China's Solar Collapse: Overproduction Crisis
The Scale of Chinese PV Overproduction
The situation is severe: China's major solar manufacturers posted combined losses of $2.8 billion in H1 2025, doubling from the previous year. The top four manufacturers (LONGi, Jinko Solar, Trina Solar, JA Solar) alone lost $1.54 billion in the first half of 2025. The sector's total losses reached $60 billion in 2024.
Overcapacity is massive: Global manufacturers (mostly Chinese) can produce over twice the number of panels the world will buy in 2025. China's solar capacity utilisation rate averaged just 24.9% from 2008 to 2023, indicating severe overcapacity.
Supply and Demand Dynamics
Supply Impact
Production cuts beginning: Over 40 solar firms have delisted, gone bankrupt, or been sold since 2024
Workforce reductions: Major Chinese solar companies shed nearly one-third of their workforce in 2024 (approximately 87,000 employees)
Government intervention: China's Ministry of Industry is urging companies to "curb overcapacity and reduce extreme competition"
Demand Side Effects
Surprisingly, demand remains strong:
China installed 212GW of new solar capacity in H1 2025, double the same period in 2024
This was driven by a policy-induced rush before pricing reforms took effect in June 2025
Export growth: China's solar cell exports rose 73% in H1 2025
Likely Outcomes
Near-term (2025-2026)
Industry consolidation: Major players are forming an OPEC-like cartel with a $7 billion fund to acquire and close inefficient facilities
Price stabilisation: Polysilicon prices rose 70% in July 2025 as consolidation begins
Slower growth: China's solar installations expected to slow significantly in H2 2025 after the policy-driven surge
Medium-term (2026-2028)
Supply-side reforms: Government intervention will likely reduce production capacity by one-third
Market rebalancing: Surviving manufacturers should return to profitability as oversupply diminishes
Technology upgrades: New efficiency standards will favour advanced manufacturers with higher-quality products
Impact on Global Solar Prices
Prices are already rising:
Global solar panel prices increased from 9.5 to 10.1 cents per watt in Q2 2025
US prices rose from 30.8 to 33.7 cents per watt due to tariffs
Module prices increased 2-5% in Q1 2025 across all segments
Future price outlook:
Continued moderate increases expected through 2025-2026
Prices will remain historically low, but won't return to 2024 lows
The long-term trajectory is still downward due to technological improvements
Bottom Line
PV prices will likely increase moderately over 2025-2026 as Chinese overcapacity gets addressed, but they'll remain historically low. The renewable energy sector will benefit from more stable supply chains and sustainable pricing, while the consolidation will create stronger, more efficient manufacturers. This is ultimately positive for the global energy transition—moving from unsustainably low prices that bankrupted manufacturers to more balanced market conditions that support continued innovation and deployment.
