China’s solar price war starts to ease

The solar sector was designated a key growth driver in China, but it has seen supply-demand imbalances. Beijing has urged companies in the solar sector to regulate their capacity and pricing.

We illustrated the scale of the issue by visualizing China’s capacity growth for polysilicon. (This high-purity version of silicon is a key raw material in solar panels.) While production grew strongly after 2021, capacity expanded even more quickly.

On Aug. 6, eight polysilicon producers representing more than 90% of China’s effective capacity pledged to avoid below-cost sales. Prices immediately rebounded from multi-year lows.

Unit values for China’s solar exports had been declining, especially for solar cells. Exports of solar modules (complete, framed assemblies of multiple interconnected solar cells) have held up in quantity terms, while falling in terms of value shipped. The outperformance of cells versus modules also suggests a shift in the value chain towards intermediate goods – i.e., exports of components that are assembled to create finished goods elsewhere.