In Depth: China’s Solar Sector Shows Glimmer of Relief

China’s solar industry has faced significant turbulence due to a prolonged supply glut and intense price wars, which have sharply eroded industry profits across the supply chain. Despite ongoing challenges, some indicators point toward improvement as excess inventory is cleared and policymakers step in to address unhealthy competition within the market [para. 1].

In the first half of 2025, leading Chinese solar companies collectively reported revenues of 392 billion yuan ($55 billion), representing a 9.7% year-over-year drop. At the same time, total net losses widened to 7.3 billion yuan [para. 2]. However, Q2 data shows signs of recovery: revenue rebounded 24.6% quarter-on-quarter to 217.4 billion yuan, while losses narrowed to 3.2 billion yuan. Notably, revenues among polysilicon suppliers remained nearly flat year-on-year, and solar cell makers saw a 14.9% increase, helped by a surge in installations preceding a June 1 deadline for guaranteed state grid purchases as Beijing shifted toward market-based pricing for wind and solar electricity [para. 3][para. 4].

Losses persisted across all major segments in Q2: module makers lost 4.92 billion yuan, wafer-makers 4.26 billion yuan, polysilicon producers 1.37 billion yuan, and solar cell firms 90 million yuan, largely due to falling prices, depreciating inventory, and the writing down of fixed assets [para. 5]. Leading companies suffered as well: Tongwei, the world’s largest polysilicon and solar cell producer, posted a 4.96 billion yuan net loss on 40.51 billion yuan of revenue (down 7.5% year-on-year), dragged down mainly by plunging polysilicon prices [para. 6]. Longi Green Energy, a key silicon wafer and module producer, narrowed its first-half losses to 2.57 billion yuan (about half the previous year’s level) despite a 15% revenue decline to 32.8 billion yuan, benefitting from operational efficiencies [para. 7]. Trina Solar, another major player, went from a 526 million yuan profit in H1 2024 to a 2.9 billion yuan loss in H1 2025, as its revenue dropped 28% due to persistent module oversupply [para. 8].

Despite industry-wide headwinds, solar cell and auxiliary component businesses like inverter manufacturers experienced resilience [para. 13][para. 14]. Solar cell losses remained comparatively light thanks to better supply-demand dynamics and broader use of premium technologies such as N-type and back-contact (BC) cells, allowing premium pricing [para. 15]. Exports supported the sector: solar cell exports grew 31.1% in value to $1.73 billion and 59.1% in volume to 44.4 GW [para. 16]. In inverter and bracket segments, companies like Sungrow Power Supply saw booming results—Sungrow’s net profit increased by 56% year-on-year to 7.7 billion yuan, while revenue jumped 40.3% to 43.5 billion yuan, underpinned by global demand, especially for energy storage [para. 18].

Companies responded to ongoing overcapacity by destocking and reducing capacity. Q2 inventories of polysilicon, modules, and solar cells fell 11.44%, 2.49%, and 8.48% quarter-on-quarter, respectively, while silicon wafer inventories edged up 0.64% [para. 20]. Construction activity related to new capacity also shrank across the supply chain [para. 21].

To address the industry’s self-destructive price wars and oversupply, Beijing intervened in August 2025 with measures aimed at curbing unfair competition, improving price monitoring, and fighting false advertising [para. 23]. However, demand for new installations is expected to decline following the expiration of policy incentives in mid-2025, with newly installed capacity plunging 47.6% year-on-year in July to 11.04 GW, and module exports softening as well [para. 24]. Looking toward 2026, market-based trading rules may put solar at a disadvantage to wind power, potentially intensifying the sector’s challenges and risking further decline [para. 25].