In-Depth Analysis: Why Are Some Companies in PV Industry Still Keen on Expansions When Others Proactively Cut Production to Cope with Cut-Throat Competition and Losses

The entire PV industry has currently entered a state of "self-rescue" through full-scale production and price restrictions. Many companies have begun responding to the call for "self-regulated production cuts" by voluntarily reducing the commencement of new projects. However, some companies are defying the trend and increasing capacity expansion, with complex reasons behind this phenomenon. Industry insiders believe that the core issue of the current "cut-throat competition" dilemma lies in insufficient innovation and the competition over existing projects. Companies should be guided to shift their competitive models from vying for existing projects to creating new ones, breaking out of the "cut-throat competition" through technological innovation and going global.

"Cut-throat competition both domestically and internationally, working hard but not making money." This is how a guest summarized the current state of the PV industry at the "2024 PV Industry Development Review and 2025 Outlook Seminar" recently hosted by the China Photovoltaic Industry Association. In recent years, China's PV manufacturing industry has developed rapidly, but issues such as supply-demand imbalance and cut-throat competition have become increasingly prominent. Under multiple pressures, the PV industry initiated a self-regulated production cut plan in December last year to control industry output from the supply side. Futures Daily reporters observed that at the beginning of 2025, the PV industry has started a new round of capacity expansion against the trend, forming a stark contrast with the "self-rescue" efforts of production and price restrictions. Amid the severe losses faced in 2024, why are some companies still increasing capacity expansion against the trend? This phenomenon has drawn significant market attention.

New Projects Continue to Be Launched

The entire PV industry has currently entered a state of "self-rescue" through full-scale production and price restrictions. Many companies have begun responding to the call for "self-regulated production cuts" by voluntarily reducing the commencement of new projects. Recently, Tongwei Co., Ltd. explicitly stated in an interview with reporters that the company currently has sufficient cash reserves and has no plans for large projects to commence in 2025. It is expected that this year's major capital expenditures will mainly be for the final payments of some existing projects.

Although production cuts have become the main theme of the industry, some companies have not stopped their pace of capacity expansion. According to incomplete statistics by Futures Daily reporters, in January and February 2025, the entire PV industry chain saw 31 projects announced, signed, commenced, or under construction, with a total scale of nearly 200 GW and a total investment of approximately 90 billion yuan.

Overall, these announced projects involve both leading enterprises in the industry and various small and medium-sized producers, covering all segments of the industry chain. Some projects even have investment scales as high as 1 billion yuan. For example, on January 21, the Baotou Municipal Ecology and Environment Bureau in Inner Mongolia disclosed the environmental impact assessment documents for Canadian Solar's 5 GW half-moon silicon rod project and JA Solar Technology's graphite thermal field processing project in Baotou. Among them, Canadian Solar's 5 GW half-moon silicon rod project is a new project with a total investment of 100.61 million yuan.

Additionally, some projects are being launched to align with local government investment promotion efforts and accelerate local industrial transformation. For instance, on January 1, Jiangsu Funing County held a groundbreaking ceremony for GCL's new-type silicon material application industrial base project, with a total investment of 2 billion yuan. At the ceremony, Xu Genlin, Deputy Secretary of the Funing County Party Committee and County Mayor, stated that the project is another fruitful achievement of GCL Group's expanded investment in Funing, contributing to the county's accelerated industrial transformation and upgrading.

From the perspective of project characteristics, these projects mostly focus on new technologies and new businesses. For example, on January 5, Henan Province's Xiangcheng County held a groundbreaking ceremony for the Pingmei LONGi BC cell technological transformation project, with a total investment of 1.23 billion yuan. The project involves upgrading seven existing production lines, adding auxiliary equipment such as new power systems, and achieving a designed annual capacity of 4.72 GW. From the perspective of industry segments, some projects are also aimed at "filling gaps" in the integrated industry chain. For instance, in January this year, TCL Zhonghuan's subsidiary, Huansheng, held a product mass production and launch ceremony for its 10 GW high-efficiency solar module smart factory Phase I project in Hohhot, Inner Mongolia. The project aims to improve its entire industry chain layout from silicon wafers to modules, enhance risk resistance, reduce production costs, and strengthen market competitiveness.

From the development stage, most of these projects have entered the stages of environmental assessment or approval, groundbreaking, equipment installation, or even production. For example, the aforementioned TCL Zhonghuan subsidiary's 10 GW high-efficiency solar module project has a total investment of 4.566 billion yuan, with the Phase I 5 GW project beginning equipment installation and commissioning in August 2024. Relevant personnel stated that this project was planned as early as 2024, and despite changes in the market environment, its progress has not been affected.

In reality, only four of these projects are newly signed. "Although most of these projects have been in progress for some time and are influenced by past expansion inertia, they still increase industry capacity from an industry impact perspective," a senior PV industry insider told reporters. "Even though these projects were initiated earlier, their impact remains the same—they all add to the industry's supply pressure."

Historically, in 2024, China's PV industry maintained a high growth trajectory, with the industry largely in a state of supply-demand imbalance. According to a research report by China Securities, by the end of 2024, the capacities of the main PV industry chain segments—polysilicon, silicon wafers, solar cells, and modules—reached 1,447 GW, 1,160 GW, 1,193 GW, and 1,428 GW, respectively, with oversupply in each segment exceeding 100%.

Against this backdrop, the profit margins of PV companies have been severely compressed. According to incomplete statistics, as of now, 33 PV publicly listed firms have issued performance forecasts, most of which report revenue declines, losses, or underperformance leading to project suspensions and equity changes. According to Wang Bohua, Honorary Chairman of the China Photovoltaic Industry Association, the total amount of performance reductions and losses disclosed by these 33 companies is approximately 40 billion yuan, roughly 10 times the total amount of performance increases, indicating an expanding industry loss.

"In the past, summaries of the PV industry were always very optimistic, but this year is different," Wang Bohua stated. It is expected that global PV installations will continue to grow in 2025, but the growth rate will slow. Optimistically, global new PV installations in 2025 are expected to grow by 10% YoY.

Capacity Expansion Against the Trend Driven by Business Needs

Amid supply-demand imbalance and worsening losses, why are industry companies still expanding capacity against the trend? Reporters learned that the core reason lies in the business development needs of enterprises. In the face of intensified industry competition, many companies need to improve their integrated layouts. "The integrated strategy in the PV industry includes ensuring supply chain security and advantages in cost and operational efficiency," the aforementioned industry insider explained. Vertical integration in the PV industry is a trend, and from a long-term development perspective, integrated industry layouts offer greater competitive advantages. However, due to the long lead time for PV capacity expansion and the lengthy ramp-up period, capacity planning needs to be arranged in advance to avoid disrupting normal business operations.

More importantly, as the industry continues to develop and progress, market structures are also undergoing constant changes. According to the latest "China PV Industry Development Roadmap" released by the China Photovoltaic Industry Association, the industry completed a rapid iteration from P-type to N-type in 2024. In the N/P-type ratio for 2023, P-type accounted for 70% and N-type for 30%; in 2024, N-type accounted for 70% and P-type for 30%. It is expected that the proportion of N-type will continue to increase in the future, while the proportion of P-type will decrease accordingly. "The PV industry, especially in terms of technological advancements and changes, updates very quickly every year," said Wang Qing, Director of the Industry Development Department of the China Photovoltaic Industry Association. Whether it is TOPCon cells, heterojunction cells, or BC cells, the average conversion efficiency is still steadily improving. Thanks to the steady improvement in cell efficiency and advancements in module encapsulation technology, the power of different types of modules is also continuously increasing.

Furthermore, with the expansion of integrated layouts, many downstream companies are extending upstream, and many companies are facing the dilemma of "customers" becoming "peers," narrowing future product sales spaces. For example, TCL Zhonghuan focuses on the silicon wafer segment, and TCL Zhonghuan New Energy Technology Vice Chairman Shen Haoping has repeatedly emphasized that Zhonghuan will never compete with its customers. However, as many leading downstream companies in the industry begin producing silicon wafers, TCL Zhonghuan's market share is shrinking. Under sales pressure, TCL Zhonghuan has started to expand into the downstream solar cell segment. Similarly, leading silicon metal producer Hoshine Silicon Industry, which previously focused on silicon metal and silicone production, has seen its market share shrink as GCL Technology and Tongwei Co., Ltd. expand upstream into silicon metal capacity. Under market pressure, Hoshine Silicon Industry has begun to enter the polysilicon sector.

Most PV companies faced significant losses in 2024, with every segment from polysilicon to modules experiencing notable losses. Upstream segments or companies with deeper integration generally faced more severe losses. Additionally, given that every segment is operating near cost-loss levels, the longer the industry chain, the more severe the losses. "For integrated layout projects, if the sales segment goes smoothly, it not only resolves market difficulties but also increases profit sources. However, if the sales segment encounters difficulties, it not only fails to resolve the sales share of the original main business but also adds the burden of fixed asset depreciation and financial pressure," the aforementioned person in charge explained. Although integrated layouts have significant long-term potential, they inevitably face the pressure of exacerbating short-term losses. As cut-throat competition intensifies, many companies face sales difficulties. To complete product sales, some companies resort to low-price sales, forcing less competitive companies to cut production or suspend operations, balancing short-term supply-demand relationships through cost and financial strength.

Guiding Companies to Shift Competitive Models

As cut-throat competition intensifies, since October 2024, the China Photovoltaic Industry Association has taken successive measures to stabilize market order and promote healthy industry development. These measures include organizing companies to sign self-regulation agreements to prevent malicious competition, publishing module cost guidance prices to provide important references for market transactions and avoid irrational competition caused by price confusion, and calling on central and state-owned enterprises to resist low-price bidding and other malicious competitive behaviors, thereby promoting high-quality industry development.

Meanwhile, the MIIT also issued relevant regulations, setting strict technical benchmarks to curb blind capacity expansion. On November 20, 2024, the MIIT released the "PV Manufacturing Industry Standard Conditions (2024 Edition)," requiring that the average efficiency indicators for new monocrystalline silicon PV cells and modules be raised from 23% and 20% to no less than 23.7% and 21.8% for P-type cells and modules, and no less than 26% and 23.1% for N-type cells and modules. The requirement to prohibit the construction of self-supplied coal-fired power plants for new projects was expanded from certain regions to the entire country. Additionally, the regulations encourage local governments to reasonably plan PV manufacturing projects based on resource endowments and industrial foundations, promoting intensive and clustered development.

Industry insiders believe that the core issue of the current "cut-throat competition" dilemma lies in insufficient innovation and the competition over existing projects. Companies should be guided to shift their competitive models from vying for existing projects to creating new ones, breaking out of the "cut-throat competition" through technological innovation and going global. On January 27, the National Development and Reform Commission (NDRC) and the National Energy Administration jointly issued the "Notice on Deepening the Market-Oriented Reform of New Energy On-Grid Tariffs to Promote High-Quality Development of New Energy" (hereinafter referred to as the "Notice"), requiring all new energy electricity to enter the market and introducing a mechanism for electricity pricing."The release of the 'Notice' signifies that PV projects must focus on enhancing their competitiveness in the market to achieve stable returns," said Shiyuan Lu, Head of the New Energy Project Department at Zhejiang Merchants Futures. From the perspective of industry development, the release of the 'Notice' will compel upstream manufacturing enterprises to innovate technologically and launch high-efficiency products. "From a historical perspective, efficiency improvement and cost reduction driven by technological innovation have run through the entire development process of China's PV industry. In the future, the growth momentum of the PV industry will undoubtedly come from breakthroughs in key technologies, driving improvements in production efficiency, product performance upgrades, and further reductions in production costs," said Ting Li, Director of the Electronic Information Department at MIIT. Currently, the PV industry urgently needs to address the issue of "cut-throat competition," which stems from both the rapid iteration of industry technologies and equipment and the influx of social capital due to the high attention on the new energy sector. Additionally, there are strategic misjudgments by mainstream industry players regarding the development trends of the sector. To curb low-level repetitive construction, it is necessary to guide local governments to rationally plan PV projects based on local conditions, reduce PV manufacturing projects that merely expand capacity, and raise the entry threshold for the industry by increasing the capital ratio before project construction and setting higher technical standards for products after project completion. Looking at both domestic and overseas markets, whether to address international competition or resolve low-level homogeneous competition domestically, technological innovation is the only path and inevitable requirement for high-quality industry development. "We must better leverage the guiding role of standards and the protection of intellectual property rights, strengthen the synergy of technology, standards, and intellectual property, and focus on the roles of national standards as the baseline, industry standards as the benchmark, and group standards as the gap filler. By using standards as a guide, we can accelerate the adjustment of the industrial structure and work with the National Intellectual Property Administration to formulate relevant policy documents for building an intellectual property system in the PV industry. This will help address issues such as technology route-driven development and insufficient original technologies," said Ting Li. Facing the current unfavorable situation, it is crucial to promote innovation and upgrading in the industry. MIIT's Electronic Information Department will actively collaborate with relevant departments to encourage and guide the R&D and application of advanced PV technologies, accelerating technological iteration and upgrading through application-driven approaches. Additionally, going global is one of the effective ways to break the "cut-throat competition." Lianqi Zhang, Standing Committee Member of the National Committee of the CPPCC, economist, and President of the China Association of Chief Financial Officers, believes that technological innovation is the "key lever" to address "cut-throat competition." "Going global is the way to break the 'competition.' Enterprises with the capability should go abroad to expand their growth ceiling and forge core competitiveness," Zhang suggested supporting enterprises in orderly globalization and building an international community of shared interests. On one hand, leading enterprises in the industry chain should organize upstream and downstream supporting enterprises to establish an innovation consortium for globalization, covering "R&D-production-service." On the other hand, tax policies should safeguard the globalization of industry chain clusters by constructing a "collaborative, green, and digital" tax support system, reducing cross-border operational costs for enterprises, and promoting the upgrade of China's industries from "single-point globalization" to "whole-chain win-win." Ting Li also suggested expanding international cooperation channels through multilateral and bilateral mechanisms such as the China-Pakistan partnership and the BRICS New Industrial Revolution Partnership. This would encourage international cooperation in talent, technology, and standards, promoting the high-level globalization of China's PV industry and establishing international discourse power that matches China's industrial status. With various efforts underway, the PV industry has shown positive signs of bottoming out and rebounding. Prices along the industry chain have begun to rise rationally, and some institutions have expressed relatively optimistic views. CICC believes that the PV industry will see some tail-end enterprises exit the market through market mechanisms in the next 2–3 quarters. Guolian Securities also predicts that the supply-demand pattern of the industry is expected to reverse at the bottom in 2025. UBS Securities stated that there will be a significant improvement in supply and demand in Q2 2025, but a complete supply-demand balance may not be achieved until 2026 or 2027. Journalist's Observation: Advanced Capacity Is Always a Scarce Resource In recent years, "cut-throat competition" has gradually become a focus of public opinion. The Politburo meeting of the CPC Central Committee in July 2024 first mentioned preventing "cut-throat competition," and the Central Economic Work Conference in December 2024 proposed comprehensive rectification of "cut-throat competition." Now, comprehensive rectification of "cut-throat competition" has been included in the government work report, signaling that breaking industry "competition" and moving toward high-quality development has embarked on a new journey. So-called "cut-throat competition" refers to low-level or even vicious competition that urgently needs guidance to return to a standardized competitive state. From the enterprise level, excessive "competition" leads companies to invest significant resources in unnecessary competitive areas such as bottomless price wars, severely compressing profit margins. From the industry perspective, "cut-throat competition" disrupts the industry ecosystem. Low-level repetitive construction and excessive competition within the industry result in the inefficient allocation of limited resources, delaying technological progress and industrial upgrading, and hindering overall industry development. Despite knowing that the industry is already mired in the predicament of "cut-throat competition," many new capacities are still expanding against the trend, driven by complex reasons. It could be the profit-driven nature of capital attracting various investors, leading enterprises into a cycle of "expansion-financing-re-expansion." Alternatively, some projects may have completed early-stage financing smoothly, but delays in subsequent project approval and other processes prevent enterprises from halting their progress, forcing them to move forward despite the changing investment environment. These counter-trend expansions may bring potential opportunities but also come with significant risks and challenges. On one hand, in the current market environment, counter-trend expansions will further exacerbate the supply-demand imbalance, intensify losses for industry enterprises, and prolong the industry's cyclical bottom. On the other hand, aggressive expansion strategies may help optimize the industrial structure by eliminating technologically backward and financially weak enterprises from the market. However, they could also intensify short-term industry competition and undermine market confidence. Overall, the PV industry is currently in a state of oversupply, with industry-wide losses being the most prominent issue. Clearly, these unstoppable capacity expansion actions run counter to the current direction of accelerating capacity clearing and restoring supply-demand balance. However, from a long-term development perspective, as global consensus on carbon neutrality strengthens, the market prospects for PV as a key component of clean energy are extremely promising. It is estimated that by 2030, the PV industry scale will reach 1,000 GW, and by 2035, it may reach 1,500 GW or even higher. The rapid development of the industry has caused oversupply issues that must be reflected upon and addressed. The key to resolving this dilemma lies in market guidance and policy establishment, making cost reduction, efficiency improvement, and technological innovation the prerequisites for enterprise survival. The 2025 government work report, when discussing the in-depth promotion of the construction of a unified national market, explicitly stated the need to accelerate the establishment and improvement of basic institutional rules, eliminate local protectionism and market segmentation, and address bottlenecks in market access, exit, and factor allocation that hinder economic circulation. Comprehensive rectification of "cut-throat competition" was also emphasized. This conveys the determination at the national level to deepen the rectification of "cut-throat competition" and provides reassurance to society. Undoubtedly, advanced capacity is always a scarce resource for any industry. For the PV industry to achieve high-quality development, it must actively embrace advanced technologies, raise the technical threshold for industry entry, accelerate the elimination of outdated capacities, and enable new technologies and products to enter the market more effectively. It is hoped that relevant departments will strictly enforce laws and regulations on fair market competition, crack down on malicious low-price bidding, and ensure that products with advanced technological attributes can participate in competition more fairly.

Note: This news is not an original work of SMM but rather SMM's translation.