China's solar industry faces near-term pressure, with policy discipline and differentiated products becoming the key recovery themes

Overview

This report is Deutsche Bank's conference note on China's solar industry, based on discussions held at the Virtual Deutsche Bank Global Solar & Clean Tech Conference on May 14, 2026, with management from LONGi Green Energy Technology, GCL Technology, Hainan Drinda New Energy, Daqo New Energy, and JinkoSolar. The core conclusion is that the industry is still in a stage of weak demand, oversupply, and pricing pressure in the near term, but policy discipline, energy-efficiency standards, industry consolidation, and company differentiation strategies may gradually improve the industry structure.

Core views

First, solar demand in 2026 will likely be regionally differentiated: China's demand may fall from 317GW in 2025 to 200-250GW in 2026, while European demand is broadly stable and markets such as India and Africa still have momentum. Second, polysilicon remains the most pressured segment, with high inventories and low prices, but if government price guidance and regulation tighten, prices could improve in 2H26. Third, module pricing has already shown signs of rationalization, with standard modules recovering to USD 0.11/W and high-power products reaching USD 0.12-0.15/W. Fourth, corporate strategies are shifting from pure scale competition to differentiation: LONGi is focusing on BC modules and ESS, GCL Technology is leveraging granular-silicon cost advantages and expanding into cathode materials and silicon-carbon anodes, Hainan Drinda is strengthening overseas cells and space solar power, and JinkoSolar is adjusting U.S. manufacturing equity to comply with OBBA regulation.

Analysis framework

The report adopts a conference-note style industry analysis approach, comparing management commentary on policy, demand, prices, costs, capacity, inventories, overseas markets, and new businesses across companies, and combining this with Deutsche Bank's ratings on covered stocks to assess where the industry sits in the cycle and which companies are relatively favored or pressured.

Methodology notes

• Industry cycleSupply-demand and inventory cycle analysis

  Determine the industry's cycle position by looking at demand growth, inventory months, price bottoms, and capacity exits.

  The report treats weak 1H26 demand, industry polysilicon inventory of 4-5 months, and prices in the RMB 30/kg range as short-term weak-cycle signals, while policy-driven capacity exits and a price recovery in 2H26 are seen as potential repair conditions.

• Policy analysisAnti-involution and energy-efficiency standards

  Assess the impact of government anti-involution measures, Price Law enforcement, and higher energy-efficiency standards on supply discipline.

  Multiple companies believe stricter standards can force inefficient idle capacity out of the market and improve pricing order through industry consolidation.

• Company comparisonDifferentiated strategy comparison

  Compare companies' differentiation paths in product technology, cost curve, overseas markets, and new businesses.

  LONGi focuses on BC modules and energy storage, GCL Technology on granular-silicon cost advantages and battery materials, Hainan Drinda on overseas cells and space solar power, and JinkoSolar on module-price rationalization and U.S. business compliance adjustments.

Asset mapping & comparison

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

• LONGi Green Energy Technology (601012.SS)

  Attending company; covered by Deutsche Bank with a BUY rating

  Strengths

  An integrated module manufacturer benefiting from lower upstream costs; BC modules offer power and price premiums; it has entered the ESS business and set a 6GWh shipment target.

  Weaknesses

  A decline in China's solar demand in 2026 and uncertainty around U.S. business regulation may limit growth.

  Comparison

  Compared with upstream polysilicon companies, LONGi is more likely to benefit from lower upstream prices through cost relief.

  Risks

  China demand comes in below expectations, BC premium is not sustainable, ESS ramp-up falls short, and U.S. regulatory changes.

• GCL Technology (3800.HK)

  Attending company; covered by Deutsche Bank with a BUY rating

  Strengths

  Granular silicon cash cost of RMB24/kg, about RMB10/kg lower than rod silicon; expanding into new businesses such as cathode materials and silicon-carbon anodes.

  Weaknesses

  The polysilicon industry remains in an oversupplied and depressed pricing phase, and recovery depends on policy and industry consolidation.

  Comparison

  Compared with higher-cost polysilicon capacity, granular-silicon cost advantages help improve resilience at the cycle bottom.

  Risks

  Polysilicon prices keep falling, anti-involution policies are implemented slowly, and new materials contributions underperform expectations.

• Hainan Drinda New Energy (2865.HK)

  Attending company; covered by Deutsche Bank with a BUY rating

  Strengths

  Strong overseas cell demand, with exports rising from 50% in FY25 to 70% in 1Q26; building out space solar power, in-orbit test platforms, and high-end CPI film.

  Weaknesses

  Domestic sales profitability is still targeted at breakeven, and silver price volatility previously compressed margins significantly.

  Comparison

  Compared with companies under domestic demand pressure, Drinda relies more on overseas market premiums and niche new applications.

  Risks

  Overseas demand or price premiums weaken, silver prices rise again, CPI film production ramps more slowly than expected, and space solar commercialization underperforms.

• Daqo New Energy (DQ.N)

  Attending company; not covered by Deutsche Bank

  Strengths

  A relatively strong balance sheet and restrained sales strategy, targeting sales at not below cost; inventory of about 4 months, close to the industry average.

  Weaknesses

  Operates in the polysilicon segment and is directly affected by oversupply and inventory pressure; about 10% of capacity may face elimination under higher energy-efficiency standards.

  Comparison

  Compared with more leveraged or higher-inventory polysilicon companies, Daqo's stronger balance sheet provides some defensiveness.

  Risks

  Polysilicon prices fail to recover from the RMB 30/kg range, policy guidance is weaker than expected, and inventory digestion is slow.

• JinkoSolar Holding (JKS.N)

  Attending company; not covered by Deutsche Bank

  Strengths

  Has reached an agreement to sell 75.1% of its U.S. module manufacturing subsidiary while retaining a 24.9% minority stake to meet OBBA regulatory requirements; believes module prices have become more rational.

  Weaknesses

  U.S. module shipments still account for 5-10%, so policy changes still require ongoing monitoring.

  Comparison

  Compared with companies still trapped in loss-making price competition, JinkoSolar emphasizes competition on technology, quality, and efficiency.

  Risks

  U.S. regulatory changes, delays in transaction completion, and unsustainable module price recovery.

• Tongwei (600438.SS)

  Covered by Deutsche Bank with a SELL rating

  Strengths

  The report does not provide specific positive operating details.

  Weaknesses

  High inventories and higher leverage than peers make it more vulnerable to declines in polysilicon prices.

  Comparison

  Compared with integrated module manufacturers such as LONGi, Tongwei is more fragile during polysilicon price declines.

  Risks

  If polysilicon prices keep falling or inventory digestion remains slow, profitability and balance-sheet pressure may intensify.

Key data

• Conference date2026-05-14Date of the 2026 Virtual Deutsche Bank Global Solar & Clean Tech Conference.
• Report date2026-05-18Deutsche Bank report publication date.
• Number of Chinese companies attending5 companiesIncluding LONGi, GCL Technology, Hainan Drinda, Daqo New Energy, and JinkoSolar.
• China solar demand outlook200-250GW in 2026, 317GW in 2025LONGi management believes China's demand may decline year over year in 2026, affected by grid constraints and local 15th Five-Year Plan targets.
• LONGi BC module powerMainstream 650-660W, 670-680W target in 2H26The company believes BC products can maintain about a 10% price premium over TopCon in 2026.
• LONGi 2026 module shipment target80GWBC products may account for more than 55% of full-year module shipments.
• LONGi 2026 energy storage shipment target6GWhThe company entered the ESS business in early 2026 and launched products in April 2026.
• GCL Technology granular silicon cash costRMB24/kgAs of 4Q25, about RMB10/kg lower than rod silicon.
• Hainan Drinda export mix50% in FY25, rising to 70% in 1Q26Key export markets include India and Turkey.
• Hainan Drinda cell capacity and shipmentsAbout 40GW of current capacity, with 2026 shipment target above 30GWThe company targets breakeven net profit margin for domestic sales and profitability for overseas sales.
• Silver price cost impactRMB0.03/WHainan Drinda said the sharp rise in silver prices in 4Q25 significantly pressured profitability.
• Daqo inventory50-60kt, about 4 months of inventoryBroadly in line with the industry average supply of 4-5 months.
• Daqo polysilicon price view1H26 may be in the RMB 30/kg mid-to-high range, and 2H26 may recover to RMB 40-50/kgAssuming further government price guidance and tighter regulation.
• Potential Daqo capacity淘汰About 3.5kt, or around 10% of total capacitySome capacity may face exit risk if energy-efficiency standards rise.
• JinkoSolar U.S. subsidiary sale75.1% stake sold, 24.9% retainedThe transaction is expected to close by the end of May 2026 to satisfy OBBA regulatory requirements.
• JinkoSolar U.S. module shipment mix5-10%This is the company's expected share of total module shipments going to the U.S.
• Module pricesStandard modules USD 0.11/W, high-power products USD 0.12-0.15/WJinkoSolar believes module competition is shifting from loss-making price wars to competition on technology, quality, and efficiency.

Impact & implications

For investment implications, near-term earnings recovery in the industry still depends heavily on demand recovery, inventory digestion, and policy enforcement. Upstream polysilicon companies still face price and inventory pressure; companies with stronger balance sheets, lower costs, or the ability to maintain sales above cost are relatively more resilient. Integrated module players may benefit from lower upstream costs and stabilizing prices. Companies with exposure to BC, energy storage, granular silicon, overseas cells, space solar power, and high-end materials are more likely to receive valuation support through differentiation.

Risks

• China's 2026 solar demand comes in below expectations, especially due to grid constraints and local 15th Five-Year Plan targets.
• Polysilicon oversupply and high inventories continue to suppress prices, and industry recovery is slower than expected.
• Anti-involution policies, energy-efficiency standards, and Price Law enforcement are insufficient to effectively drive out inefficient capacity.
• Regulatory changes such as the U.S. OBBA affect the structure and shipments of Chinese module companies' U.S. business.
• Raw material price volatility, such as silver, compresses cell makers' margins.
• Overseas demand, export price premiums, or momentum in markets such as India and Turkey fall short of expectations.
• Commercialization progress for new businesses such as ESS, cathode materials, silicon-carbon anodes, space solar power, and CPI film underperforms expectations.

What to watch

• Whether China's actual new solar installations in 2026 fall within the 200-250GW range or lower.
• Whether polysilicon prices recover in 2H26 from the RMB 30/kg mid-to-high range to RMB 40-50/kg.
• Whether anti-involution policies, energy-efficiency standards, and Price Law enforcement produce verifiable capacity exits.
• Whether module prices can hold at USD 0.11/W or above, and whether high-power products can stay in the USD 0.12-0.15/W range.
• LONGi's BC module shipment mix, power improvement, and the profitability inflection point in 2H26.
• Whether GCL Technology's granular-silicon cost advantage is sustained and how its new materials business progresses.
• Hainan Drinda's overseas sales profitability, silver cost management, CPI film production launch in June, and space solar power orders.
• Daqo's inventory digestion, sales discipline, and the potential scale of capacity eliminations.
• Whether JinkoSolar's U.S. subsidiary equity sale closes on schedule and how OBBA policy evolves afterward.