China's photovoltaic industry, the epicenter of global solar manufacturing, continues to struggle to find a clear path to recovery. Following the capacity expansion boom between 2020 and 2022, the sector faces a combination of oversupply, falling prices, pressure on margins, financial deterioration, and the elimination of export tax incentives.
Data from the first quarter of 2026 confirms the depth of the downturn. According to analyses published in China and corroborated with financial reports from leading companies, 22 listed companies in the photovoltaic sector recorded combined revenues of approximately 95.8 billion yuan , representing a year-on-year decline of over 11%, and adjusted net losses of nearly 13.1 billion yuan . Tongwei, LONGi, and TCL Zhonghuan have now posted losses for ten consecutive quarters , a sign of the structural deterioration the sector is experiencing.
The situation affects the entire value chain: polysilicon, wafers, cells, and modules. It's not just a one-off adjustment in a specific technology or company, but an industrial cleanup process impacting both integrated manufacturers and specialized suppliers.
In the first quarter, Tongwei reported revenue of 12.125 billion yuan , a year-on-year decrease of nearly 24%. LONGi Green Energy reported revenue of 11.192 billion yuan and a net loss of approximately 1.92 billion yuan . JA Solar recorded revenue of 9.216 billion yuan , down 13.65%, and net losses exceeding 1 billion yuan . JinkoSolar reported revenue of 12.25 billion yuan , a year-on-year decrease of 11.5%, with a net loss of 463.5 million yuan . ( pv magazine International )
The only exception is CSI Solar , a subsidiary majority-owned by Canadian Solar and listed in China, which posted a profit attributable to shareholders in the quarter. However, this result was influenced by specific accounting and tax factors, and therefore does not necessarily reflect a generalized recovery in photovoltaic profitability.
An industrial capacity that already exceeds 1,000 GW annually
The magnitude of the problem is best understood by observing the scale reached by the global manufacturing of modules.
According to manufacturers meeting BloombergNEF's Tier 1 criteria as of the first quarter of 2026, annual module production capacity already reaches approximately 1,005 GW . The ranking shows a market clearly dominated by Chinese companies or those highly linked to the Chinese industrial ecosystem.
Among the greatest productive capacities are:
The total figure gives an idea of the speed at which the industry has grown in the last five years. Less than a decade ago, a manufacturer with 10 GW of annual capacity was considered one of the global leaders. Today, several companies exceed 100 GW .
This growth was driven by expectations of rapidly expanding global demand, carbon neutrality goals, and fierce competition among local Chinese governments to attract industrial investment. But capacity expanded faster than the end market.
The result is an industry that not only produces above demand, but also operates with a significant portion of its capacity underutilized.
Record shipments, but insufficient utilization
One of the most relevant points arises when comparing the installed capacity with the actual shipments of modules during 2025.
According to Solarbe Consulting and InfoLink Consulting, JinkoSolar and LONGi led global shipments in 2025 , with volumes ranging from 80 to 90 GW each. Trina Solar and JA Solar were in the second group, with shipments of 60 to 70 GW , while Tongwei and Astronergy comprised a third group of manufacturers with volumes between 30 and 50 GW . ( InfoLink Group )
The comparison reveals a key situation for understanding the present of the industry: even global leaders operate with utilization levels below their maximum capacity.
Jinko Solar , for example, has an approximate capacity of 120 GW and would have dispatched between 85 and 90 GW in 2025. That is, it maintained a high commercial scale, but still did not fully utilize its available capacity.
LONGi , also with around 120 GW of capacity, was close to the same shipment range. Trina Solar and JA Solar , with capacities close to 100 GW , are estimated to have shipped between 65 and 70 GW each. In these cases, the gap between installed capacity and actual sales also illustrates the pressure the sector is facing.
The message is clear: the problem with Chinese photovoltaics is not a lack of global leadership or a loss of commercial scale. The major companies still account for the largest volumes of shipments worldwide. The problem is that production scale has grown so much that even record volumes are insufficient to absorb all installed capacity.
The origin: an expansion that doubled demand
The root of the problem lies in the accelerated expansion of capacity that followed the 2020-2022 boom cycle. In those years, the advancement of carbon neutrality policies, the growth of global demand, and the increased cost of polysilicon generated extraordinary profits for a large part of the industry.
The price of polysilicon reached over 300,000 yuan per ton in 2022, spurring massive investment. Leading companies, local governments, banks, and new players promoted manufacturing projects across all links of the supply chain.
But that new capacity took between one and two years to become operational. Much of the investment approved during the boom began to materialize between 2023 and 2024, just as prices were beginning a rapid correction.
Several international analyses had already warned that global solar production capacity was approaching or exceeding double the effective demand, with China concentrating more than 80% of global manufacturing capacity in the main stages of the supply chain. ( World Economic Forum )
In that context, prices plummeted. Polysilicon fell from highs near 300,000 yuan per ton to levels close to 55,000 yuan, while modules dropped from over 1.8 yuan per watt to around 0.6 yuan per watt in the Chinese market. The competition ceased to be a dispute over market share and became a battle for survival.
Negative margins and factories operating at half capacity
The pressure is particularly acute in the wafer segment, where overcapacity is most pronounced and utilization rates have fallen below 50% in many cases. This means that a significant portion of the production lines remain idle, but this is not enough to sustainably restore prices.
In polysilicon, companies face high inventories and difficulties balancing supply and demand. In cells, the technological transition to TOPCon, BC, and other more efficient architectures coincides with the gradual retirement of obsolete PERC capacity. In modules, several manufacturers have begun to prioritize profitability over volume, although prices remain highly compressed.
The problem is that shutting down capacity isn't easy. Photovoltaic plants require investments of billions of yuan. A company that decides to halt or dismantle production lines incurs immediate losses, while its competitors could benefit from a potential price improvement.
This dilemma is slowing down market adjustments. All players know that a coordinated reduction in supply would help stabilize prices, but no company wants to be the first to bear the cost of shutting down capacity.
Therefore, although the Chinese industry has been promoting measures against so-called "backsliding" —destructive competition based on ever-lower prices—for months, the impact is still limited. Industry associations have pushed for coordinated cuts, the government has signaled its intention to correct excessive competition, and some polysilicon manufacturers have explored joint inventory platforms to absorb surpluses. However, the losses in the first quarter show that the adjustment is not yet sufficient.
Fewer tax incentives and more cost pressure
In addition to overcapacity, another relevant factor is the elimination of VAT refunds on photovoltaic exports, effective April 1, 2026. Reuters reported that China decided to abolish these refunds for solar products, a measure that alters the economic balance of exports and puts particular pressure on companies with significant international exposure. ( Reuters )
Until now, some manufacturers could partially offset their weak margins through export-related tax benefits. With the elimination of that incentive, companies have less room to maintain aggressive pricing abroad without deepening their losses.
Added to this are higher costs for key inputs. Silver, used in solar cells, has seen significant price increases on international markets, while the technological transition requires additional investment in more efficient production lines. In a sector with depressed selling prices, any increase in costs quickly translates into pressure on margins.
When will Chinese photovoltaics hit rock bottom?
The central question for the industry is when the turning point will arrive. For now, the answer seems less tied to a specific date than to the convergence of three conditions: effective capacity reduction, business consolidation, and a recovery of profitable demand.
Supply has already begun to adjust. Utilization rates have fallen, weaker companies are facing liquidity problems, and some mergers, acquisitions, or closures are starting to take shape. But installed capacity remains too high relative to current demand.
Global demand continues to grow, although not enough to absorb the excess supply on its own. Energy storage is emerging as a key factor: as battery costs decrease and grid investments increase, integrating solar with storage could expand the absorption capacity of new renewable generation. However, these changes take time and do not guarantee an immediate recovery of profit margins.
There is also a technological way out. Companies that manage to differentiate themselves with more efficient modules, lower silver usage, better performance, and lower costs could recover sooner than those trapped in homogeneous products and price wars. The transition to TOPCon, BC, HJT, and new architectures will be part of that process, although it also implies more investment at a time of financial weakness.
Therefore, the most likely scenario is not a sharp recovery, but a gradual stabilization. Some sector analyses suggest that 2026 could be a year of restructuring for the solar energy sector, with greater consolidation and the removal of inefficient capacity. However, a return to widespread profitability will depend on deeper supply cuts and demand absorbing products with better margins.
A profitability crisis, not a structural demand crisis.
The paradox is that the solar industry is experiencing its worst financial cycle just as global demand for renewables continues to grow. Photovoltaics remains a core technology for energy transition, electrification, and decarbonization plans. But the market demonstrates that a technology with positive structural demand can face a severe crisis if manufacturing capacity grows faster than actual consumption.
In China, the debate is no longer about whether the solar industry has a future, but rather about how many players will be able to survive the current process of market consolidation. Leaders with greater scale, vertical integration, technology, and access to financing have a better chance of weathering the storm. Small and medium-sized enterprises, on the other hand, will face greater risks of closure, acquisition, or loss of competitiveness.
The comparison between 1,005 GW of Tier 1 capacity and actual shipments in 2025 shows that the sector is not held back by a lack of global players or a lack of demand, but by an excess of industrial muscle built during the euphoria cycle.
The “darkest moment” for Chinese photovoltaics may not be over yet. But the adjustment is underway. The key will be whether the industry can transform the current price crisis into a consolidation that reduces inefficient capacity, accelerates technological differentiation, and restores profitability to a supply chain that remains strategic for the global energy transition.
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