In Depth: China’s Polysilicon Majors Plan to Bail Out Rest of Glut-Stricken Industry

China’s largest polysilicon producers, including Tongwei Co. Ltd. and GCL Technology Holdings Ltd., are collaborating to set up a new company to acquire and consolidate struggling rivals. The aim is to address a severe oversupply and halt a damaging price war that has undermined the nation’s solar industry. The planned joint entity would acquire surplus factory capacity and take on the debt of weaker firms. It would also coordinate production and sales, managing operating rates, output and inventory to bring supply and demand back into balance [para. 1][para. 2][para. 3][para. 4]. Negotiations on this initiative began at the start of 2024, gaining buy-in from major producers, target companies, and financial institutions [para. 3].

The context for this intervention is a crisis precipitated by excessive expansion; China’s polysilicon production capacity has more than doubled global demand, standing at around 3.5 million tons per year, with six major producers controlling over 70% of capacity. Rapid industry expansion since 2023 pushed capacity and output up sharply, with capacity reaching 2.87 million tons and output 1.84 million tons in 2024—4.5 and 2.76 times their 2021 levels, respectively [para. 7][para. 8][para. 9][para. 10]. Efforts to cut operating rates in mid-2024 largely failed, as competitors fought to preserve market share, leading to ballooning inventory (over 300,000 tons by year-end) and a plunge in prices from 72,100 yuan per ton to just 34,000 yuan in June 2025—below the average production cost of 40,000 yuan per ton [para. 11][para. 12].

Resulting losses have been severe and persistent, with average sector operating rates dropping from 98% in early 2024 to under 40% by mid-2025. Many companies have halted production; only nine remain operational, down from 18 in early 2024. In the first half of 2025, domestic output declined 44% year-on-year, reaching only 596,000 tons [para. 13][para. 14]. Attempts at coordinated production cuts through industry groups failed due to divergent interests and fragmented downstream sectors [para. 16].

By June 2025, leading producers reached consensus on the urgent need for consolidation. The government endorsed the plan, with the National Development and Reform Commission and the Ministry of Industry and Information Technology expressing support and encouraging financial institutions to back the new company [para. 24][para. 25][para. 26][para. 27]. Banks are ready to provide capital, given the risk of further bad loans if the industry collapses, and the funding model may include apportioning future profits to ensure loan repayment [para. 27][para. 28].

The consolidation entity, designed as a temporary, multi-stakeholder platform, will dissolve once prices and supply stabilize. The move comes amid increased central government pressure to end “disorderly price competition” and phase out outdated capacity. GCL Technology representatives describe the initiative as an effort to move from destructive competition toward negotiation and cooperation [para. 29][para. 31].

Anticipation of the rescue lifted sentiment: as of July 9, polysilicon futures rebounded nearly 30%, and major producers’ shares increased by 35% to 43%. However, risks remain: even large firms are operating at losses and may lack capital for acquisitions. For instance, Tongwei lost 7.04 billion yuan in 2024 and 2.59 billion yuan in the first quarter of 2025; similar losses were posted by GCL Technology, Xinte Energy, and Daqo New Energy [para. 32][para. 34]. Some smaller producers oppose acquisition, and because modern production lines are flexible, companies may simply pause operations until market recovery, complicating any coordinated output reduction [para. 36][para. 37]. Analysts warn that differing conditions and valuations will likely make implementation difficult [para. 38].