Overseas Front-Loading Pushes Up Wafer and Cell Prices, but Weak Demand Raises Doubts About the Sustainability of Upstream Price Restoration

Overview

This report tracks changes in cash gross margins and EBITDA margins across China's solar industry chain using monthly supply-demand data, inventories, spot prices along the industry chain, and input costs. It concludes that profitability improved in the wafer, solar cell, and glass segments in August, but overall industry-chain demand remains weak, and some price increases depend on short-term overseas front-loading or supply constraints, resulting in uneven sustainability.

Core views

The most notable changes in August came from wafers and solar cells. Solar cell prices rose by 26% during the month, while wafer prices increased by 30%, mainly because overseas customers increased inventory through OEM channels against the backdrop of Section 232 policy. Goldman Sachs believes this round of increases more closely reflects policy-window-driven front-loading than a broad recovery in end demand. According to PVInfolink, Chinese module manufacturers are unwilling to accept upstream price increases, so the report expects wafer and cell prices could retreat as front-loaded shipments fade in October. The near-term price increases have improved the spot-price-implied profitability of both segments, but their sustainability depends on genuine post-front-loading demand and whether module manufacturers can accept the pass-through of higher costs. The rationale behind the increase in photovoltaic glass differs from that for wafers and solar cells. Glass prices have risen by 10% month-to-date in August, mainly reflecting market expectations of further production cuts; according to Oilchem, supply is scheduled to be reduced by approximately 10% from late August to early September. Inventories remained broadly stable at 47 days during the price increase, indicating that the current improvement stems more from supply expectations than from significant inventory destocking. Goldman Sachs expects inventory days to decline to 35 days in September as production cuts combine with a seasonal demand recovery, supporting broadly stable glass prices in the second half of 2026. The glass segment is therefore viewed as an earnings inflection with relatively stronger supply-side support, although actual production cuts and inventory declines still need to materialize. The polysilicon market has shown a divergence among quotations, futures, and spot transactions. Following industry self-discipline in early August, polysilicon quotations and futures prices both rose by 25%, but spot prices remained broadly flat during the month due to muted trading. The report remains cautious about whether spot-price increases can be implemented: weak photovoltaic demand and elevated downstream inventories make it more difficult for higher prices to pass through to actual orders. This is also the main industry backdrop behind Goldman Sachs' continued caution on rod polysilicon companies and its Sell views on Daqo New Energy ADR/A and Tongwei. Aggregate industry-chain indicators have yet to confirm a broad turnaround. The ratio of sub-industry output to module output deteriorated from 105% in July to 110% in August, meaning upstream production grew faster than downstream module output and potential supply pressure remains. Meanwhile, demand-adjusted producers' inventory days declined from 48 days in July to 46 days in August, indicating a slight improvement in inventories. Together, the two data points show marginal progress in destocking but weaker alignment between production and demand, meaning that price increases alone are insufficient to conclude that the industry chain has entered a solid recovery. Demand also remains weak. Goldman Sachs estimates global module demand by combining module demand implied by Chinese installations, Chinese module exports, and demand implied by US AC-side installations. Global demand was 35GW in July 2026, down 5% month-over-month and 8% year-over-year; cumulative demand in the first seven months of 2026 was 267GW, down 41% year-over-year and below the trajectory implied by Goldman Sachs' forecast for a 12% full-year decline in 2026. China's installations rose 28% year-over-year to 14.1GW in July, improving from 12.5GW and a 13% year-over-year decline in June, but cumulative installations in the first seven months still fell 61% year-over-year to 86GW, also below the trajectory implied by the forecast for a 26% full-year decline. Exports did not offset the cumulative decline in domestic demand. China's module exports fell 32% year-over-year to 15GW in July, a steeper decline than the 24% drop in June; exports totaled 138GW in the first seven months, down 9% year-over-year and weaker than the 6% decline in the first half. By region, demand in the Middle East, Asia-Pacific, and the EU fell by 43%, 41%, and 30% year-over-year, respectively, while only Africa recorded growth, at 3%. These data support the report's caution regarding polysilicon spot-price restoration and also show a clear divergence between localized price increases in August and global demand trends. In stock selection, Goldman Sachs favors Maxwell Technologies, First Applied Material, Xinyi Solar, and LONGi Green Energy. The thesis for Maxwell Technologies is the opportunity from new-application orders; its 12-month target price is RMB278, based on 22x 2027 EV/EBITDA. Core operations and new-application orders are assigned EBITDA weights of 90%/10% and valued at 15x and 85x EV/EBITDA, respectively, before discounting to 2026 at an 8.3% cost of equity. First Applied Material benefits from photovoltaic encapsulant film price increases and potential unit-profit expansion. Its 12-month target price is RMB21, based on 17x 2027 EV/EBITDA and discounted to 2026 at a 10.7% cost of equity. The primary thesis for Xinyi Solar is the inflection in photovoltaic glass prices. Its 12-month target price is HKD3.0, based on 0.8x 2026 price-to-book and referencing the historical regression relationship between price-to-book and ROE. The thesis for LONGi Green Energy includes energy-storage potential, relatively resilient EBITDA amid declining upstream prices, and medium-cycle upside from BC technology. Its 12-month target price is RMB14.2, based on 2.3x 2026 price-to-book and likewise referencing the historical regression relationship between price-to-book and ROE. The report also notes that if polysilicon and glass prices rebound more strongly than expected, LONGi's earnings resilience derived from lower upstream costs could be affected. The main risks center on demand realization, cost pass-through, technology, and capacity-expansion progress. Maxwell Technologies faces the risk that insufficient demand for new applications cools experimental capital expenditure and causes order cancellations, as well as tighter export controls on photovoltaic equipment and slower-than-expected semiconductor industry development. First Applied Material faces risks from insufficient photovoltaic installations, lower encapsulant film selling prices and capacity utilization, delayed capacity expansion or development of high-end non-photovoltaic businesses, and resin supply disruptions that intensify procurement pressure. LONGi Green Energy faces risks from a stronger-than-expected rebound in upstream prices and slower-than-expected progress in cost-reduction technology applications, BC, and energy storage. Xinyi Solar faces risks from low glass selling prices, high raw-material and energy costs, and slower-than-expected overseas capacity expansion.

Analysis framework

The report first tracks monthly price changes across each segment of the industry chain and their catalysts, then estimates cash gross margins and unit gross profits using spot selling prices and input costs. It subsequently compares production volumes across segments, module output, and beginning inventories to assess supply-demand conditions and destocking progress. On the demand side, it estimates global module demand using demand implied by Chinese installations, Chinese module exports, and demand implied by US AC-side installations, and compares the results with year-over-year and month-over-month changes and the full-year forecast trajectory. Finally, it maps industry changes to covered companies and derives target prices using EV/EBITDA or valuation methods based on the relationship between price-to-book and ROE.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Monthly supply, demand, and inventory tracking

  The report compares production volumes across sub-industries, downstream module production, and inventory days to determine whether price changes are supported by genuine improvements in supply and demand.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Separate analysis of module demand volumes and spot prices along the industry chain

  The report separately examines installations, exports, and module demand volumes, as well as price changes in polysilicon, wafers, solar cells, glass, and other segments, to distinguish the effects of changes in demand, supply adjustments, and price pass-through.

• (Out-of-Vocabulary Method)

  Estimation of spot-price-implied cash gross margins and unit gross profits

  The report uses spot selling prices and input costs to estimate changes in cash gross margins and unit gross profits across segments. These estimates exclude company-level price discounts or premiums and may differ from actual operating results due to shutdowns or maintenance arrangements at specific plants.

• Valuation MethodEV/EBITDA valuation

  Based on 2027 EV/EBITDA and discounted at the cost of equity

  For Maxwell Technologies, a combination of segment multiples for the core business and new-application orders produces a 2027 EV/EBITDA multiple of 22x. First Applied Material uses 17x 2027 EV/EBITDA. The valuations are then discounted to 2026 at costs of equity of 8.3% and 10.7%, respectively.

• Valuation MethodPB valuation

  Target multiples determined using historical regression relationships between price-to-book and ROE

  LONGi Green Energy and Xinyi Solar use 2026 price-to-book multiples of 2.3x and 0.8x, respectively, with the target multiples referencing the regression relationships between each company's historical price-to-book ratio and ROE.

Asset mapping & comparison

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

• Maxwell Technologies (300751.SZ)

  The report assigns a Buy rating, viewing new-application order opportunities as the primary driver.

  Strengths

  Opportunities exist for growth in new-application orders beyond the core business; the 12-month target price is RMB278.

  Weaknesses

  The new-application business carries a relatively high valuation, and order realization depends on experimental capital expenditure and industry development.

  Comparison

  One of the report's preferred companies within its photovoltaic coverage.

  Risks

  Slower-than-expected demand for new applications could lead to order cancellations; export controls on photovoltaic equipment could tighten; semiconductor industry development could be slower than expected.

• First Applied Material (603806.SH)

  The report assigns a Buy rating, favoring the potential for photovoltaic encapsulant film price increases and unit-profit expansion.

  Strengths

  Higher encapsulant film prices could improve unit profitability, while the company has potential to expand into high-end non-photovoltaic businesses such as AI-PCB and solid-state battery packaging.

  Weaknesses

  Performance remains affected by photovoltaic installations, capacity utilization, encapsulant film selling prices, and resin procurement conditions.

  Comparison

  A preferred name in the photovoltaic materials segment.

  Risks

  Photovoltaic installations, capacity expansion, or development of high-end non-photovoltaic businesses could be slower than expected, while resin supply disruptions could intensify procurement pressure.

• Xinyi Solar (00968.HK)

  The report assigns a Buy rating, primarily reflecting benefits from the inflection in photovoltaic glass prices.

  Strengths

  Glass production cuts, a seasonal demand recovery, and an expected inventory decline could support price stabilization in the second half of 2026.

  Weaknesses

  Profitability is relatively sensitive to glass selling prices and raw-material and energy costs.

  Comparison

  The report lists it as a preferred company benefiting from improved profitability in the glass segment.

  Risks

  Average glass selling prices below expectations, raw-material and energy prices above expectations, and slower-than-expected overseas capacity expansion.

• LONGi Green Energy (601012.SH)

  The report assigns a Buy rating, favoring its energy-storage potential, EBITDA resilience amid lower upstream prices, and medium-cycle opportunities from BC technology.

  Strengths

  Lower upstream costs could enhance EBITDA resilience, while energy storage and BC technology provide potential sources of growth.

  Weaknesses

  The earnings thesis partly depends on lower upstream prices and progress in cost reduction, BC, and energy storage.

  Comparison

  One of the report's preferred vertically integrated industry-chain companies, while rod polysilicon companies are viewed cautiously.

  Risks

  A stronger-than-expected rebound in polysilicon or glass prices, slower-than-expected application of cost-reduction technologies, or slower-than-expected development of BC or energy storage.

• Daqo New Energy ADR/A (DQ, 688303.SH)

  The report remains cautious on the rod polysilicon segment and assigns Sell views to Daqo New Energy ADR/A.

  Weaknesses

  Higher polysilicon quotations and futures prices have yet to translate into higher spot prices, while weak demand and elevated downstream inventories make price restoration difficult.

  Comparison

  Relative to the report's preferred equipment, encapsulant film, glass, and integrated companies, rod polysilicon is viewed cautiously.

  Risks

  Implementation of spot-price increases could fall short of expectations, while weak demand and high inventories could continue to suppress the earnings recovery.

• Tongwei (600438.SH)

  The report maintains a Sell view due to its cautious stance on the rod polysilicon industry.

  Weaknesses

  Upstream trading is muted, with a divergence between higher quotations and actual spot transactions.

  Comparison

  The report's stance on the company is less favorable than on Maxwell Technologies, First Applied Material, Xinyi Solar, and LONGi Green Energy.

  Risks

  Weak photovoltaic demand, elevated downstream inventories, and difficulty implementing spot-price increases could delay the earnings recovery.

Key data

• Solar Cell PricesUp 26% month-to-date in AugustDriven by inventory-building demand against the backdrop of overseas Section 232 policy
• Wafer PricesUp 30% month-to-date in AugustThe report expects they may retreat in October after front-loaded shipments fade
• Photovoltaic Glass PricesUp 10% month-to-date in AugustA further production cut of approximately 10% is planned from late August to early September
• Photovoltaic Glass Inventory47 daysBroadly stable in August; the report expects a decline to 35 days in September
• Polysilicon Quotations and Futures PricesUp 25%Rose following industry self-discipline, but spot trading was muted and spot prices remained broadly flat during the month
• Ratio of Sub-Industry Output to Module Output110%Rose from 105% in July to 110% in August, indicating some deterioration in supply-demand alignment
• Producers' Inventory Days46 daysDeclined from 48 days in July to 46 days in August
• Global Module Demand in July35GWDown 5% month-over-month and 8% year-over-year
• Global Module Demand in the First Seven Months of 2026267GWDown 41% year-over-year, below the trajectory implied by the forecast for a 12% full-year decline
• China Installations in July14.1GWUp 28% year-over-year; June was 12.5GW, down 13% year-over-year
• China Installations in the First Seven Months of 202686GWDown 61% year-over-year, below the trajectory implied by the forecast for a 26% full-year decline
• China Module Exports in July15GWDown 32% year-over-year; 138GW in the first seven months, down 9% year-over-year
• Year-over-Year Change in Regional DemandMiddle East -43%, Asia-Pacific -41%, EU -30%, Africa +3%Changes in regional demand reflected by China's module exports

Impact & implications

The report believes the improvement in industry-chain profitability in August does not represent a uniform demand recovery: wafers and solar cells were mainly driven by short-term overseas front-loading, glass was supported more by production-cut and inventory expectations, while higher polysilicon quotations have yet to translate into spot transactions. Global module demand, cumulative Chinese installations, and export data remain weak. The report therefore concentrates its preferences on companies with catalysts from new applications, encapsulant film price increases, a glass-price inflection, energy storage, or BC technology, while remaining cautious on rod polysilicon companies.

Risks

• After overseas policy-driven front-loading fades, wafer and solar cell prices could retreat in October.
• Weak photovoltaic demand and elevated downstream inventories could make polysilicon spot-price increases difficult to implement.
• Maxwell Technologies faces risks from order cancellations caused by weaker-than-expected demand for new applications, tighter export controls on photovoltaic equipment, and sluggish semiconductor industry development.
• First Applied Material faces risks from insufficient installations depressing capacity utilization and encapsulant film selling prices, delayed capacity expansion or development of high-end non-photovoltaic businesses, and resin supply disruptions.
• LONGi Green Energy faces risks from a stronger-than-expected rebound in polysilicon or glass prices and slower-than-expected progress in cost-reduction technology applications, BC, and energy storage.
• Xinyi Solar faces risks from glass selling prices below expectations, raw-material and energy prices above expectations, and delayed overseas capacity expansion.

What to watch

• Monitor whether wafer and solar cell prices retreat after Section 232-related front-loading fades in October.
• Monitor whether the planned glass production cut of approximately 10% from late August to early September is implemented and whether inventory declines from 47 days to the expected 35 days in September.
• Monitor whether higher polysilicon quotations and futures prices translate into genuine spot transactions and price implementation.
• Monitor whether global module demand, Chinese installations, and module exports return to the trajectory of Goldman Sachs' full-year forecasts.
• Monitor Maxwell Technologies' new-application orders, First Applied Material's encapsulant film price increases, Xinyi Solar's glass-price inflection, and LONGi Green Energy's progress in energy storage and BC technology.