China solar value chain: China solar demand weakness deepens while profitability diverges across the value chain

Overview

This China solar profitability tracker assesses monthly supply, demand, inventory, spot prices and input costs across the solar value chain. Goldman Sachs finds continued demand weakness and worsening upstream imbalance, although profitability improved in glass and polysilicon while wafer and cell economics deteriorated.

Core views

Goldman Sachs reports a widening divergence in September pricing and profitability across China’s solar value chain. Wafer and cell prices fell 8% and 6% month-to-date, respectively, as overseas shipment demand softened after August stockpiling. The lower selling prices drove implied cash gross-margin contractions of 7 percentage points for wafers and 5 percentage points for cells. In contrast, glass prices increased 11% month-to-date, supported by a 6% production cut, lifting implied glass profitability by 5 percentage points. Polysilicon profitability improved by 9 percentage points, helped by lower electricity costs in Xinjiang and Inner Mongolia. The report remains cautious on the polysilicon price outlook despite planned coordinated cuts in October. China Silicon indicated that industry utilization could fall from 56% in September to 35% from October, implying a 40% production reduction from September levels to 75kt per month per GSe. Goldman Sachs views this as seasonal, reflecting rising power costs and weaker winter installation demand rather than a durable market reset. It notes that production fell 37% per month between September 2025 and March 2026, yet polysilicon prices still declined 24% because inventory remained excessive. Demand indicators reinforce the cautious view. Global module demand fell 7% month-on-month and 21% year-on-year to 32GW in August; cumulative demand in the first eight months of 2026 was 300GW, down 39% year-on-year and weaker than Goldman Sachs’ FY26 estimate of a 12% decline. China module production declined 5% month-on-month in September, versus an average 6% seasonal increase during 2022-25. The usual pre-National Holiday replenishment did not occur, as module makers kept inventory and utilization low amid higher upstream prices and cautious fourth-quarter demand expectations. China installations rose 50% year-on-year to 11GW in August, versus 14.1GW and 28% year-on-year growth in July, but cumulative 8M26 installations still fell 58% year-on-year to 97GW, below Goldman Sachs’ FY26 forecast of a 26% decline. China module exports fell 45% year-on-year to 16GW in August, taking 8M26 exports down 15% year-on-year to 154GW. Weakness was broad across the Middle East, APAC, the EU and Africa. Upstream balance also deteriorated: the sub-sector production-to-demand ratio rose to 118% in September from 111% in August, while producer-side inventory days increased to 52 from 48. Against this backdrop, Goldman Sachs prefers Maxwell for new-application opportunities, Hangzhou First for solar-film price increases and margin-expansion potential, Xinyi Solar for the glass-price inflection, and Longi for energy-storage-system potential and relatively resilient EBITDA as upstream prices fall, with potential mid-cycle BC upside. It stays cautious on rod polysilicon, including Sell views on Daqo ADR/A and Tongwei.

Analysis framework

The tracker combines monthly supply, demand, inventory, spot-price and input-cost data by solar sub-sector to estimate spot-price-implied cash gross-profit and EBITDA-margin trends for covered companies. It then links changes in supply-demand balance, utilization, inventories, power costs and end-demand to pricing and profitability outcomes.

Methodology notes

• Industry AnalysisSupply-demand framework

  Monthly supply-demand, utilization and inventory tracking across solar sub-sectors

  The report compares production, inventory and downstream module demand to assess whether oversupply or tighter availability is likely to affect prices and profitability.

• Industry AnalysisUpstream-Midstream-Downstream Transmission

  Solar value-chain pricing and margin transmission

  It traces how changes in polysilicon, wafer, cell and glass prices, along with input costs, translate into segment-level implied cash margins.

• Industry AnalysisVolume-price decomposition

  Module-demand volumes and spot-price changes

  The analysis separates shipment and installation volumes from price movements to explain changes in revenue conditions and profitability.

Asset mapping & comparison

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

• Maxwell

  Preferred for new application opportunities.

  Strengths

  New application opportunity.

• Hangzhou First

  Preferred for solar-film price increases and margin-expansion potential.

  Strengths

  Solar-film price hike and profitability expansion potential.

• Xinyi Solar (0968.HK)

  Preferred on a glass-price inflection.

  Strengths

  Benefits from rising glass prices.

• Longi (601012.SS)

  Preferred for ESS potential and relatively resilient EBITDA as upstream prices decline.

  Strengths

  ESS potential, upstream-cost support and possible mid-cycle BC upside.

  Comparison

  More resilient EBITDA than businesses more exposed to upstream pricing pressure.

• Daqo

  Goldman Sachs remains cautious on rod polysilicon exposure.

  Weaknesses

  Exposure to cautious rod-polysilicon price outlook.

  Risks

  Excess inventory and weak demand may continue to pressure polysilicon prices.

• Tongwei (600438.SS)

  Goldman Sachs remains cautious on rod polysilicon exposure.

  Weaknesses

  Exposure to cautious rod-polysilicon price outlook.

  Risks

  Excess inventory and weak demand may continue to pressure polysilicon prices.

Key data

• Wafer price change-8% MTD in Sep-26Declined as overseas shipment demand softened.
• Cell price change-6% MTD in Sep-26Lower pricing led to weaker implied profitability.
• Glass price change+11% MTD in Sep-26Supported by a 6% production cut.
• Wafer implied cash-margin change-7pp MTDDriven by lower wafer pricing.
• Cell implied cash-margin change-5pp MTDDriven by lower cell pricing.
• Glass implied cash-margin change+5pp MTDSupported by the price increase.
• Polysilicon implied cash-margin change+9pp MTDHelped by lower electricity costs in Xinjiang and Inner Mongolia.
• Global module demand32GW in Aug-26-7% month-on-month and -21% year-on-year; 8M26 demand was 300GW, down 39% year-on-year.
• China solar installations11GW in Aug-26+50% year-on-year; 8M26 installations were 97GW, down 58% year-on-year.
• China module exports16GW in Aug-26-45% year-on-year; 8M26 exports were 154GW, down 15% year-on-year.
• Production-to-demand ratio118% in Sep-26Deteriorated from 111% in August.
• Producer-side inventory days52 days in Sep-26Increased from 48 days in August.

Impact & implications

The report sees weak end-demand, low utilization and rising inventories as continuing constraints on upstream solar pricing, particularly polysilicon, wafers and cells. Glass is a relative exception because production restraint has supported prices and profitability. Goldman Sachs’ preferences favor businesses with specific price, application or resilience catalysts rather than broad exposure to the stressed upstream market.

Risks

• Spot-price-implied margin estimates may differ from actual results because they exclude company-specific price discounts or premiums.
• Actual operations may differ from the analysis because individual plants can face production suspensions or maintenance schedules.
• Polysilicon prices may remain under pressure if excess inventory persists despite production cuts.