2026 Annual Strategy: Photovoltaic Equipment Sector

Bottoming Fundamentals, Orbital Compute Expansion, and Overseas Ground Demand Growth

Date: February 24, 2026
Analysts: Zhou Ershuang (S0600515110002), Li Wenyi (S0600524080005)
Source: Dongwu Securities Research Institute

Executive Summary

The photovoltaic (PV) equipment sector is poised for a dual-track recovery in 2026, driven by cyclical bottoming and structural growth opportunities. After a profound industry adjustment in 2025 characterized by margin compression and capacity rationalization, leading equipment manufacturers have successfully mitigated financial risks through optimized payment terms ("3421/3601" models) and rigorous credit impairment provisioning. We anticipate that new equipment orders will enter a repair channel in 2026 as落后 (backward) capacity exits the market and overseas demand accelerates.

Beyond the cyclical recovery, two transformative themes are redefining the long-term growth trajectory of the sector:
1. Space-Based Compute (Orbital Data Centers): The convergence of commercial aerospace and AI is creating a new paradigm for energy infrastructure. With launch costs plummeting due to reusable rocket technology, space-based data centers are transitioning from concept to reality. Photovoltaics, particularly Heterojunction (HJT) technology due to its lightweight, flexible, and radiation-resistant properties, is emerging as the core power source for orbital compute clusters. This introduces a "semiconductor-like" long-cycle growth logic to PV equipment.
2. Overseas Ground Demand & Localized Manufacturing: The United States and the Middle East are becoming critical growth engines. In the US, Tesla’s ambitious plan to build 100GW of ground-mounted PV capacity to support AI data center power needs, coupled with high labor/utility costs and patent risks associated with TOPCon, favors HJT technology. HJT’s low process complexity, low water/power consumption, and lack of patent encumbrances make it the optimal choice for US-localized manufacturing. Meanwhile, Chinese PV leaders are accelerating capacity localization in the Middle East, driving a "ship-out-with-the-ship" opportunity for domestic equipment suppliers.

We maintain an Overweight rating on the sector. We recommend focusing on leaders in HJT whole-line equipment (Maxwell Technologies), low-oxygen single-crystal furnaces (Jingsheng Mechanical & Electrical), module automation/0BB equipment (Autowell), and ultra-thin wafer slicing equipment (Gaoce Shares).

Key Takeaways

1. Fundamental Bottoming: Risk Release and Order Recovery

• Financial Resilience: In 2025, leading equipment vendors adjusted collection models to "3421" (domestic) and "3601" (overseas), ensuring cost coverage upon shipment given ~30% gross margins. This has significantly strengthened cash flow management.
• Credit Quality: Accounts receivable are concentrated among top-tier downstream clients (e.g., >70% for Jingsheng’s top 5 customers), minimizing tail risk. Credit impairments were fully accrued in 2024–2025, cleaning up the balance sheet.
• Order Cycle Turn: Contract liabilities and inventory levels declined in 2025 due to downstream capex slowdowns. However, with the acceleration of backward capacity exit and the onset of overseas demand, we expect new orders to rebound in 2026.

2. Space Compute: The New Frontier for PV Technology

• Market Catalyst: Reusable rockets (e.g., SpaceX Starship) are driving launch costs down exponentially. SpaceX aims for 100GW/year of space compute deployment by 2029, supported by a planned 100GW PV production capacity. Google and other tech giants are also launching prototype orbital data centers.
• Cost Advantage: Space data centers offer significant OPEX savings over ground facilities. For a 40MW cluster over 10 years, space-based operations save ~$159 million primarily due to free solar energy and near-zero cooling costs (utilizing the -270°C space environment).
• Technology Shift: While Gallium Arsenide (GaAs) currently dominates MW-scale satellites due to high efficiency (~30%), its prohibitive cost ($12/GW) limits scalability. Silicon-based technologies, particularly HJT, are becoming the mainstream choice for GW-scale deployments due to their cost advantage ($2–3.5/GW), improving efficiency (24%+), and suitability for flexible, rolled-array structures.
• HJT Superiority in Space:
  • Weight & Flexibility: HJT can be produced on ultra-thin wafers (60–110μm), reducing weight and enabling flexible designs compatible with rolled array mechanisms (the optimal solution for LEO satellites).
  • Radiation Resistance: HJT exhibits self-healing properties under radiation, recovering >97% performance after electron irradiation.
  • Tandem Potential: HJT’s low-temperature process and TCO layers make it the ideal bottom cell for Perovskite-Silicon tandem cells, which promise >30% efficiency for future space applications.

3. Overseas Ground Demand: US & Middle East Drivers

• US Market Dynamics:
  • Tesla’s 100GW Plan: To secure power for AI data centers, Tesla is ramping up US PV manufacturing, targeting 100GW capacity by 2028. This creates a massive demand for localized equipment.
  • HJT vs. TOPCon in the US: HJT is structurally superior for US manufacturing due to:
    • Lower OPEX: HJT saves ~60% in labor, 30–40% in electricity, and 20% in water compared to TOPCon. Our model shows HJT OPEX at $0.05/W vs. TOPCon at $0.07/W in the US context.
    • Patent Safety: TOPCon faces significant patent litigation risks in the US (from First Solar, Maxeon, etc.), whereas HJT patents have expired, offering a clear IP landscape.
    • Lower Capex/ Retrofit Cost: HJT lines require less factory reinforcement and simpler infrastructure.
• Middle East Expansion:
  • Strong solar resources and national energy transition goals (e.g., Saudi Vision 2030) are driving robust demand.
  • Chinese majors (Jinko, TCL Zhonghuan, Trina) are building localized factories in Saudi Arabia, Oman, and Egypt, with major commissions expected in 2026. This directly benefits Chinese equipment suppliers via the "borrowed ship" export model.

4. Technology Iteration: HJT and 0BB as Key Variables

• Policy Support: China’s MIIT updated PV manufacturing norms in late 2024, raising efficiency thresholds (N-type cell ≥26%, module ≥23.1%) and tightening water/energy consumption limits. These standards favor high-efficiency, low-consumption technologies like HJT.
• HJT Cost Reduction Roadmap:
  • Silver Consumption: Through Silver-Coated Copper (SCC) pastes and 0BB (Zero Busbar) technology, HJT silver consumption is dropping rapidly. Tongwei’s HJT silver usage fell to <4mg/W in 2025Q3, targeting 2.5mg/W in 2026.
  • Non-Silicon Cost: With 0BB and 20% SCC paste, HJT non-silicon costs are projected to fall to 0.15–0.16 RMB/W in 2026, narrowing or eliminating the cost gap with TOPCon, especially as silver prices remain elevated (>2400 USD/kg).
• 0BB Retrofit Market: The adoption of 0BB technology offers a ~6 billion RMB retrofit market for existing TOPCon stringer machines, providing a near-term revenue boost for equipment vendors like Autowell.

Detailed Analysis

I. 2025 Review: Fundamentals Bottom Out Amidst Industry Clearing

1.1 Risk Control and Cash Flow Management
The PV industry underwent a severe correction in 2025, with main-chain players facing losses and slowing expansion. Equipment vendors faced pressure on new orders but demonstrated strong risk control capabilities.
* Payment Model Optimization: Leading vendors shifted from the traditional "3331" model to "3421" (Domestic) and "3601" (Overseas).
* Logic: With gross margins around 30%, collecting 30-40% upon shipment covers the cost of goods sold (COGS), effectively neutralizing credit risk during the delivery phase.
* Evidence: Maxwell Technologies’ major contracts (e.g., Reliance Industries, Huasheng) show high collection rates (51%-90%) aligned with shipment/acceptance milestones.
* Receivables Quality: Despite an increase in Days Sales Outstanding (DSO) due to slower downstream confirmation, the quality of receivables remains high. Top 5 customers account for a significant portion of receivables (e.g., >70% for Jingsheng), indicating exposure to financially stable industry leaders rather than risky long-tail clients. Operating cash flows improved in Q3 2025 for most leaders.

1.2 Order Book and Inventory Trends
* Contract Liabilities & Inventory: Both metrics declined YoY in 2025Q3, reflecting the slowdown in downstream capex. Silicon wafer, cell, and module capacity expansions were deferred.
* Outlook: This decline signals the trough of the order cycle. As global demand picks up in 2026 (driven by overseas markets) and domestic supply-side clearing completes, we expect a sequential improvement in new orders.

1.3 Profitability and Impairments
* Margins: While gross margins dipped slightly, leading equipment vendors maintained >30% gross margins, outperforming the industry average of ~28%. Net margins hovered around 10%, impacted by one-time impairments.
* Impairment Cleaning: Significant credit impairment losses were recorded in 2024 and continued into 2025Q1-Q3. This proactive accounting treatment has largely cleared historical bad debt risks, setting a cleaner base for 2026 earnings.

II. Space Compute: Opening the "Starry Ocean" for PV Equipment

2.1 The Emergence of Orbital Data Centers
The convergence of AI compute demand and commercial aerospace is creating a new infrastructure class: Space-Based Data Centers.
* Launch Cost Deflation: Reusable rockets (SpaceX Starship, etc.) are reducing LEO launch costs towards <$200/kg by the mid-2030s. SpaceX aims for hourly launches by 2029, enabling massive constellation deployment.
* Strategic Plans:
* SpaceX: Plans to deploy 100GW/year of space compute capacity by 2029. Acquired xAI to close the loop on "Launch + Space Compute + AI Models." Filed for >1 million satellite slots for an Orbital Data Center (ODC) system.
* Google (Project Suncatcher): Partnering with Planet Labs to launch TPU-equipped prototype satellites in 2027, targeting a GW-scale space data center by 2030.
* China: Guoxing Yuhang and CAS are advancing "Star Compute" constellations, with hundreds of compute satellites planned for the late 2020s.

2.2 Economic Case for Space PV
Space data centers leverage the unique environment of orbit to achieve superior economics for specific workloads:
* Energy Cost: Solar irradiance in space is ~8x stronger than on Earth and available ~24/7 in Sun-Synchronous Orbits (SSO). Energy cost is essentially the amortized cost of the PV array (~$2–6 million for a 40MW cluster) versus ~$140 million in electricity for a ground equivalent over 10 years.
* Cooling Cost: The -270°C background temperature of space allows for passive radiative cooling, eliminating the need for energy-intensive chillers and vast water consumption (1.7 million tons saved for a 40MW ground plant).
* Total Cost of Ownership (TCO): For a 40MW cluster over 10 years, Starcloud estimates a total cost of ~$8.2 million for space vs. ~$167 million for ground, a ~95% cost saving, primarily driven by energy and cooling efficiencies. Even accounting for higher launch costs, the TCO advantage remains substantial.

2.3 Technology Selection: Why HJT Wins in Space
Power systems constitute 20–30% of a satellite's weight and ~22% of its cost. Minimizing weight (mass density) and maximizing reliability are critical.

• Flexible Arrays & Weight Reduction:
  • Rolled Arrays: The optimal deployment mechanism for LEO satellites (e.g., ISS iROSA) requires flexible solar cells. Rigid cells necessitate heavy Z-fold mechanisms.
  • HJT Thinness: HJT can be manufactured on 60–110μm wafers (vs. standard 150μm+), significantly reducing mass. Companies like NexWafe and Solestial are already producing ultra-thin HJT cells for space applications.
  • Radiation Hardness: INES (France) demonstrated that ultra-thin HJT cells recover >97% of initial performance after 1MeV electron irradiation due to self-healing effects at operating temperatures.

2.4 Orbital Resource Constraints
* Sun-Synchronous Orbit (SSO): The preferred orbit for space compute due to consistent sunlight (>8,300 hours/year).
* Capacity: At 50km spacing, ~3,600 satellite slots remain available in SSO; at 30km spacing, ~9,600 slots. This supports a theoretical compute capacity of 18–48 TW, providing a long-term runway for PV equipment demand.
* Cluster Architecture: Future designs (e.g., Starcloud’s "Mothership," Google’s formation flying) will consolidate power generation on large platforms or tight formations, further optimizing orbital slot usage and requiring high-power, reliable PV systems.

III. Overseas Ground Demand: US and Middle East Opportunities

3.1 United States: Localized Manufacturing & HJT Advantage
The US market is undergoing a structural shift driven by energy security, AI power demand, and trade protectionism.

• Demand Driver: Tesla’s announcement to build 100GW of ground-mounted PV capacity by 2028 to power its AI infrastructure. This is not just an installation target but a manufacturing commitment, implying a massive need for local production lines.
• Policy Environment:
  • ITC Phase-out: The 30% Investment Tax Credit for installations is phasing out, shifting focus to manufacturing subsidies (45X Advanced Manufacturing Production Credit).
  • Trade Barriers: Section 301 tariffs (50-60%) and AD/CVD duties on Chinese imports make localized manufacturing essential for cost competitiveness.
• Why HJT is the Winner in the US:
  1. OPEX Advantage: US labor costs are ~15x higher than China. HJT’s simplified 4-step process (vs. 10+ for TOPCon) reduces labor requirements by 60%. It also saves 30-40% in electricity and 20% in water.
     • Model Estimate: HJT OPEX in the US is $0.05/W, compared to $0.07/W for TOPCon.
  2. Capex/Retrofit Advantage: HJT lines require less factory reinforcement and lower infrastructure investment. Retrofitting existing facilities for HJT is estimated to save $30 million/GW compared to TOPCon.
  3. Patent Freedom: TOPCon technology is entangled in patent litigation involving First Solar, Maxeon, and Hanwha Qcells. HJT patents (originally held by Sanyo/Panasonic) expired in 2015, offering a clear IP landscape for US manufacturers.
  4. Carbon Footprint: HJT’s low-temperature process reduces carbon emissions by 20%, aligning with strict US environmental regulations and corporate ESG goals.

3.2 Middle East: Resource-Rich Expansion
* Market Growth: MENA region PV installations are projected to grow from 5GW (2024) to 35GW (2030). Countries like Saudi Arabia, UAE, and Oman offer superior solar irradiance (2200–2400 kWh/m²) and low land costs.
* Chinese Localization: Leading Chinese firms are establishing integrated manufacturing bases:
* Jinko Solar: 10GW cell/module plant in Saudi Arabia (commissioning 2026).
* TCL Zhonghuan: 20GW crystal wafer plant in Saudi Arabia (commissioning 2026).
* Trina Solar: 3GW tracker plant in Jeddah (operational 2025).
* Equipment Opportunity: These projects rely heavily on Chinese equipment due to cost, speed, and technical superiority. This "going global" trend directly boosts orders for vendors like Jingsheng, Maxwell, and Autowell.

3.3 Southeast Asia & India
* India: Targeting 280–320GW total PV capacity by 2030. 2025 additions reached 37.9GW.
* Southeast Asia: Chinese firms are expanding capacity in Vietnam, Malaysia, and Indonesia to serve global markets while navigating trade barriers. 2025–2027 will see ~11.5GW of new module capacity and 15.5GW of cell capacity added in the region by Chinese firms.

IV. Domestic Policy & Technology Iteration

4.1 Policy Guidance: Quality Over Quantity
The MIIT’s November 2024 revision of the PV Manufacturing Industry Norms sets higher bars for new capacity:
* Efficiency: N-type cell efficiency ≥ 26% (+3ppt); Module efficiency ≥ 23.1% (+3.1ppt). This effectively excludes standard TOPCon from new greenfield projects, favoring HJT and advanced BC.
* Consumption: Water consumption for new projects < 360 tons/MWp with >40% recycled water use. HJT’s low water usage gives it a distinct compliance advantage.
* Capital Requirement: Minimum capital ratio raised to 30%, discouraging speculative, under-capitalized expansion.

4.2 HJT Cost Reduction Breakthroughs (2026 Outlook)
HJT is entering a phase of rapid cost convergence with TOPCon, driven by several key technologies:

• Silver Price Sensitivity: With silver prices exceeding $2,400/kg (Jan 2026), the cost advantage of HJT using SCC paste and 0BB becomes pronounced. Every $2,000/kg increase in silver price adds ~0.03 RMB/W cost savings for HJT vs. TOPCon.
• Tongwei’s Progress: Tongwei’s HJT modules reached 790.8W (25.5% efficiency) in pilot lines. Silver consumption dropped to <4mg/W, targeting 2.5mg/W in 2026.

4.3 0BB Retrofit Market
* Market Size: There are >4,000 existing TOPCon SMBB/MBB stringers. Retrofitting them to 0BB technology costs ~1.5 million RMB/unit, creating a >6 billion RMB aftermarket opportunity.
* Driver: Rising silver prices and the need for higher module power output are accelerating 0BB adoption in 2026.

Investment Recommendations

We recommend a barbell strategy: Cyclical Recovery (leaders with strong balance sheets) + Structural Growth (exposure to HJT, Space, and Overseas markets).

Top Picks

Valuation Table (as of Feb 13, 2026)

(Note: PEs for Maxwell, Jingsheng, Autowell, and Gaoce are based on Dongwu Securities internal forecasts. Others are Wind consensus.)

Risks / Headwinds

1. Slower-than-Expected Supply/Demand Repair: If the exit of backward capacity is delayed or overseas装机 (installation) growth misses expectations, the recovery in main-chain profitability may be postponed, impacting equipment order momentum.
2. Geopolitical & Trade Policy Uncertainty: Escalating trade barriers in the US, EU, or India (tariffs, local content requirements) could disrupt the overseas expansion plans of Chinese PV manufacturers and equipment vendors. Changes in US subsidy rules (IRA) pose a risk to project economics.
3. Technology Commercialization Delays:
   • HJT/0BB: If cost reductions (silver consumption, efficiency) lag expectations, HJT may fail to gain significant market share against TOPCon/BC.
   • Space PV: The orbital data center market is in early validation. Delays in launch schedules, regulatory approvals, or technical failures could push back the realization of this long-term growth engine.
4. Exchange Rate Fluctuations: Significant appreciation of the RMB could negatively impact the competitiveness of Chinese equipment exports and reduce the value of overseas earnings.

Rating / Sector Outlook

Sector Rating: Overweight

The PV equipment sector is transitioning from a period of intense competition and valuation compression to a phase of differentiated growth. The "bottoming" of fundamentals provides a safety margin, while the Space Compute and US/Middle East Overseas Expansion narratives offer compelling upside potential. We believe the market is underestimating the strategic value of HJT technology in both orbital and high-cost terrestrial environments.

Investment View:
Investors should pivot from broad sector beta to alpha generation through technology leaders.
* Short-Term (2026): Focus on companies with strong overseas order visibility (Autowell, Jingsheng) and those benefiting from the 0BB retrofit cycle.
* Long-Term (2027+): Position for the structural shift towards HJT and Space PV. Maxwell Technologies is the primary proxy for this transition, given its dominance in HJT and early mover advantage in space-grade PV equipment.

The convergence of AI energy needs and aerospace innovation is creating a new "Blue Ocean" for the PV industry. Equipment vendors that can deliver high-efficiency, lightweight, and low-OPEX solutions will command premium valuations in the coming cycle.

Appendix: Detailed Data & Charts Reference

(Note: The following data points are derived from the original research report and are included for reference.)

1. SpaceX Starship Launch Capacity Projection
* 2029 Target: >1 launch/hour.
* Annual Lift Capacity: ~1 million tons to LEO.
* Compute Deployment: 100GW/year of solar-powered AI satellites.
* Satellite Count: >1 million satellites filed for ODC constellation.

2. HJT vs. TOPCon OPEX Comparison (US Context)

3. Space Data Center Cost Comparison (40MW, 10-Year Lifecycle)

*Launch cost varies significantly based on launch provider and frequency assumptions. SpaceX internal costs are assumed to be much lower than commercial Falcon 9 rates.

4. Key Patent Litigation Landscape (US)
* TOPCon: Active litigation involving First Solar, Maxeon, Hanwha Qcells, Canadian Solar, JA Solar, Longi, Jinko, Trina. High risk for new entrants.
* HJT: Patents expired (2015). No active litigation barriers. Safe for US manufacturing.

5. MIIT 2024 Norms vs. 2021 Norms

Disclaimer:
This report is prepared by Dongwu Securities Research Institute. It is intended for institutional investors and does not constitute an offer to sell or a solicitation of an offer to buy any securities. The information contained herein is believed to be reliable but has not been independently verified. Past performance is not indicative of future results. Investors should conduct their own independent research and consult with financial advisors before making investment decisions.