Cao, chief financial officer of JinkoSolar Co.

Limited. Mr. Li will discuss JinkoSolar's business operations and the company highlights, followed by Mr. Miao, who will talk about sales and marketing.

And then Mr. Pan Li, who will go through the financials. We will all be available to answer your questions during the Q&A session that follows. Please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S.

Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in JinkoSolar's public filings with the Securities and Exchange Commission.

JinkoSolar does not assume any obligation to update any forward-looking statements, except as required under the applicable law. It's now my pleasure to introduce Mr. Li Xiande, chairman and CEO of JinkoSolar Holdings. Mr.

Li will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Li.

Xiande Li -- Independent Chairman of the Board

[Foreign language]

Ripple Zhang -- Investor Relations Manager

We are very pleased to have delivered revenue of USD 1.23 billion and a gross margin of 17.1%, as well as a significant increase in non-GAAP net profit quarter over quarter despite very challenging market conditions in response to sharp polysilicon price increases in May and June, and there is a certain time gap in the transmission of price increases from upstream to downstream in the supply chain. We quickly increased the external sales of silicon wafers and proactively lowered the production volume of modules. Total shipments and revenues in the second quarter were approximately flat compared with the first quarter while profit improved sequentially as prices along the supply chain will remain high but relatively stable. We see overall acceptance of module price increases continuing well into the second half of the year.

Demand for modules is gradually resuming and our module production volume increased remarkably month over month in the third quarter.

Xiande Li -- Independent Chairman of the Board

[Foreign language]

Ripple Zhang -- Investor Relations Manager

As well of the first PV enterprises to go global, we have accumulated experience and insights into the development and management of overseas supply chains. This has given us the know-how and capability to mitigate risk. Since the beginning of the year, we have continued to optimize and improve our global supply chain management. So far, we have announced a few strategic cooperations such as the joint investment with Tongwei Co., Ltd.

in a high-purity crystalline silicon project with annual capacity of 45,000 metric tons and investment in Inner Mongolia Xinte Silicon Materials Co., Ltd., a wholly owned subsidiary of Xinte Energy Co., Ltd. And we have signed a strategic five-year polysilicon supply agreement with Wacker Chemie AG. Wacker will supply polysilicon to JinkoSolar from its production sites in Germany and the United States, which contribute to a long-term stability of our supply chain and the business growth. Meanwhile, the overseas wafer manufacturing facility will start construction soon and will serve our production facilities in Malaysia and the United States when production ramps up.

Xiande Li -- Independent Chairman of the Board

[Foreign language]

Ripple Zhang -- Investor Relations Manager

In terms of integrated operations, over 7 gigawatts of newly added capacity of large-size cells has put into production during the second quarter to support the rapid growth in demand for large-size products with the release of new capacity aided by the application of new technologies and the continuous optimization of our process. We are confident that optimizing the integrated capacity structure will gradually be reflected in cost reductions during the second half of the year. At the same time, cell technology is at a transitional stage from P-type to N-type, and we are expanding the investment plan for N-type cell capacity based on technical advantages and two years mass production experience.

Xiande Li -- Independent Chairman of the Board

[Foreign language]

Ripple Zhang -- Investor Relations Manager

Leading technology, high-quality products, and reliable services form the foundation of our success and the growth of our market share worldwide. Recently, the maximum laboratory conversion efficiency of our large area N-type monocrystalline silicon solar sale reached 25.25% and the maximum laboratory conversion efficiency of our high-efficiency module reached 23.53%, both making history with new world records. This year, the shortage of polysilicon highlighted the economics of large-size products, we expected proportion of our large-size product shipment to increase rapidly in the second half of 2021 and the market penetration rate of large-size products to further increase next year. High module prices have also brought about changes in the market structure.

The uptake of the distributed generation business achieved rapid development with more flexible business models and lower sensitivity to prices. In response to this trend, we have also raised the proportion of distributed business for the full year to around 40% of total shipments compared with 20%-25% last year in order to meet the needs of customers facing different distributed application scenarios.

Xiande Li -- Independent Chairman of the Board

[Foreign language]

Ripple Zhang -- Investor Relations Manager

The PV industry has largely completed its transition from relying on policy subsidies to policy's strategic support and the continuous cost reduction and product upgrades brought about by technology innovations have continued to fuel solar demand. We expect the second half of 2021 through 2022 to be a big moment for solar installations. Top-tier enterprises are expected to grow even faster than the industry average and further increase market share with higher proportions of large-size products and faster penetration of distributed generation markets. In order to secure the annual growth rate of our global shipments, we signed strategic cooperation agreements with both COSCO Shipping and Maersk.

At the same time, in order to facilitate the rapid penetration of China's distributed generation business and the accelerated development of the energy storage business, we recently signed a strategic cooperation agreements with Contemporary Amperex Technology, Gotion High-tech and other industry chain leaders. The partners will set up project teams to do joint research and development, share resources, and leverage their respective advantages to jointly promote further business development for solar plus energy solutions.

Xiande Li -- Independent Chairman of the Board

[Foreign language]

Ripple Zhang -- Investor Relations Manager

Before turning over to Gener, I would like to go over our guidance for the third-quarter 2021. We expect total shipments to be in the range of 5 to 5.5 gigawatts, including module shipments to be in the range of 4.5 to 5 gigawatts for the third quarter of 2021. Total revenue for the third quarter is expected to be in the range of USD 1.24 billion to USD 1.37 billion. Gross margin for the third quarter is expected to be in the range of 12% to 15%.

The annual mono wafer, solar cell, and solar module production capacity is expected to be -- to reach 32.5, 24, and 45 gigawatts, respectively, by the end 2021. The full-year 2021 shipment guidance, including wafer, cell, and modules is still expected to be in the range of 25 to 30 gigawatts.

Gener Miao -- Chief Marketing Officer

Thank you, Mr. Li. In the second quarter, total shipments reached 5.2 gigawatts, inclusive of over 1 gigawatt of wafer and cell shipped to China market. In terms of module shipment by region, Europe contributed the largest portion of the module shipment this quarter, as module shipments increased by more than 40% year over year.

Shipments to China and the United States remain stable sequentially. The rapid developing Chinese market has been given a boost by government policy and expected to contribute a large proportion of shipment in the second half of this year and 2022. Through continuously monitoring China's market demand and our customers' needs, we have allocated the utility projects and the distribution market with different personal products and the resources to support the coming strong growth. Overall, demand from overseas market remained strong in the second quarter, benefiting from both increasing power consumption brought about by the gradual recovery of energy consumption level, thanks to effective pandemic control measures and the effective implementation of carbon emission reduction goes in major economies like Europe and the United States.

In addition, the expected reduction in subsidies in some markets has brought forward some demand. We believe that Europe and the United States and India will become even bigger driving forces for the newly overseas installation. The United States is one of our most important markets, although the supplies have become more difficult of late due to challenges with shipping and policies in short term. We have made strategic and long-term commitment to adapt our resources and infrastructure to better serve the U.S.

market. Our teams have already been proactively deploying researching and promoting suitable long-term solutions that will allow us to continuously grow and meet the needs of U.S. market. We expect annual global installation in 2021 to be in the range between 150 to 160 gigawatts.

Some projects scheduled for this year have been delayed to the following year due to higher cost in the supply chain. Along with the new project in 2022, installations in 2022 are expected to increase by over 30%. We reiterate our total shipment guidance of 25 to 30 gigawatts for the full-year 2021. Looking forward, as we have a high degree of uncertainty on the future demand, we are striving to deliver faster shipment growth compared with industry average to increase our global market share as well as reaffirm our competitive position and leading position in this industry.

In terms of product prices outside the United States, markets have generally maintained an upward trend. In terms of product structure, the proportion of our large-size products have been rapidly increasing with 182-millimeter product accounting for approximately 50% of shipments in the second half of this year. We are bullish about the development prospects of distributed generation markets and expect up to 40% of total shipments this year would be going to distributed generation market. We will continue to explore the global market demand for the distributed generation based on market trends and customer needs, and proactively increased our presence in China, United States, Europe and explore other potential markets.

With that, I will turn it over to Pan.

Pan Li -- Chief Financial Officer

Thank you, Gener. In the second quarter, we remained flexible and adjusted shipments for wafers, cells, and solar modules according to the prevailing market conditions. As a result, we achieved a relatively balanced performance in terms of shipments and profitability. Sales revenue was basically flat with the first quarter of 2021, while gross margin exceeded our expectations.

The changes we addressed on the management and control operating expenses and exchange rate volatility have proven to be effective. Income from operations and net profit, excluding long-term items increased significantly compared with the first quarter of 2021. For the second half of 2021. We expect raw material prices to further stabilize and production volume to gradually increase, which combined with cost reductions resulting from new production capacity, should have a positive impact on profitability.

Let me go into more details about this quarter now. Total revenue was $1.23 billion, sequentially flat. Gross margin was 17.1 percentage, sequentially flat. Disposal and impairment loss on property, plant, and equipment in the second quarter decreased significantly compared with the first quarter of 2021.

Total operating expenses in the second quarter were $155.3 million, which accounted for 12.6 percentage of total revenues. In terms of absolute amount and proportion, both improved significantly compared with the first quarter of 2021. Excluding shipping costs, we expect operating expenses as a percentage of total revenues to remain stable. The effective management and control operating expenses increased income from operations to $55.2 million, up to 139 percentage sequentially.

Operating margin increased to 4.5 percentage from 1.9 percentage in the first quarter of 2021. EBITDA was $143 million compared with $123 million in the first quarter of 2021. Net income was $10.3 million and non-GAAP net income was $42.5 million, up significantly sequentially. Non-GAAP diluted earnings per ADS increased to $0.89.

We continue to optimize our hedging against foreign exchange risks and recorded a net exchange loss of $0.7 million, a significant reduction from a loss of $4.1 million in the first quarter of '21. Moving to the balance sheet. At the end of the second quarter, our balance sheet of cash and cash equivalents was $1.01 billion, approximately flat with the first quarter of 2021. Accounts receivables due from third parties improved significantly, sequentially, and we will continue to work on improving liquidity.

AR turnover days were 62 days compared with 68 days in the first quarter of 2021. Inventory turnover days were 138 days, compared with 126 days in the first quarter of 2021. Total debt was $3.12 billion at the end of second quarter, compared to $2.67 billion at the end of first quarter. Out of total debt, $67.6 million was related to international solar projects.

Net debt was $2.11 billion, compared with $1.59 billion at the end of the first quarter of 2021. This concludes our prepared remarks. We are happy to take your questions. Operator, please proceed.

Questions & Answers:


Operator

[Operator instructions] Our first question is from Mr. Philip Shen from ROTH Capital Partners. Please go ahead, sir.

Philip Shen -- ROTH Capital Partners -- Analyst

Hi, everybody. Thank you for taking my questions. I'd like to ask about the -- your view of the anti-circumvention Southeast Asia AD/CVD tariffs. that could come around.

So if the Department of Commerce takes on the case in the coming weeks, what would you expect to do? Would you continue to ship into the U.S.? And if so, how would you mitigate that risk of retroactive tariffs? Or is there a possibility that you might stop shipping into the U.S.?

Charlie Cao -- Chief Financial Officer

Philip, this is Charlie speaking. And to mitigate the risk, not only the risk you are talking about, let's say, U.S.-China right on this solar industries. And we have accelerated the process to build up more strong supply chain and integrated production line out of China. And I think we signed the silicon arrangement with Wacker and we have begun to build up the -- around 7 gigawatts wafer capacities in Vietnam and to match our capacity in -- existing capacities in Malaysia and the U.S.

So from the -- let's say, the medium term, we are optimistic and we will continue to serve our U.S. -- U.S. customers and for the circumvention you are talking about risk and it's still in the early stage. And it did have some uncertainties, but we are following up the event and, of course, we are keep in touch with our customers.

Philip Shen -- ROTH Capital Partners -- Analyst

OK. Thanks, Charlie. I know it's a tough situation. And I think you brought up the silicon arrangement with Wacker.

And your 7 gigawatts of wafer capacity in Vietnam, I think in the anti-circumvention case, the Jinko Vietnam facility is mentioned in that case. And so if they do take the case on, does the wafer facility in Vietnam -- would you continue to expand that -- build that facility out? Or is there a chance that you might slow things down there?

Charlie Cao -- Chief Financial Officer

We don't have any further plan to expand capacity on the wafer out of China. But the first I would want to have a relatively competitiveness to build up integrated, including the silicon, right, out of China to make sure to mitigate the risk to zero. And we think we are in a good position to mitigate this risk.

Philip Shen -- ROTH Capital Partners -- Analyst

OK. Great. And then how much -- with the WRO enforcement, how much product has not made it -- how much of your product from Malaysia has not made it to the U.S. shores thus far? And what is the impact of that on Q3 results? Because I think in your prepared remarks, you talked about opex should be flat ahead except or excluding shipping costs.

And so to what degree -- how much product has been not able to get to the U.S. shores? And then how much is it costing you to store that product because my understanding is it can be quite expensive. And have you been able to find other markets for that product? Or do you expect to wait for that product to make it to the U.S.? Thanks.

Charlie Cao -- Chief Financial Officer

So, yes, we did have some modules stopped by the U.S. CBP and to request additional documentations. And we are still in the process in the preparation of relevant documentations. And at this stage, we are cautiously optimistic for the results.

And it did have -- because it's going to take time, so it did have some impact on our shipments to the U.S. market. And in terms of the storage, we did have additional -- we are expecting to incur additional storage for the inventories and waiting for the preparation of the relevant documentations. And back to question now is the solar demand pretty strong? And I think it's not the demand issues.

It's just globally, it's just the supply chain and the higher supply chain cost and production capacity bottleneck.

Philip Shen -- ROTH Capital Partners -- Analyst

OK. Charlie, sorry to ask the question again, but can you quantify how much product has not been able to make it to the U.S.? And what the cost might be to store that?

Charlie Cao -- Chief Financial Officer

Well, in the process evaluation additional costs, it did have, as I said, negative impact on the shipments to the U.S. as well as the gross margin, even net profitability in the short term, but we are not in a position to disclose the detailed number.

Philip Shen -- ROTH Capital Partners -- Analyst

OK. I really appreciate you taking my questions. I know they were some tough questions. With that, I'll pass it on.

Charlie Cao -- Chief Financial Officer

Sure. Thank you.

Operator

Our next question is from Credit Suisse, Mr. Gary Zhou. Please go ahead, sir.

Gary Zhou -- Credit Suisse -- Analyst

Hello. Thank you for taking my questions. This is Gary from CS. I have three questions.

So firstly, can management share with us what is your module price outlook into the fourth quarter of this year, so especially after the recent upstream cost hikes? And what do we think is the maximum kind of module price, can the developers in China accept?

Gener Miao -- Chief Marketing Officer

Sure. Thank you, Gary, for your question. This is Gener. Regarding the market price, we have seen the latest changes from the upstream supply chain side like the polysilicon price change and the EVA price change, and even sometimes the glass price changes upwards as well.

So we are anticipating the modules price will not be able to accept all the upwards because there are certain bottleneck and the ceilings for the downstream players and the customers to adopt all these numbers. So in our observation, the latest, I think, tenders by some of Chinese SOEs numbers are just released today and yesterday. We have observed all the Tier 1 players are about RMB 1.80 per watt peak. So if we make it more specific, I think the range is somewhere between RMB 1.82 to RMB 1.86.

That should be a flagship price for the rest of '21.

Gary Zhou -- Credit Suisse -- Analyst

Yes. OK. Thank you. So my second question is can management share with us a little bit more information on our cooperation with CATL.

So just wondering if it has any kind of numerical targets on the energy storage business and/or other operations? And my last question is if a company can share with us some updates on the subsidiary Asia listing?

Gener Miao -- Chief Marketing Officer

Yes. Thank you for your question again. So for the cooperation with the other storage battery companies, including CATL, Gotion and others, I think that's a very strategic move. In our prepared remarks, we emphasize that that is our long-term strategy prepared for the future because with great parity ongoing, we are anticipating a massive insulation in the renewable sector, especially in PV industry to be happened in the next coming years.

And because the nature of the PV solar power generation system and the storage is masked for the whole industry's further growth. That's why we have established a partnership with the key players in the storage sectors to make sure that we are well prepared for that. And make it more specifically -- and we joined the research and development together with some of the resources sharing and the leverage each other's respective advantage to jointly promote future business development for the solar plus energy solutions. And the next question, I think Charlie will take that.

Charlie Cao -- Chief Financial Officer

The IPO process is still on the track and we submitted the application to Shanghai Stock Exchange by the end of June. And as of today, still in the review process by the regulators.

Gary Zhou -- Credit Suisse -- Analyst

Thank you for taking my questions and I will pass them on. Thank you.

Gener Miao -- Chief Marketing Officer

Thank you.

Operator

Our next question comes for Sunsara Capital, Mr. Rajiv. Please go ahead, sir.

Rajiv Chaudhri -- Sunsara Capital -- Analyst

Yes. Good morning. Good evening. I had a few questions.

The first question is about gross income. You guys did a very good job improving the gross income number from the second -- from the first quarter and balancing the mix of wafers and modules to get there. Is it reasonable to think that, obviously, there's a lot of dynamics that gross income will continue to grow in the third quarter even as you are increasing sharply the amount of modules that you will ship relative to wafers and cells. I'm not talking about the gross margin number, but the gross income itself should -- is it reasonable to think that, that will continue to increase in the third quarter?

Charlie Cao -- Chief Financial Officer

So you have two questions. One is the gross income and gross margins. Gross margin in the second quarter, we did have relatively good compared to our expectations. The major parties the wafer third-party sales contributing.

And toward the third quarter, we expect the gross income will continue to increase while the gross margin is under pressure because we shipped -- we are targeting to have more solar module shipments. At the same time, the upstream, the material costs are on the upwards. And -- but we are trying to continue to increase our module price and -- but it's still facing the high polysilicon, the EVA,the glasses price upwards. So in general, we expect the gross income will increase while the gross margin is in a downward trend.

Rajiv Chaudhri -- Sunsara Capital -- Analyst

I understand. I understand. But the important thing is that gross income will continue to grow. The second question is that you maintained your guidance of 25 to 30 gigawatts for full-year shipments, which suggests that you are expecting shipments of about 9 gigawatts in the fourth quarter.

Can you elaborate? Can you give us some insights into what the reasons are? Do you expect such a big ramp from third-quarter shipments? And then I have one more question.

Gener Miao -- Chief Marketing Officer

Yes. So I think we are -- I think the strong Q4 is within the plan. I think it's part of the nature of the solar industry because if you look back in the last two, even three years' time, Q4 is always the peak season as of the whole year, mainly because they're expecting -- people are expecting a very strong demand from China. I think each company or the whole industry as a whole, everyone will expect a stronger Q4.

That's one part of the nature of the industry demand. And another part is we are steadily ramping up our in-house capacity as well. So naturally, our capacity will grow by time flying and also as well as preparing for the 2022 as well.

Rajiv Chaudhri -- Sunsara Capital -- Analyst

OK. So obviously, you are expecting a very substantial increase in module shipments as well in the fourth quarter. So the way you'll get to the 9 gigawatts will be a substantial increase in module shipments.

Gener Miao -- Chief Marketing Officer

Well, that will -- part -- in general, yes, that's the direction, but we still have the flexibility to expose our sales -- break our sells into wafer, cells or modules as we did in the Q2 or even Q3. So have the flexibility. But in general, the total shipment will grow for sure.

Rajiv Chaudhri -- Sunsara Capital -- Analyst

OK. And my final question is on your capacity. You have substantially increased your capacity for modules. And you are now talking about 45 gigawatts for next year.

That's a very significant increase. And this is despite the fact that your module shipments this year are not growing as rapidly as they have grown in past years. So can you give us some insights into why you think that 45 gigawatts for modules in 2022 is the right number, especially given that you'll have shipped about 21 or 22 gigawatts this year?

Charlie Cao -- Chief Financial Officer

It's strategic preparations for next year. And this year, the market is constrained by the polysilicon. And as the bottleneck is the part of polysilicon, and we expect next year, the market will be accelerate the demand. And on top of that, we are planning the N-type cell capacities.

And it's next generations and the capacities -- and the module, it's -- the capacity is relatively small, and we want to build up module as quickly as possible and for the preparation of next year. And if you look at our shipments, let's say, 9 gigawatts and based on your calculations in fourth quarter, and the module is still -- we face some supply shortage, particularly we are building the large-size module capacities for the next generations.

Rajiv Chaudhri -- Sunsara Capital -- Analyst

OK. Thank you very much. Thank you.

Operator

Thank you. Our next question is from Goldman Sachs, Mr. Brian Lee. Please go ahead, sir.

Brian Lee -- Goldman Sachs -- Analyst

Hey, guys. Thanks for squeezing me in for some questions. I had a couple of housekeeping ones. First one, you guys gave us the breakout for modules and wafers.

Can you do anything similar for what is embedded in the 3Q guidance as well as -- since you're maintaining the full year, there's an implicit mix here as filling in for you. Can you give us a sense of module versus non-module shipments in 3Q and 4Q?

Charlie Cao -- Chief Financial Officer

Third quarter, we gave the guidance, total shipments 5 to 5.5 including module 4.5 to 5. So the gap -- the difference is the majority of the part is wafer third-party sales. Taking to the fourth quarter, yes, we are still flexible, but majority part of at this stage, we are expecting it's from the module shipments.

Brian Lee -- Goldman Sachs -- Analyst

OK. Fair enough. And then just on the earlier question about gross margins. It sounds like you're seeing some margin pressure on both product types.

Can you give us a rough sense of where gross margins are for modules versus non-module shipments in your guidance?

Charlie Cao -- Chief Financial Officer

Third quarter, we gave the guidance of 12% to 15%. And the majority part is more so the gross margins -- it's about the same with module gross margin. And for the fourth quarter, we still -- it's still some uncertainties. The material cost is upward very quickly.

And at the same time, we are shifting our module shipment to China, the majority part. And we are trying to get relatively high the module price. And hopefully, we are able to offset the cost upward pressures.

Brian Lee -- Goldman Sachs -- Analyst

OK. Fair enough. And then maybe two more for me. I know you can't quantify or you don't want to quantify the shipments that have been held up at the border here with the WRO in the U.S.

Can you give us a sense, I guess, what sort of mix impact or mix are you assuming in terms of shipments for the U.S. in Q3 and Q4? Are you actually embedding U.S. shipments -- module shipments into the forecast here for either quarter? And then maybe related to that, you have the 400-megawatt facility in Florida. Are you able to get cells, I guess, non-Jinko or Jinko cells into the country to run that module facility?

Gener Miao -- Chief Marketing Officer

Well, I think the mix is something difficult to disclose at the current stage because we are -- even we are cautiously optimistic about our documentations, which has been well prepared. But still it's not 100% Jinko's call to decide what to do next. That's why we are cautiously monitoring the situation and doing our best. And right now, like Charlie just said just now, I think we are very confident about the demand.

It's not -- right now, it's not the problem of the demand, it's the problem of supply so our shipment wise, we have multiple alternatives and even we have a full commitment to our U.S. customers and our U.S. market, and we are preparing for it, but it's difficult to disclose any detailed number even for Q3 or Q4 in U.S. shipment yet.

Brian Lee -- Goldman Sachs -- Analyst

Yes. I guess maybe to ask it another way if you don't have clarity that you can move product into the U.S. -- ship product into the U.S., are you still planning to bring products to the border at risk of having it being seized for months until it gets released and you can maybe ship it to another alternative location, as you mentioned. I guess, what's the strategy around taking that risk of having shipments, which get delayed, and then ultimately, you do have to reroute them elsewhere versus waiting out the process to see what you should do with future shipments over the next couple of quarters?

Gener Miao -- Chief Marketing Officer

I think we are still continue to stick to our plan for the shipment, even we have some challenges because of the tariff controlling the local Southeast Asia countries, but we're still doing our best to find solutions with our customers right now. So for detailed number wise, again, we cannot quantify it yet because it's -- we don't have any number which we can close -- disclose, but still, we are doing our best. And we have the confidence to continue to have our business ongoing, not only in U.S. but in other markets as well.

So we are working in different alternatives in parallel. So we have no concerns on that.

Brian Lee -- Goldman Sachs -- Analyst

OK. Last housekeeping one for me. What was the capex here for the first half of the year? And then is there an updated view on capex guidance for 2021?

Pan Li -- Chief Financial Officer

OK. For the first half of 2021, where the capex number is approximately USD 580 million.

Charlie Cao -- Chief Financial Officer

And we increased the plan to build up more module capacities to reach to 45 gigawatts. So we increased our capex target this year. And it's -- for the full year, it's roughly around USD 1.1 billion.

Brian Lee -- Goldman Sachs -- Analyst

OK. Thanks, guys.

Pan Li -- Chief Financial Officer

Thank you.

Operator

[Operator instructions] Our next question is from UBS, Mr. William Grippin. Please go ahead, sir.

William Grippin -- UBS -- Analyst

Great. Thank you very much for fitting me in here. Just another one on the shipments. Obviously, the guidance implies a pretty substantial ramp in the fourth quarter for shipments to reach the total guidance.

I'm curious, going into the quarter, are you expecting to hold more module inventory? Or do you have the ability to ramp production that quickly depending on what the final mix of module and component cell and wafer cells end up being?

Gener Miao -- Chief Marketing Officer

So firstly, let me comment in general. I think my colleagues will give you a breakdown detail later. So in general, I think the market demand is quite strong. And we are holding some of the inventory really because of the accounting issues, and we have the contract to fulfill.

But right now, the global international logistics, shipping lines are facing a big headache right now. I think it's not only for solar industry, but for all the industries. So it's difficult to get the ship on time and on schedule. So that's why we have -- sometimes we have to face accounting point, we have some inventories on hand, but actually, we have all the contracts covered for those inventories.

William Grippin -- UBS -- Analyst

OK. And then just one more for me. The guidance obviously implies cost pressures accelerating here in the third quarter. Despite polysilicon prices being pretty stable over the time period, glass obviously coming down, just wondering if you could provide a little more color on why are we seeing or expected to see margin compression in the third quarter relative to the second quarter? And what level of confidence do you have here that you may actually meet or exceed the high end of the range again?

Charlie Cao -- Chief Financial Officer

The major part is, I think, how we calculate the costs in second quarter and third quarter is based on the weighted average and the polysilicon reached to the high price starting from May this year. So in the second quarter, based on the weighted average, the polysilicon price is not so high. It's not, let's say, 200. It's not based on that cost in calculation in the second quarter.

It's fairly low. But with the time collapse to the third quarter and the polysilicon, the average cost has reached to a relatively high level. That is the major part and hopefully, you understand that this is really average and the polysilicon price and it's accelerated the pace starting from 8 May. And so from a calculation perspective, really on average, the more impact will be reflected in the third quarter.

So it's I think one of the key impact on the cost side.

William Grippin -- UBS -- Analyst

Got it. Thanks very much.

Charlie Cao -- Chief Financial Officer

Thank you.

Operator

Our next question is a follow-up from Mr. Rajiv from Sunsara Capital. Please go ahead, sir.

Rajiv Chaudhri -- Sunsara Capital -- Analyst

I would like you to give us a little bit more clarification on the revenue number that you have guided for the third quarter because using different combinations of wafers and modules shipments in the third quarter and assuming that there is some price increases from Q2 to Q3, the revenue numbers that I'm coming up with are higher than 1.4 billion, which is obviously higher than your guidance. So can you help us understand why your revenue guidance at the high end is 1.35 billion, when using your low end of your shipment guidance combined with -- assuming that prices are stable or up for both modules and wafers, the revenue number that we come up with is higher than 1.4 billion?

Charlie Cao -- Chief Financial Officer

It's a mixed issue and I mean, the shipment to the U.S. versus other regions. The U.S., the ASP is relatively stable by regions, but we have more shipments in the third quarter versus second quarter. And yes -- and in the third quarter, the U.S.

shipments is relatively lower than the second quarter. And the percentage-wise, U.S. shipments taking less percentage of the total shipment. And the U.S., because of the trade issues and the ASP is dramatically higher than the other regions.

So it's a mix issue.

Rajiv Chaudhri -- Sunsara Capital -- Analyst

So what you're saying is that you can increase your gross income from second quarter to third quarter, even if at the aggregate levels the wafer -- the module price that you will realize from the -- will go down from second quarter to third quarter because you have less shipments with the U.S. where the module price is inflated.

Charlie Cao -- Chief Financial Officer

Yes. You're right. And with the cost -- production cost is higher, and in the U.S., we need to pay additional towing tariff cost. So the gross margin, gross income from U.S.

shipments actually is not so significant difference with other regions, and we have more shipments in other regions, which has no impact on the gross income contributions.

Rajiv Chaudhri -- Sunsara Capital -- Analyst

Great. Thank you very much.

Charlie Cao -- Chief Financial Officer

Thank you.

Operator

[Operator signoff]

Duration: 58 minutes

Call participants:

Ripple Zhang -- Investor Relations Manager

Xiande Li -- Independent Chairman of the Board

Gener Miao -- Chief Marketing Officer

Pan Li -- Chief Financial Officer

Philip Shen -- ROTH Capital Partners -- Analyst

Charlie Cao -- Chief Financial Officer

Gary Zhou -- Credit Suisse -- Analyst

Rajiv Chaudhri -- Sunsara Capital -- Analyst

Brian Lee -- Goldman Sachs -- Analyst

William Grippin -- UBS -- Analyst

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