Deutsche Bank: Solar industry remains weak in the short term, while anti-involution measures and consolidation drive a recovery in price discipline

Overview

This report summarizes management discussions with Chinese solar companies at the DB Virtual Global Solar & Clean Tech Conference on May 14, 2026. Participating companies included LONGi Green Energy Technology, GCL Technology, Hainan Drinda New Energy, Daqo New Energy, and JinkoSolar. The core conclusion is that the industry remains in a phase of slowing demand, oversupply, and inventory digestion in the short term, but anti-involution policies, potentially higher efficiency standards, enforcement of pricing laws, and the exit of outdated capacity are shifting competition away from low-price internal competition toward technology, quality, and efficiency.

Core views

Deutsche Bank believes that near-term fundamentals for China's solar industry remain under pressure, especially due to weak Chinese demand in 1H26, elevated polysilicon inventories, and soft prices. However, companies across different segments are seeking resilience through differentiated technologies and business expansion: LONGi through BC modules and ESS, GCL through low-cost granular silicon and entry into battery materials, Hainan Drinda through overseas cell sales and space solar, JinkoSolar through emphasizing more rational module pricing, and Daqo through maintaining sales discipline above cost backed by a strong balance sheet.

Analysis framework

The report is mainly based on management interviews and fireside chats at the conference, providing a cross-sectional comparison of demand, prices, policy, cost, inventory, overseas markets, and new businesses. Rather than a traditional financial model update, it uses cross-validation from multiple company statements to assess the industry's cycle position, changes in price discipline, and each company's differentiated strategy.

Methodology notes

• Industry cycle and supply-demand analysisConference takeaways and management interviews

  Judge the stage of the industry through statements from multiple companies on demand, prices, inventory, and policy.

  The report compares the views of LONGi, GCL, Daqo, Drinda, and JinkoSolar side by side to identify a common conclusion: demand in 1H26 is weak and polysilicon oversupply remains, but policy constraints and consolidation expectations are improving price discipline.

• Value chain comparisonSegment-level asset mapping

  Identify beneficiaries and risk exposure across polysilicon, cells, modules, energy storage, and new materials.

  The report maps upstream costs, module prices, overseas premiums, inventory levels, and new business opportunities to different companies, emphasizing that integrated module makers may benefit from low upstream costs, while high-inventory polysilicon companies are more vulnerable to falling prices.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• LONGi Green Energy Technology (601012.SS)

  Covered by DB, rated BUY; an integrated module manufacturer.

  Strengths

  Lower upstream costs may provide near-term benefits; BC modules carry about a 10% price premium, with a 2026 module shipment target of 80GW and an ESS business target of 6GWh.

  Weaknesses

  China demand is expected to decline year over year, U.S. operations remain cautious, and profitability recovery in the module business may need to wait for demand and pricing improvement in 2H26.

  Comparison

  Compared with upstream polysilicon companies, as an integrated module maker it benefits more directly from lower upstream costs.

  Risks

  Slower-than-expected demand recovery, narrowing BC premium, changes in U.S. OBBA regulation, ESS shipments missing expectations.

• GCL Technology (3800.HK)

  Covered by DB, rated BUY; a company related to polysilicon and new materials.

  Strengths

  Granular silicon cash cost is RMB24/kg, about RMB10/kg lower than rod silicon; the company is expanding into cathode materials and silicon-carbon anodes.

  Weaknesses

  It is still waiting for further clarity on anti-involution policies, and polysilicon price recovery depends on policy and industry consolidation.

  Comparison

  Compared with rod-silicon capacity, granular silicon has a cost advantage; compared with pure-play polysilicon companies, its new materials strategy provides potential growth options.

  Risks

  Insufficient policy execution, continued weakness in polysilicon prices, uncertain returns on investment in new business expansion.

• Hainan Drinda New Energy (2865.HK)

  Covered by DB, rated BUY; a company related to solar cells and space solar.

  Strengths

  Strong overseas demand, with export mix rising to 70% in 1Q26; 2026 cell shipment target of over 30GW; CPI film for space solar has potential for premium ASP.

  Weaknesses

  The sharp rise in silver prices in 4Q25 created RMB0.03/W cost pressure on profitability, and domestic sales only target break-even net margin.

  Comparison

  Overseas sales are expected to have a RMB0.02/W price premium over the domestic market, making the company more resilient than those with pure domestic sales exposure.

  Risks

  Renewed silver price volatility, changes in overseas demand or trade policy, and slower-than-expected commissioning and commercialization of CPI film production.

• Daqo New Energy (DQ.N)

  Not covered; a polysilicon producer.

  Strengths

  Strong balance sheet, with 2Q26 sales strategy emphasizing selling no lower than cost; inventory of 50-60k tons is roughly in line with the industry average of about 4-5 months.

  Weaknesses

  Polysilicon remains in a phase of oversupply and inventory pressure, and about 3.5kt of capacity may face elimination risk under higher efficiency standards.

  Comparison

  Inventory levels are broadly in line with the industry average, but earnings elasticity depends heavily on whether polysilicon prices can rebound from the mid-to-high RMB30/kg range.

  Risks

  Slower-than-expected recovery in polysilicon prices, capacity exits caused by efficiency standards, slower-than-expected inventory digestion.

• JinkoSolar (JKS.N)

  Not covered; a module manufacturer.

  Strengths

  Module prices have recovered, with standard modules around USD0.11/W and high-power products around USD0.12-0.15/W; after selling equity in its U.S. subsidiary, the company plans to retain a 24.9% minority stake to comply with OBBA requirements.

  Weaknesses

  U.S. shipments are expected to account for only 5-10% of total volume, and policy changes need to be monitored continuously.

  Comparison

  The company believes industry competition is shifting from loss-making low pricing toward technology, quality, and efficiency, and high-power products can command higher prices.

  Risks

  Changes in U.S. regulation, module price pullback, unstable premium for high-power products.

• Tongwei (600438.SS)

  Covered by DB, rated SELL; has high upstream polysilicon exposure.

  Strengths

  The report did not provide clear positive operating highlights.

  Weaknesses

  Deutsche Bank believes its high polysilicon inventory and more leveraged balance sheet than peers make it more vulnerable to sharp declines in polysilicon prices.

  Comparison

  Compared with integrated module makers, Tongwei is more sensitive to declines in upstream polysilicon prices.

  Risks

  Further declines in polysilicon prices, inventory write-downs or turnover pressure, expanding balance sheet pressure.

Key data

• Conference date2026-05-14Date of the DB Virtual Global Solar & Clean Tech Conference.
• Report date2026-05-18Date shown on the report cover page.
• Participating Chinese companies5: LONGi, GCL Technology, Hainan Drinda, Daqo, JinkoSolarAll are companies related to China's solar industry chain.
• LONGi's China demand forecast200-250GW in 2026, versus 317GW in 2025The company believes China's demand will decline year over year due to grid constraints and the formulation of local 15th Five-Year Plan targets.
• LONGi BC modules and shipment targetMainstream BC modules at 650-660W, with a 2H26 target of 670-680W; full-year module shipments of 80GW, with BC potentially accounting for over 55%The company believes BC products can maintain a 10% price premium over TopCon in 2026.
• LONGi ESS target2026 ESS shipments of 6GWhThe company expects China's ESS installation demand to still grow by more than 50% year over year in 2026 after rising 74% in 2025.
• GCL granular silicon cost4Q25 cash cost of RMB24/kg, about RMB10/kg lower than rod siliconThe company believes granular silicon has a clear cost advantage over rod silicon.
• Hainan Drinda overseas mixExport mix rose from 50% in FY25 to 70% in 1Q26Main export markets include India and Turkey; overseas module prices are expected to have a RMB0.02/W premium over domestic prices.
• Hainan Drinda shipment targetMore than 30GW of cell shipments in 2026The company currently has around 40GW of cell capacity and targets domestic sales at break-even net margin and profitable overseas sales.
• Daqo polysilicon inventory and price viewInventory of 50-60k tons, about 4 months; 1H26 prices may be in the mid-to-high RMB30/kg range, with 2H26 potentially rebounding to RMB40-50/kgThe prerequisite for a price rebound is further government price guidance and regulation.
• JinkoSolar module pricesStandard modules around USD0.11/W, high-power products around USD0.12-0.15/WThe company believes the industry is moving away from destructive loss-making pricing, with competition shifting toward technology, quality, and efficiency.

Impact & implications

From an investment perspective, the report leans toward the view that the industry has already shown early signs of improved price discipline, but earnings recovery still depends on demand recovery, polysilicon inventory digestion, policy enforcement strength, and the exit of outdated capacity. In the short term, integrated module makers benefiting from low upstream costs and companies with differentiated technologies are better positioned; polysilicon companies with high inventories and more leveraged balance sheets are under more obvious pressure.

Risks

• Global and China solar demand in 1H26 may be weaker than expected, especially in China due to grid constraints and the formulation of 15th Five-Year Plan targets.
• Polysilicon oversupply and high inventories continue to suppress prices, and price recovery depends on policy guidance, regulation, and industry consolidation.
• There is uncertainty over the strength of anti-involution policies, efficiency standards, and pricing law enforcement, which may fail to quickly drive the exit of outdated capacity.
• Regulatory requirements such as the U.S. OBBA may affect the U.S. business arrangements of LONGi and JinkoSolar.
• Volatility in raw material prices such as silver may continue to pressure profitability in the cell segment.
• If overseas market demand, trade policy, and price premiums weaken, profitability of companies with high export exposure such as Hainan Drinda will be affected.

What to watch

• Detailed rules and enforcement strength of anti-involution policies in China's solar industry.
• Whether higher product quality and efficiency standards are implemented, and the pace of outdated capacity exits.
• Whether China's PV demand in 2026 falls within the 200-250GW range, and the impact of local 15th Five-Year Plan targets on demand.
• Whether polysilicon prices can rebound from the mid-to-high RMB30/kg range to RMB40-50/kg.
• Progress on LONGi's 10% BC module premium, 80GW module shipments, and 6GWh ESS target.
• Hainan Drinda's overseas sales margin, silver cost control, and June commissioning progress of the CPI film production line.
• Daqo's inventory digestion, whether it maintains sales no lower than cost, and potential buyback arrangements.
• Completion of JinkoSolar's U.S. subsidiary equity sale and sustainability of high-power module pricing.