Photovoltaic glass is nearing the cycle bottom; polysilicon pressure has yet to ease

Overview

This report covers China’s solar industry chain and focuses on supply and demand, inventory, prices, margins, and valuation changes for polysilicon, wafers, cells, modules, and photovoltaic glass. The core conclusion is that the industry remains in a bottoming, choppy phase: end demand has not clearly recovered, but photovoltaic glass, due to supply contraction and inventory decline, may be the first segment approaching a cyclical turning point.

Core views

The report prefers the segments with technological or sub-segment advantages, with preference ranking of LONGi (BC technology) > Drinda (space solar) > Xinyi Solar (photovoltaic glass margins near cycle bottom) > GCL Technology (upside in downstream battery materials, but polysilicon remains under pressure) > Tongwei (most exposed to polysilicon oversupply). Photovoltaic glass may benefit from destocking and price rebound; polysilicon faces downside risk, including a possible drop to around Rmb30/kg, due to restarts and weak demand.

Analysis framework

The report uses monthly supply-demand models, SMM and SCI99 industry data, days of inventory, capacity utilization, spot prices, unitized cash profit, and DCF valuation to compare the solar chain segments, and adjusts company earnings forecasts and target prices accordingly.

Methodology notes

• Supply-demand analysisMonthly supply-demand monitoring

  DBe monthly supply-demand model

  Tracks production, inventory, demand, and utilization by segment across polysilicon, wafers, cells, modules, and photovoltaic glass to determine price and inventory inflection points.

• Valuation analysisDCF valuation

  Discounted cash flow valuation

  Xinyi Solar’s target price is based on DCF assumptions of 9% WACC, 10% cost of equity, 4% after-tax cost of debt, and a 1% terminal growth rate.

• Profitability trackingUnit cash profit/net profit tracking

  Chain margin monitoring

  Uses spot prices, costs, and unit profits to assess whether each segment is in a cash break-even or loss position.

• Policy analysisEnergy consumption and efficiency standard assessment

  Supply-side capacity elimination constraints

  New standards effective January 1, 2027, may phase out about one-third of polysilicon capacity, but the report argues this alone is unlikely to restore industry profitability.

Asset mapping & comparison

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

• Xinyi Solar Holdings Limited (0968.HK)

  Photovoltaic glass leader and the report’s primary mapped proxy

  Strengths

  Photovoltaic glass inventory appears to have peaked and is coming down, current price is at historical lows, and valuation is around 0.6x P/B; if ASP rebounds, sentiment and earnings expectations could improve directly.

  Weaknesses

  In 1H26, photovoltaic glass prices fell 25% year-on-year and 19% sequentially; the company is expected to swing to a loss in FY26E.

  Comparison

  Ranks below LONGi and Drinda, above GCL Technology and Tongwei in the report’s preference ordering.

  Risks

  Chinese solar demand weaker than expected, more intense price competition in photovoltaic glass, and slower-than-expected progress in overseas expansion.

• GCL Technology Holdings Limited (3800.HK)

  Benchmark name for polysilicon and granular silicon

  Strengths

  Has long maintained a granular silicon cost advantage and may benefit from new businesses such as lithium iron phosphate.

  Weaknesses

  Polysilicon prices remain depressed, with expected FY26 net loss expanding to Rmb0.9bn.

  Comparison

  Favored above Tongwei but below Xinyi Solar due to continued polysilicon pressure.

  Risks

  Global solar demand weaker than expected, narrowing granular-silicon cost advantage versus monocrystalline silicon, and uncertainty around industry consolidation and supply-side reform.

• Drinda (2865.HK)

  Proxy for cells and space solar-related positioning

  Strengths

  Space solar positioning is strong, with related profits expected to contribute to growth progressively from 2027.

  Weaknesses

  Short term still burdened by weak ground-based module prices and weak margins; FY26E net loss is expected at Rmb0.6bn.

  Comparison

  Ranks second in the report’s preference order, behind only LONGi.

  Risks

  Cell prices weaker than expected, silver paste costs higher than expected, and slower-than-expected commercialization of space solar products.

• LONGi

  Leading BC cell/module technology provider

  Strengths

  New module efficiency standards may be more favorable to high-efficiency, scalable manufacturers.

  Weaknesses

  The report does not provide detailed financial modeling data.

  Comparison

  Ranks first among the report’s preferred solar names.

  Risks

  Weak end demand, module price declines, and intensified competition among technology pathways.

• Tongwei

  Solar manufacturer with high polysilicon exposure

  Strengths

  Industry standards, if enforced, may phase out inefficient capacity.

  Weaknesses

  Most sensitive to polysilicon overhang, with substantial inventory and price downside pressure.

  Comparison

  Ranks last in the report’s preference order.

  Risks

  Polysilicon price drops, utilization below 60%, and insufficient demand recovery.

Key data

• Report date2026-07-07The report is titled China solar industry monthly tracking.
• Photovoltaic glass inventory48 days, down about 10% from early JuneSCI99 data show industry inventory had eased by early July 2026.
• Photovoltaic glass operating capacity81kt/day, down 1% sequentiallyMaintenance plus idled capacity totals 53kt, about 40% of domestic total capacity.
• Module planned production in July42GW, up 10% sequentiallyAverage utilization around 41%, with a modest demand recovery.
• China 2026 solar demand forecast215GW, down 32% year-on-yearCPIA estimates a range of 180-240GW.
• China July 2026 newly installed solar8.7GW, down 91% year-on-yearShows end demand remains significantly weak.
• Polysilicon July planned production98.2kt, up 6% sequentiallyIndustry average utilization is expected to rise to 31%.
• Total polysilicon inventoryabout 6 months of productionInventory levels remain elevated across polysilicon and wafer producers.
• Wafer July planned production52GW, down 6% sequentiallyAverage utilization around 52%.
• Cell July planned production56GW, up 8% sequentiallyTOPCon cell utilization could reach about 58%.
• Module spot priceabout Rmb0.71/WDomestic tenders are near Rmb0.68/W, with further downside risk.
• Xinyi Solar target priceHKD 3.60, prior HKD 4.70Downgraded ASP assumptions and earnings forecasts because 1H26 photovoltaic glass prices were weaker than expected.

Impact & implications

For investors, the report suggests the industry is not seeing broad recovery but structural differentiation: photovoltaic glass and high-efficiency module technology may see first marginal improvement, while polysilicon, low-efficiency modules, and higher-cost capacity still face inventory, price, and utilization pressure. If 4Q26 end-demand seasonally recovers and supply restarts remain constrained, a rebound in photovoltaic glass prices could be a near-term stock catalyst for Xinyi Solar.

Risks

• Chinese and global solar installation demand is weaker than expected.
• Photovoltaic glass price competition is more intense than expected, delaying a price rebound.
• Polysilicon restarts outpace demand recovery, increasing inventory pressure further.
• Insufficient enforcement of new energy and efficiency standards, slowing exit of inefficient capacity.
• Falling module tender prices transmit to upstream, compressing margins across the chain.
• Overseas expansion, space solar commercialization, or new business contributions lag expectations for relevant companies.

What to watch

• Whether 2026 July–August polysilicon production and inventory continue to rise.
• Whether photovoltaic glass days of inventory continue to decline and whether a pass-through to Rmb8.5-9.0/sqm for 2.0mm glass can be implemented.
• Whether 4Q26 end demand shows seasonal recovery.
• How strongly the new energy and efficiency standards are enforced from January 1, 2027.
• Whether domestic module tender prices fall below Rmb0.68/W and trigger another round of pricing pressure.
• Whether Xinyi Solar’s ASP, cash profit, and P/B valuation recover in line with chain-wide destocking.