The photovoltaic (PV) industry is currently witnessing a significant shift as two major companies have announced production cuts in an effort to stabilize the market and eliminate cutthroat competitionThis initiative, regarded as a form of self-rescue within the industry, has been prompted by various economic pressures, particularly the ongoing adjustments following a long period of oversupply and declining prices.

On December 24, Tongwei Co., a notable player in the PV sector, released an announcement via its official account, highlighting the impact of seasonal changesAs the winter season approaches, marked by a dry spell in southwestern China, the company has decided to respond proactivelyThe cost of electricity has risen in this period, placing additional strain on the PV industry, which has been experiencing a bottoming phase in the marketFollowing the spirit of the central government’s economic work conference, Tongwei declared that its subsidiary, Yongxiang, would gradually reduce production across its four high-purity silicon production facilities

This strategy includes technical upgrades and maintenance, intended to align production with the current market conditions and electricity costs.

Tongwei’s decision is particularly significant, as it hopes to mitigate financial losses associated with high-purity silicon operationsThe company anticipates that these production adjustments will positively affect its overall financial health and profitabilityThe scope of these cuts reflects the ongoing recalibration of supply and demand dynamics within the PV market.

Simultaneously, Daqo Energy also announced similar production measures on the same eveningThe company expressed concern over the persistent imbalance in the supply and demand for polysilicon, which has led to extensive losses across the industryBy adhering to the principles outlined in the central government's economic guidelines, Daqo aims to curb vicious competition while promoting sustainable growth in the photovoltaic sector

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This entails initiating phased maintenance of polysilicon production lines at its bases in Xinjiang and Inner Mongolia, thereby enabling a regulated reduction in output.

While Daqo's reduction in silicon production capacity is expected to decrease its effective production output, the company reassured stakeholders that this strategic move aims to enhance future stability and improve product quality while also lowering operating costs over timeDaqo’s proactive approach is deemed essential for weathering the current challenging economic landscape, with expectations that it will not significantly disrupt its overall operations.

The magnitude of the reduction is noteworthy, as Tongwei’s Yongxiang boasts a capacity exceeding 900,000 tons, with facilities located in Sichuan, Yunnan, and Inner Mongolia, making it a global leader in market share for multiple consecutive years

Daqo Energy contributes a substantial capacity of 305,000 tons of polysilicon to the overall marketCombined, these two companies represent a staggering production potential of over 1.2 million tons, with industry analysts anticipating that this collective reduction could exceed 800,000 tons, leading to a sharp decline in silicon output during the months of December and January.

The acceleration in capacity cuts comes in response to the rapid expansion observed in China’s photovoltaic sector, which has outpaced both domestic and international demand since 2022. The consequences of this rapid escalation have been dire, resulting in severe discrepancies in the supply-demand balance and leading to intense price competition—the so-called “intense competition ” or involutionary rivalry.” This situation has catalyzed a downward spiral in pricing, exacerbating financial pressure on companies across the board.

As pricing continues to plummet throughout the industry, profitability has taken a significant hit

Data from the China Photovoltaic Industry Association revealed that among 121 publicly listed photovoltaic companies, 39 reported losses in the first three quarters of the year, with leading enterprises suffering even greater declinesOf the top players, 11 out of 15 in the primary supply chain experienced profit reductions exceeding 100% compared to previous financial periods.

For instance, Tongwei reported a total revenue of 68.27 billion yuan for the first three quarters, marking a 38.73% drop year-on-year and resulting in a net loss of 3.973 billion yuanSimilarly, Daqo posted a revenue of 6.005 billion yuan, which was down 53.37% from the previous year, with a net loss of 1.099 billion yuan also recorded.

In response to these pressing challenges, the photovoltaic industry has initiated a self-regulation and rescue movementThe China Photovoltaic Industry Association has proposed a minimum price for solar modules set at 0.69 yuan per watt and released continuous cost analysis reports on key products within the photovoltaic supply chain

The association emphasizes the necessity for enterprises to engage in compliant market competition and to refrain from selling at prices below cost.

Analysts from Guolian Securities observe that recent policies and industry guidelines are increasingly directing rational competition on the supply side, which may provide a pathway for the photovoltaic sector to recover from its current low point.

Research by Jebao Investment Advisory indicates that while production cuts have commenced, the industry still faces high inventory pressureTypically, the standard inventory cycle for silicon materials is approximately one month, correlating with downstream demandTo achieve a normalized inventory cycle of one month before the end of 2025, the monthly silicon output needs to dip below 90,000 tons starting from JanuarySince the second half of the year, silicon prices have consistently hovered at levels that reflect cash losses across the industry