Significant Changes in the Solar Industry Amidst Market Restructuring
The solar industry is currently undergoing its fourth major restructuring, which is more intense than any previous downturn. From 2020 to 2023, China’s publicly listed solar companies reported a total net profit of nearly 500 billion RMB. However, projections for the fiscal year 2024 indicate anticipated losses exceeding 60 billion RMB. The industry has swiftly transitioned from a booming phase to a chilling low within just over a year.
The current landscape of solar energy is marked by supply-side transformations and the gradual clearing of excess capacity, amidst a backdrop of fluctuating capital markets. Many companies are struggling to navigate IPO processes, and intense competition over various technologies is ongoing, with patent disputes occurring more frequently than ever. New policies have also significantly altered the return mechanisms for downstream solar investments. What does the future hold?
We predict that by the second half of 2025, the situation regarding capacity clearance will improve, but achieving a complete balance may take at least three years. It is likely that more than five mid-sized solar manufacturers will go bankrupt during this harsh restructuring process. This upheaval affects over one million registered companies, nearly 150 publicly listed companies, and around four million workers within the industry. The pressure on all facets of the solar sector is undeniable. As they say, “pessimists are always right, but optimists keep moving forward!” This restructuring serves as a significant rite of passage for China’s solar industry.
During this cycle, we face the harsh reality that the pain of winter prepares us for the actions of summer, while the harvest of autumn is rooted in the sowing of spring. This cycle is not new; some companies will fall while others will endure. In the midst of this duality, the global renewable energy industry remains promising.
Supply-Demand Imbalance and Capacity Clearance
The mismatch between supply and demand in the solar industry is severe, and achieving a complete balance could take at least three years. This lengthy and painful process will lead to the elimination of numerous manufacturing enterprises. As noted by Longi’s Li Zhenguo during the 2023 Shanghai Expo, over half of the solar manufacturers may exit the market in the next two to three years—a statement that now appears quite realistic.
One of the most significant challenges is the extreme imbalance in solar capacity, a consequence of the industry’s previous years of aggressive expansion. Between 2020 and 2024, investments in solar manufacturing exceeded 34 trillion RMB. By the end of 2024, the production capacities of key segments in the solar supply chain—silicon materials, wafers, cells, and modules—are projected to reach 1447 GW, 1160 GW, 1193 GW, and 1428 GW, respectively. In comparison, the CPIA predicts a maximum of 300 GW of new installations globally for 2024, indicating a theoretical consumption cycle of over three years.
The reality is harsh, and with various driving and resisting forces for capacity clearance, it is expected that the supply-demand situation will see slight improvement starting in the second half of 2025, but achieving full balance may not occur until the end of 2027. Since last year, solar energy has initiated a top-down supply-side reform involving various stakeholders, including government agencies and enterprises. Despite unprecedented efforts and policy measures, the “anti-involution” policies have only partially mitigated chaotic price competition without reversing the overall supply-demand mismatch.
Fluctuating Capital Markets and IPO Challenges
The capital market landscape is also changing, with a significant decrease in successful IPOs and many companies facing challenges in accessing capital markets. The adjustments and fluctuations in capital markets have profoundly impacted the competitive landscape and future development of the solar industry. Many companies are experiencing existential threats due to their inability to go public or being delisted.
Over the past two decades, the changes in China’s solar capital market have been remarkable. While there were only 18 publicly listed solar companies two decades ago, that number has now approached 150. At the peak of the solar capital market, the total market value approached 5 trillion RMB, but it has since fallen back into undervaluation. The number of successful IPOs in the solar sector was substantial in years like 2010, 2011, and 2017. However, from 2020 to 2023, more than 50 companies went public, only for the tide to turn amidst the current restructuring.
As of the second half of 2023, the tightening of IPO policies has led to a sharp decline in successful listings. In 2024, only three solar companies managed to complete IPOs on the A-share market, while 16 companies have terminated their IPO processes. The overall difficulty of entering and staying in the capital market has become increasingly pronounced. Last year, several solar companies were marked with “ST” status, indicating financial distress, and the trend continues into 2025 as more companies face similar fates.
Intellectual Property Battles
The solar industry is witnessing an unprecedented intensity in patent disputes. The past year has seen a surge in “patent wars” involving major manufacturers and equipment firms, both domestically and internationally. Notably, leading companies such as Jinko, Longi, JA Solar, and Trina have all been embroiled in patent disputes. The Chinese government has elevated the importance of intellectual property protection, moving away from a previously lax approach.
Industry leaders have emphasized the urgent need for patent protection and continuous innovation. The current patent battles reflect a shift from chaotic growth to a focus on technological competition. As N-type TOPCon technology becomes mainstream, companies with significant patent barriers are attempting to reshape competitive dynamics through legal means, leaving smaller players in precarious positions. As one industry executive stated, “Without intellectual property accumulation, there’s no seat at the table.”
Technological Rivalry and Future Directions
The competition among different technological pathways in the solar sector is intense, with various technologies coexisting and evolving. The ongoing technological revolution means that companies must navigate carefully to avoid misjudging directions. Unlike previous cycles, this restructuring is driven significantly by technological updates and innovations.
TOPCon technology has seen rapid adoption, with over 900 GW of capacity established, accounting for 70% of the N-type market. As companies work to digest excess capacity, they emphasize the stability and mainstream status of their preferred technologies while downplaying efficiency bottlenecks. The competitive landscape suggests that various technology pathways will continue to coexist, each with its strengths, rather than one completely replacing another.
Talent Mobility as a Key Factor
This restructuring is not just about companies but also involves a significant realignment of talent within the solar industry. The past few years have seen a wave of executive turnover as experienced leaders leave firms for new opportunities or entrepreneurial ventures. The current landscape necessitates a reevaluation of talent strategies, with competition for skilled professionals intensifying.
As the solar sector undergoes this fourth major restructuring, the selection process for top companies and talent is becoming increasingly critical. The industry is witnessing a higher frequency of personnel changes as firms adapt to the challenges of this evolving market.
New Investment Models and Changes in Returns
Recent policy changes have deepened uncertainties in the return mechanisms for solar projects. The investment value of solar power projects is increasingly tied to electricity pricing, which directly affects profitability. Many solar projects have become “undesirable” assets due to low or negative electricity prices, leading to significant market challenges.
New policies, such as the management measures for distributed solar power construction, have introduced market-based pricing mechanisms, further complicating the investment landscape. The shift to market-driven electricity pricing will impact project revenues, operational management, and overall viability.
Integration of Solar and Storage Technologies
The trend towards integrating solar and storage solutions is becoming more pronounced, as energy storage systems are increasingly recognized as essential components of the solar landscape. The solar sector is transitioning from a cost-reduction focus to a solution-driven era, where effective integration with energy storage technology is crucial for maximizing solar’s potential.
Leading solar companies are exploring storage solutions, with many executives transitioning to or founding storage-focused enterprises. This evolution highlights the industry’s need to adapt to more complex application environments and emphasizes the importance of innovative product development.
Conclusion
In summary, the current restructuring of the solar industry presents both challenges and opportunities. The ongoing transformation will significantly impact the competitive landscape, requiring companies to adapt and innovate continually. As the industry navigates these changes, a focus on technological advancement, talent retention, and investment strategies will be crucial for long-term success.
