The Chinese solar industry has never received as much global attention as it does today. After years of rapid growth, this massive sector, generating hundreds of billions of dollars annually, finds itself ensnared in a brutal price war from which it cannot escape.
As the world's largest solar market and product manufacturer, China's solar production capacity accounts for over 80% of the global supply chain in nearly every segment. In 2023, the total export value of Chinese solar products reached approximately $48.48 billion, with all ten leading companies in global module shipments being Chinese.
However, behind these achievements lies a troubling reality: the Chinese solar industry is increasingly trapped in a vicious cycle of overcapacity, supply-demand imbalance, and cutthroat competition. According to the China Photovoltaic Industry Association, production of solar products surged by over 32% year-on-year in the first half of 2024. Yet, fierce competition has driven prices down dramatically, with silicon materials and wafers seeing declines of over 40%. This irrational pricing has led to significant revenue losses for many companies, resulting in a phenomenon where "selling more means losing more."
Amidst this supply-demand imbalance, operational rates for companies have been steadily declining, especially for polysilicon and cell manufacturers, whose utilization rates are below 60%. Even as global solar installation capacity continues to grow, companies are feeling increased survival pressure, with market competition reaching a fever pitch.
To address these challenges, on October 12, leaders from seven prominent Chinese solar companies gathered on a financial program aired by China Central Television to confront the industry's current situation and discuss future directions. Executives from Tongwei Group, LONGi Green Energy, JinkoSolar, and others called for a reduction in internal competition, enhanced collaboration, and the promotion of industry self-discipline.
Despite the proposals from Liu Hanyuan, chairman of Tongwei Group, and Zhong Baoshen, chairman of LONGi Green Energy, advocating for industry growth through cooperation and differentiated competition, skepticism remains about the feasibility of these ideas. The current market environment is drastically different from the past, with competition among companies reaching unprecedented levels. Achieving true collaboration and self-regulation is fraught with challenges.
Two days later, on October 14, the China Photovoltaic Industry Association convened a closed-door meeting in Shanghai themed "Anti-Internal Competition," aimed at systematically addressing supply-demand imbalances and clearing excess capacity. Attendees discussed a self-regulation charter to combat "internal competition" and engaged in in-depth dialogue on guiding the industry toward healthy development. The meeting emphasized the need to streamline the exit channels for outdated and inefficient capacity to maintain fair competition in the solar market.
However, the effectiveness of these meetings remains to be seen. While representatives reached some consensus on enhancing industry self-discipline and promoting technological innovation and collaboration, it is uncertain whether effective market rules and cooperative mechanisms can be established in the short term. The long-standing competitive inertia among companies has not dissipated, and achieving healthy development will require overcoming numerous internal and external challenges.
The difficulties facing China's solar industry are multifaceted. On one hand, excessive market competition and low-price strategies have significantly eroded profit margins. On the other hand, the industry suffers from severe product homogenization and a lack of innovation, making it difficult for companies to establish lasting competitive advantages. Additionally, shifts in domestic and international market conditions, along with economic cycles, pose substantial challenges for the solar sector.
Analysts warn that if the Chinese solar industry cannot extricate itself from the current low-price competition, the market may remain sluggish, leading to further losses and even bankruptcies for more companies, jeopardizing the industry's sustainable development. The "Anti-Internal Competition" meeting is still in its early stages, and it remains unclear whether it can effectively guide the industry toward healthy growth. Whether major companies can break free from the long-standing cycle of low-price competition to achieve self-repair and sustainable development will depend on future market responses.