China’s top solar equipment manufacturers are turning to self-regulation in an effort to survive amid market challenges. Over 30 leading firms signed a self-discipline agreement at the China Photovoltaic Industry Association (CPIA) annual meeting last week. The initiative, inspired by the Organization of Petroleum Exporting Countries’ (OPEC) approach to managing oil supply, sets production quotas for companies based on their market share, capacity, and expected demand for 2025. The move comes as the industry faces overcapacity, geopolitical tensions, and slowing global demand.
The CPIA declined to comment on the new program.
Crisis in the Solar Industry
The agreement marks a significant shift for China’s solar sector, which has historically been marked by fierce competition. Years of aggressive price cuts and technological advancements have made solar energy the fastest-growing and most affordable energy source. However, overcapacity and slowing demand have strained the industry.
China’s solar equipment makers are bracing for more challenging times, with many executives predicting it could take another year or more for profits to rebound.
“The keyword for next year is survival,” said Xing Guoqiang, chief technology officer of Tongwei Co., at the BloombergNEF Summit in Shanghai. “2025 will be crucial for many companies to survive this cycle.”
Overcapacity and Declining Demand
The sector’s current crisis stems from an overexpansion of manufacturing capacity that began in 2021. China, which accounts for more than 80% of global solar panel production, now has the ability to produce over 1,100 gigawatts of solar panels annually—almost double the global installation forecast for 2024 and far exceeding demand through 2035, according to BloombergNEF.
While China is not alone in facing the overcapacity issue, it is one of the most affected, as rapid industrial growth in recent decades has outpaced demand, particularly as the global economy slows. Industries from copper smelting to steelmaking are experiencing similar problems, with companies reluctant to cut production despite the growing supply glut.
Solar companies’ fortunes were once buoyed by a surge in global demand, but that boom is now fading. Solar panel installations surged 76% in 2023, and are expected to rise 34% in 2024. However, growth is projected to slow significantly to just 8% in 2025, according to BloombergNEF. Trade tensions are also exacerbating the situation, with Chinese companies setting up manufacturing plants in countries like the U.S., India, and Indonesia to avoid rising tariffs.
Fierce Price Cuts and Growing Losses
The overcapacity crisis has led to a sharp decline in prices, with many companies selling panels below production costs. Longi Green Energy, once the world’s largest solar manufacturer, is expected to report a net loss of nearly $1 billion this year after posting a profit of over $1.7 billion in 2023. Many industry leaders don’t expect the situation to improve until at least the second half of 2025, and some are even more pessimistic.
“Given the current capacity levels, it could take at least three years for the wafer and module sectors to bottom out,” said Zhang Longgen, chairman of United Solar Polysilicon.
Industry’s Shift in Strategy
In response to these pressures, solar executives are calling for greater restraint and a shift away from cutthroat competition. At the CPIA gathering in Yibin, Sichuan, industry leaders cited OPEC as a model for managing supply and prices.
However, there is uncertainty about whether the self-discipline agreement will work in such a fragmented and competitive industry. “If you make a promise, how do you follow through?” asked Lu Chuan, chairman of Chint New Energy Technology Co. “How do you reach consensus and enforce compliance? These questions will continue to be discussed in the future.”
Despite these concerns, the agreement is expected to help stabilize the sector, potentially boosting prices. “We are entering a new ‘OPEC era,’ where traditional supply-demand analysis may not apply if the execution is successful,” said Alan Lau, an analyst at Jefferies Financial Group Inc.
A Long Road to Recovery
The agreement may help mitigate some of the challenges, but the road to recovery for China’s solar industry remains long. The sector’s history of rapid expansion, followed by intense competition and price cuts, has created both industry giants and major failures. Companies like Suntech Power and Yingli Green Energy, once among the biggest global players, have since collapsed.
In Yibin, executives reflected on how to avoid such a fate and emphasized the need for industry-wide cooperation and discipline. While the details of the self-discipline program are still evolving, its potential to stabilize the sector and curb overproduction offers a glimmer of hope for China’s solar manufacturers as they navigate through a challenging economic landscape.
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