The photovoltaic (PV) industry is currently facing significant losses, yet some companies are still choosing to expand production despite the adverse market conditions. This paradox has raised questions about the underlying motivations for such decisions.
As the entire PV sector enters a phase of self-rescue characterized by production limits and price controls, many companies have begun to heed the call for self-regulation by voluntarily reducing the initiation of new projects. However, a number of firms are bucking this trend by ramping up production, a phenomenon attributed to various complex factors. Industry experts believe that the core issue leading to the current state of “involution” within the industry is a lack of innovation and an ongoing struggle over existing market shares. It is suggested that companies should shift their competitive strategies from vying for existing resources to generating new ones through technological innovation and overseas expansion.
During a recent seminar hosted by the China Photovoltaic Industry Association, a guest succinctly summarized the current state of the PV industry: “Both domestically and internationally, we are exhausted and not making any money.” Over the years, China’s PV manufacturing sector has experienced rapid growth, but challenges such as supply-demand imbalances and intense competition have become increasingly prominent. Under mounting pressure, the industry initiated a self-regulated production reduction plan last December to control output from the supply side. However, as 2025 begins, a new wave of production expansion is emerging, starkly contrasting with the industry-wide efforts to limit production and stabilize prices. This raises critical questions about why some companies continue to expand production amidst significant losses.
New projects are still being launched. Currently, the entire PV industry is in a state of self-rescue through production limits and price controls. Many firms have started to respond to calls for self-regulation by actively reducing the start of new projects. Recently, Tongwei Co., Ltd. stated in an interview that it has sufficient cash reserves and has no plans for large-scale project initiations in 2025, with this year’s capital expenditures mainly allocated for settling payments on existing projects.
Despite the prevailing trend of production reduction, some companies continue to pursue expansion. According to incomplete statistics, from January to February 2025, there were 31 projects across the entire PV supply chain that were publicly disclosed, signed, initiated, or under construction, collectively amounting to nearly 200 GW and involving approximately 90 billion yuan in total investment.
These disclosed projects include contributions from both major industry leaders and various small to medium-sized enterprises, covering all segments of the supply chain, with some projects boasting investments as high as 1 billion yuan. For instance, on January 21, the Environmental Protection Bureau of Baotou City in Inner Mongolia announced the environmental impact assessment documents for the 5 GW half-month silicon rod project by Canadian Solar and the graphite thermal field processing project by JA Solar Carbon Technology Co., Ltd. The Baotou 5 GW half-month silicon rod project is a new initiative with a total investment of 100.61 million yuan.
Furthermore, some projects are being launched in alignment with local government initiatives to attract investment and accelerate regional industrial transformation. For example, on January 1, a groundbreaking ceremony was held for the GCL New Silicon Material Application Industrial Base project in Funing County, Jiangsu Province, with a total investment of 2 billion yuan. The Deputy Secretary of the Funing County Party Committee and County Mayor, Xu Genlin, emphasized during the ceremony that this project represents GCL Group’s commitment to expanding its investment in Funing and aiding the region’s industrial transformation and upgrade.
From the characteristics of these projects, many are focused on new technologies and business models. For instance, on January 5, the Pingmei Longji BC cell technology upgrade project was initiated in Xiangcheng County, Henan Province, with a total investment of 1.23 billion yuan. This project involves upgrading the existing seven production lines and adding new auxiliary equipment, with a designed annual production capacity of 4.72 GW. Other expansions are also taking place to integrate and enhance the supply chain; for example, in January, the TCL Zhonghuan’s HuanSheng 10 GW high-efficiency solar module smart factory project in Hohhot, Inner Mongolia, held its product rollout ceremony, aimed at completing its vertical integration from silicon wafers to modules, enhancing resilience, reducing production costs, and boosting market competitiveness.
Most of these projects have already progressed to stages such as environmental assessment approvals, construction commencement, and equipment installation. For instance, the aforementioned TCL Zhonghuan HuanSheng 10 GW high-efficiency solar module project is set to see its first phase, which involves an investment of 4.566 billion yuan, begin equipment testing in August 2024. Sources indicate that this project was planned as early as 2024, and despite changes in the market environment, its progress has remained unaffected.
In terms of actual conditions, only four of the signed projects are new. “While most of these projects have been in the pipeline for some time and reflect the inertia of past expansions, their impact on the industry remains significant as they contribute to increased supply pressure,” a senior industry expert explained. Although these ongoing projects were initiated in earlier periods, their influence continues to amplify the overall supply situation within the industry.
Looking back, in 2024, China’s PV industry sustained a high growth trajectory while also experiencing significant supply-demand imbalances. According to a report by CITIC Securities, by the end of 2024, the production capacities of key segments of the PV supply chain—silicon materials, silicon wafers, solar cells, and modules—are projected to reach 1,447 GW, 1,160 GW, 1,193 GW, and 1,428 GW, respectively, with excess capacity exceeding 100% across most segments.
This backdrop has severely compressed the profit margins for PV companies. As of now, 33 publicly listed PV companies have released performance forecasts, with the majority reporting revenue declines, shifts from profit to loss, and project suspensions due to performance falling short of expectations. According to Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, the total projected decrease in performance among these 33 companies is approximately 40 billion yuan, roughly ten times the total increase in performance, indicating a worsening trend in industry losses.
“In the past, assessments of the PV industry were always optimistic, but this year is different,” Wang Bohua stated, predicting that global PV installations will continue to grow in 2025, albeit at a slower rate. The optimistic forecast anticipates a 10% year-on-year increase in new installations.
The decision to expand production against the odds is primarily driven by the business needs of the companies involved. Amid fierce competition, many firms are compelled to solidify their integrated operational frameworks. “The integration strategy in the PV industry focuses on ensuring supply chain security and enhancing cost and operational efficiency,” noted an industry insider. Vertical integration is becoming the norm, with long-term competitive advantages associated with such strategies. However, as expanding PV capacity entails a prolonged ramp-up period, companies must plan capacity expansions carefully to avoid disrupting their operational continuity.
Moreover, as the industry evolves, market structures are also undergoing significant changes. The latest data from the China Photovoltaic Industry Association indicates that by 2024, the industry will have largely completed a rapid transition from N-type to P-type technology. In 2023, P-type cells accounted for 70% of the market, while N-type cells represented 30%. By 2024, this ratio is expected to shift to 70% for N-type and 30% for P-type, with N-type’s share likely continuing to rise. “The pace of technological advancements in the PV industry is rapid,” said Wang Qing, director of the industry development department at the China Photovoltaic Industry Association. The average conversion efficiency of technologies such as TOPCon cells, heterojunction cells, and BC cells continues to increase steadily, enhancing the power output of various types of modules.
Additionally, as integrated layouts expand, many downstream companies are pushing upstream, leading to situations where “customers” become “competitors,” which may narrow future sales prospects. For instance, TCL Zhonghuan, which focuses on silicon wafers, has repeatedly stated that it will not compete with its customers. However, as numerous major downstream companies begin producing silicon wafers, TCL Zhonghuan’s market share is contracting, forcing it to enter the downstream solar cell segment. Similarly, Hoshine Silicon Industry, previously focused on industrial and organic silicon production, has begun expanding its production capacity for polysilicon in response to competition from firms like GCL and Tongwei, leading to a similar contraction in market share.
Most PV companies faced severe losses in 2024, with every segment from polysilicon to modules experiencing significant financial strain. The situation is even more dire for firms with deeper vertical integration. Given that each segment is approaching cost-loss levels for sales, the longer the supply chain, the more severe the losses become. “Integrated projects that perform well in sales not only overcome market challenges but also enhance profit margins. However, if sales are difficult, it compounds the financial pressure and burdens of fixed asset depreciation,” noted a company executive. Although the long-term prospects for integrated layouts are promising, they inevitably bring short-term pressures that exacerbate losses. As “involution” intensifies, many firms are struggling to sell products, leading to aggressive price reductions that force weaker competitors to cut production or cease operations altogether, attempting to balance short-term supply and demand through financial strength.
As the industry grapples with intensified “involution” competition, the China Photovoltaic Industry Association has taken proactive measures since October 2024 to stabilize market order and promote healthy industry development. It has organized companies to sign self-regulation agreements to prevent “involution” and released cost guidance for components to provide important reference points for market transactions, avoiding irrational competition stemming from price confusion. They have also called on central enterprises to resist low-price bidding practices that lead to detrimental competition, fostering high-quality industry growth.
Furthermore, the Ministry of Industry and Information Technology has issued related regulations that set hard lines on technical standards, curbing blind capacity expansion. On November 20, 2024, the ministry released the “Regulations for the Photovoltaic Manufacturing Industry (2024 Edition),” which mandates that new projects for monocrystalline silicon photovoltaic cells and modules must achieve efficiency targets of at least 23.7% and 21.8% for P-type, and 26% and 23.1% for N-type, respectively. Moreover, the requirement to prohibit the construction of self-sustained coal-fired power plants alongside new projects has been expanded from certain regions to nationwide. It also calls for local governments to reasonably allocate photovoltaic manufacturing projects based on resource endowments and industrial foundations, encouraging intensive and clustered development.
Industry insiders assert that the core issue leading to the current state of “involution” is insufficient innovation and the struggle over existing market shares. Companies need to transition their competitive strategies from competing for existing resources to generating new opportunities through technological innovation and international expansion. On January 27, the National Development and Reform Commission and the National Energy Administration jointly issued a notice aimed at deepening the market-oriented reform of renewable energy grid prices and promoting high-quality development in the sector. This notice emphasizes that renewable energy must fully enter the market and introduces mechanisms for pricing. “The issuance of this notice signifies that photovoltaic projects must enhance their competitiveness in the market to secure stable profits,” stated Lu Shiyuan, head of the New Energy Project Department at Zheshang Futures. From a developmental perspective, the notice will compel upstream manufacturers to innovate technologically and deliver high-efficiency products.
Historically, technological innovation has been pivotal for enhancing efficiency and reducing costs, shaping the trajectory of China’s PV industry. Future growth within the sector will undoubtedly hinge on breakthroughs in key technologies that enhance production efficiency, upgrade product performance, and further lower production costs. “The current pressing need for the PV industry is to address the challenges posed by ‘involution’ competition, which stems from rapid technological and equipment upgrades and the influx of social capital into the renewable energy sector,” said Li Ting, director of the Electronic Information Department at the Ministry of Industry and Information Technology. “To mitigate low-level repetitive construction, we must guide local governments to allocate photovoltaic projects sensibly and reduce purely capacity-expanding manufacturing projects by increasing the capital ratio prior to project initiation and enhancing product technical standards after project completion to raise industry entry barriers.”
Globally, whether facing international competition or addressing domestic low-level homogenization, technological innovation remains the essential path and inevitable requirement for high-quality industry development. “To effectively leverage standards and protect intellectual property, we must enhance the synergy of technology, standards, and intellectual property, focusing on the pivotal role of national standards in establishing baselines, industry standards in raising benchmarks, and group standards in filling gaps, thus accelerating industrial structural adjustments,” Li Ting added. The Ministry of Industry and Information Technology will work with relevant departments to encourage and guide advanced photovoltaic technology research and application, using practical applications to accelerate technological iterations.
Additionally, international expansion is one of the effective means to break the cycle of “involution” competition. Zhang Lianqi, a member of the National Committee of the Chinese People’s Political Consultative Conference and an expert in economics, emphasized that technological innovation is key to addressing “involution.” “Going abroad is a way to break the cycle; capable companies should expand internationally to release their growth ceilings and build core competitiveness.” Zhang suggests supporting enterprises in a structured international expansion and creating a shared international community of interests. This includes guiding leading enterprises to organize upstream and downstream partners to establish industry-wide innovation alliances covering “research and development—production—service,” and utilizing policies like tax incentives to support the internationalization of industrial clusters, thereby reducing cross-border operation costs and upgrading China’s industries from “isolated expansion” to “full-chain mutual benefit.”
Li Ting also suggested using mechanisms such as the China-Brazil partnership and the BRICS New Industrial Revolution Partnership to broaden international cooperation channels, encourage talent, technology, and standards collaborations, and promote the high-level internationalization of China’s photovoltaic industry to match its domestic industrial status.
In light of these efforts, the photovoltaic industry is showing signs of stabilization and recovery, with industry chain prices beginning to rise rationally, and some institutions offering more optimistic outlooks. CICC believes that the photovoltaic sector will achieve market clearance for some tail-end enterprises in the next 2-3 quarters. Guolian Securities anticipates that the supply-demand dynamics in the industry may see a turnaround in 2025. UBS has also indicated that a noticeable improvement in supply and demand is expected in the second quarter of 2025, although complete balance may not be reached until 2026 or 2027.
As an observation, advanced capacity remains a scarce resource. Recently, “involution” competition has become a focal point of public discourse. In July 2024, the Political Bureau of the Central Committee of the Communist Party of China mentioned for the first time the need to prevent “involution” competition, and in December 2024, the Central Economic Work Conference called for comprehensive rectification of “involution” competition. The inclusion of this issue in government work reports indicates a commitment at the national level to address involution and embark on a new path toward high-quality development.
In summary, “involution” competition refers to a state of unhealthy and low-level competition that necessitates guidance to return to a normalized competitive status. Excessive involution can lead businesses to invest significant resources in unnecessary price wars, severely compressing profit margins. From an industry perspective, such competition undermines the ecological balance of the sector, causing limited resources to be misallocated, stalling technological progress and hindering overall industrial advancement.
Despite the prevailing “involution” challenges, many companies are still pursuing reverse production expansion, driven by various complex motivations. These may include the inherent pursuit of profit, attracting multiple capital sources, resulting in a cycle of “expansion—financing—further expansion,” or delays in the project initiation and regulatory approval processes despite favorable initial financing. Even amid fluctuating investment environments, companies find it difficult to halt expansion plans and must push forward.
Such reverse expansion efforts may present potential opportunities, but they also carry substantial risks and challenges. In the current market environment, further production increases could exacerbate supply-demand imbalances, intensifying losses within the industry and prolonging the downturn. While aggressive expansion strategies may help optimize industry structure and force out less competitive firms, they could also temporarily heighten competitive pressures and undermine market confidence. Overall, the PV industry is currently experiencing a surplus situation, with losses becoming the most pressing issue.
Clearly, the continuous expansion of production capacity runs counter to the broader objective of expediting capacity clearance and restoring supply-demand balance. However, from a long-term perspective, as the global consensus on carbon neutrality strengthens, the market prospects for photovoltaics as a vital component of clean energy are extremely promising. It is projected that by 2030, the PV industry will scale to 1,000 GW, potentially reaching 1,500 GW or more by 2035.
In conclusion, the rapid development of the industry has led to supply-demand imbalances that warrant serious reflection and attention. The key to resolving this predicament lies in market guidance and policy establishment that prioritize cost reduction, efficiency enhancement, and technological innovation as essential for business survival.
The 2025 government work report emphasizes the need to deepen the establishment of a unified national market by accelerating the creation of foundational institutional rules, eliminating local protectionism and market fragmentation, and smoothing barriers to market entry and exit. The comprehensive rectification of “involution” competition conveys the determination at the national level to address this phenomenon and reassures society.
Without a doubt, advanced production capacity remains a scarce resource across any industry. For the PV sector to achieve high-quality growth, it must actively embrace advanced technologies, raise industry entry barriers, and expedite the elimination of outdated capacities, allowing new technologies and products to enter the market more effectively. It is hoped that relevant authorities will strictly enforce laws and regulations that promote fair competition in the market and take strong measures against malicious low-price bidding practices, ensuring that products with advanced technological attributes can compete more equitably.
