Goldman Sachs: Photovoltaics Anti-Competition, When is the Profit Turning Point?

According to the Zhitong Finance APP, Goldman Sachs invited seven companies from the photovoltaic industry chain (GCL-Poly Energy, Daqo New Energy, LONGi Green Energy, Aiko Solar, JinkoSolar, Canadian Solar, and JA Solar) to the Asia Leaders Conference event held from September 3 to 5. Both module and equipment companies mentioned that since the self-restriction began, very strict controls on new production capacity have been implemented. Not only have approvals for new projects using mainstream technologies (such as TOPCon) been suspended, but projects that have already been approved and are under construction have also been required to suspend construction. Companies believe that in the future, only advanced technologies will be able to obtain expansion approvals. The guidance provided by polysilicon companies indicates that the profit inflection point will occur in the third quarter of 2025; the guidance from high-efficiency module companies indicates it will be in the fourth quarter of 2025.

Divergence in Price Outlook for Polysilicon and Module Companies

Polysilicon companies mentioned that the first phase of polysilicon price increases, aimed at covering production costs at full capacity, has been well executed.

According to Daqo, trading volume significantly rebounded at the end of August, with prices in the range of RMB 45-50 per kilogram, most of which were purchased by integrated module companies.

According to GCL-Poly Energy, starting from September, the China Photovoltaic Industry Association (CPIA) will implement production quota restrictions for the entire industry for the remainder of the year (a total of 500,000 tons from September to December 2025), with each company receiving corresponding quotas based on their production capacity share, thereby rebalancing monthly supply and demand. In the current environment of unfair competition, GCL-Poly Energy believes that polysilicon prices need to rise further to RMB 50-60 per kilogram to compensate for the increased unit depreciation costs caused by production quota controls.

In Chart 1, Goldman Sachs illustrates the three-phase price increase for polysilicon discussed during our panel meeting at the Asia Leaders Conference.

However, module companies are skeptical about the sustainability of polysilicon prices, as most module companies stated that despite the continuous rise in polysilicon quotes, they have no plans to replenish polysilicon inventory at current prices. Additionally, module companies mentioned that the acceptance of price increases for modules in photovoltaic power plants is relatively low, as the uncertainty of grid connection prices has increased under the new policy environment (i.e., Document No. 136, also known as the market-oriented mechanism for new energy grid connection prices).

Multiple Measures to Achieve Rebalancing of Overcapacity Across the Entire Industry Chain

Goldman Sachs summarized the most discussed rebalancing measures during the Asia Leaders Conference panel, including the establishment of a polysilicon tail-end capacity acquisition fund, driving the clearance of battery and module capacity through R&D, and strictly controlling the expansion of new production capacity.

According to GCL-Poly Energy and Daqo, the polysilicon tail-end capacity acquisition fund is still under discussion and may announce significant progress in the second half of 2025. If progress does not meet expectations, GCL-Poly Energy anticipates that policy measures will be intensified to help accelerate the acquisition process The acceptance of price increases in the photovoltaic power station sector is relatively low, while component companies mainly focus on accelerating product efficiency improvements and exploring niche markets with high profit margins. This not only helps maintain price trends (by saving more BoS costs for customers) but also reduces material usage, thereby accelerating cost declines. According to companies, this can also eliminate lower-tier manufacturers with poor R&D and funding capabilities.

In addition, both component and equipment companies have mentioned that since the self-reinforcing competition began, they have implemented very strict controls on new production capacity. Not only have approvals for new projects using mainstream technologies (such as TOPCon) been suspended, but also approved projects under construction have been required to halt construction. Companies believe that only advanced technologies will be able to obtain expansion approvals in the future.

The guidance provided by polysilicon companies indicates that the profit inflection point will occur in the third quarter of 2025, while the guidance from high-efficiency component companies indicates that it will occur in the fourth quarter of 2025.

In light of the price increase in polysilicon, GCL-Poly Energy and Daqo New Energy both stated that the profit inflection point has already emerged since the third quarter of 2025. Specifically: i) GCL-Poly Energy stated that under the current price, its polysilicon business achieved positive operating profit in August; ii) Daqo New Energy indicated that it achieved positive cash profit in the third quarter of 2025 (compared to -22% in the second quarter of 2025).

Regarding components, LONGi Green Energy reiterated its guidance for achieving breakeven operating profit in the fourth quarter of 2025 (i.e., core business gross profit can cover sales and management expenses), which is more driven by the company's own factors (increased contribution from high-margin products). Specifically, LONGi Green Energy pointed out that the assumption in its guidance is that the shipment proportion of its high-efficiency BC components will increase (from 20% in the first half of 2025 to about 35% in the second half of 2025 and 50% in 2026), while the gross margin of BC components is 10-15 percentage points higher than that of TOPCon