Power Equipment & New Energy: Weekly Industry Report

Date: January 14, 2026
Rating: In-line with Market (Maintained)
Analysts: Xiao Suo, Jia Huilin

Executive Summary

The Chinese power equipment and new energy sector is currently navigating a pivotal transition phase characterized by significant policy shifts, supply-side consolidation, and emerging technological frontiers. This week’s analysis highlights three critical developments that will shape the investment landscape for 2026:

1. Policy Shock to Export Economics: The Ministry of Finance and the State Administration of Taxation have announced the cancellation of VAT export rebates for photovoltaic (PV) products effective April 1, 2026. Additionally, export rebates for battery products will be reduced from 9% to 6% starting April 1, 2026, before being fully cancelled on January 1, 2027. This marks a definitive end to the era of subsidized exports, forcing a restructuring of global pricing power and accelerating industry consolidation.
2. Supply-Demand Rebalancing in PV Chain: Upstream and mid-stream sectors are witnessing active production cuts. Polysilicon output in 2025 decreased by 28.4% year-over-year, and module production in December 2025 dropped by approximately 15% month-over-month. These supply constraints, coupled with anticipated pre-policy rush orders from overseas clients, are driving short-term price increases across silicon materials, cells, and modules.
3. Strategic Expansion in Space Infrastructure: China submitted applications for over 203,000 new satellites to the International Telecommunication Union (ITU) in late December 2025. This massive deployment, primarily led by the CTC-1 and CTC-2 constellations, signals a robust expansion in the space-based infrastructure sector, potentially creating new synergies with renewable energy systems in terms of power supply and connectivity.

Despite the headwinds from policy changes, the sector’s fundamentals are stabilizing due to disciplined supply management. We maintain an "In-line with Market" rating for the industry. However, selective opportunities exist in companies with strong cost advantages, technological leadership (particularly in BC technology), and exposure to domestic grid modernization.

Key Takeaways

1. Policy Landscape: The End of Export Subsidies and Its Implications

The most significant development this week is the joint announcement by the Ministry of Finance and the State Administration of Taxation regarding the adjustment of export tax rebate policies.

• Photovoltaic Products: Effective April 1, 2026, the VAT export rebate for PV products will be cancelled entirely.
• Battery Products: A two-step reduction is implemented. From April 1, 2026, to December 31, 2026, the export rebate rate for battery products will be lowered from 9% to 6%. Starting January 1, 2027, the rebate will be fully cancelled.

Investment Implication:
This policy shift is designed to curb "involutionary" (excessive internal) competition and reduce the fiscal burden of subsidizing low-margin exports. For manufacturers, this implies an immediate pressure on net margins unless they can pass costs onto international buyers. We anticipate a "rush-to-export" phenomenon in Q1 2026 as overseas terminal enterprises accelerate orders to lock in current rebate benefits before the April deadline. This temporary demand surge supports short-term volume growth but may lead to inventory buildup in H2 2026 if global demand does not sustain the pace. Long-term, this favors industry leaders with strong brand premium and non-price competitive advantages, while squeezing out smaller, cost-plus exporters.

2. Operational Metrics: Utilization Rates and Grid Absorption

Data from the Electric Power Planning & Engineering Institute reveals the current state of renewable energy integration in China:

• Solar PV Utilization:
  • November 2025: 93.7%
  • Cumulative (Jan-Nov 2025): 94.8%
• Wind Power Utilization:
  • November 2025: 93.1%
  • Cumulative (Jan-Nov 2025): 94.3%

Analysis:
The utilization rates remain relatively healthy, hovering above the 93% threshold. This indicates that despite the rapid addition of capacity, grid absorption capabilities are keeping pace, largely due to ongoing investments in ultra-high voltage (UHV) transmission lines and energy storage systems. The stability in utilization rates mitigates the risk of widespread curtailment, supporting the revenue visibility of utility-scale project developers.

3. Price Trends: Supply Cuts Drive Marginal Recovery

The PV supply chain is experiencing a coordinated contraction in output, leading to a tentative price recovery across key segments.

A. Polysilicon: Cost Push and Supply Tightness

• Price Movement:
  • Dense Material Average Price: 54.0 RMB/kg (+3.8% WoW).
  • Granular Silicon Average Price: 52.0 RMB/kg (+4.0% WoW).
• Drivers:
  • Supply Constraint: Only 4-5 enterprises reported transactions this week. Operating rates have been continuously adjusted downward.
  • Cost Support: Comprehensive unit production costs have risen, providing a floor for prices.
  • Downstream Acceptance: Rising prices in wafers and cells have improved downstream acceptance of higher silicon prices.
• Outlook: Total polysilicon production in 2025 was approx. 1.319 million tons (-28.4% YoY). January 2026 production is estimated at 106,000 tons (-5% MoM). While inventory is slowly accumulating, prices are expected to remain stable in the short term due to tight supply.

B. Wafers: Inventory Normalization

• Price Movement:
  • 182-183.75mm N-type Wafer (130μm): 1.40 RMB/piece (Flat WoW).
  • 210mm N-type Wafer (130μm): 1.70 RMB/piece (Flat WoW).
• Drivers: Significant production cuts in December 2025 have brought inventory levels to a reasonable range. January schedules show a slight potential for rebound.
• Outlook: With cost pressures transmitting upstream, wafer prices have a high probability of modest increases in the near term.

C. Cells: Margin Protection via Production Cuts

• Price Movement:
  • 182-183.75mm N-type Cell (Efficiency >25.0%): 0.39 RMB/W (+2.6% WoW).
  • N21 Type Cell (Efficiency >25.0%): 0.39 RMB/W (+2.6% WoW).
• Drivers: To combat inventory pressure and weak demand, cell manufacturers implemented large-scale production cuts in December, with output dropping ~15% MoM.
• Outlook: Rising silver paste costs and the impending cancellation of export rebates are expected to keep cell prices elevated in the short term as manufacturers protect margins.

D. Modules: Pre-Policy Rush Order Effect

• Price Movement:
  • TOPCon Double-Glass Module (182/210mm): 0.70 RMB/W (+0.3% WoW).
  • HJT N-type Module (210mm): 0.760 RMB/W (Flat WoW).
  • Centralized BC Module: 0.78 RMB/W (Flat WoW; 13.9% premium over TOPCon).
  • Distributed BC Module: 0.79 RMB/W (Flat WoW; 11.3% premium over TOPCon).
• Drivers: December module production fell ~15% MoM to approx. 35GW. However, the window before the April 1 export rebate cancellation is triggering a surge in overseas orders.
• Outlook: Short-term export volumes are poised for rapid growth, likely driving a short-term price increase for modules. The premium for BC (Back Contact) technology remains robust, indicating strong market preference for high-efficiency solutions.

E. Photovoltaic Glass: Mixed Performance

• 3.2mm Coated Glass: 17.5 RMB/m² (Flat WoW).
• 2.0mm Coated Glass: 10.5 RMB/m² (-2.78% WoW).
• Analysis: The divergence suggests varying demand dynamics between utility-scale (3.2mm) and distributed/residential (2.0mm) segments.

4. Strategic Frontier: Satellite Internet Expansion

On January 11, 2026, the ITU website revealed that China submitted frequency and orbit resource applications for 203,000 new satellites between December 25-31, 2025.

• Scale: This is the largest single international frequency/orbit declaration action in China’s history.
• Key Players:
  • Radio Spectrum Development and Technology Innovation Institute: Applied for the CTC-1 and CTC-2 constellations, totaling 193,428 satellites (95% of the total application).
  • Other Entities: China SatNet, China Mobile, Yuanxin Satellite.
• Relevance to Power Sector: While primarily a telecommunications/aerospace development, the massive deployment of Low Earth Orbit (LEO) satellites requires advanced power management systems, high-efficiency solar arrays for space applications, and robust ground station energy infrastructure. This opens niche high-value markets for specialized power equipment manufacturers and materials suppliers (e.g., high-purity quartz for semiconductor/space applications).

Risks / Headwinds

Investors should carefully monitor the following risks that could derail the projected recovery or impact profitability:

1. Policy Execution Risk: The cancellation of export rebates may lead to sharper-than-expected declines in overseas demand if international customers refuse to absorb the increased costs. This could result in a glut of inventory in the domestic market, reigniting price wars.
2. Installation Misses: If domestic PV installation targets are not met due to grid connection bottlenecks or financing issues, the demand buffer for the excess supply will weaken.
3. Raw Material Volatility: While polysilicon prices are stabilizing, fluctuations in silver prices (critical for cell production) and other raw materials can erode margins, especially if price transmission to downstream modules is blocked by competitive pressures.
4. Geopolitical Tensions: Trade barriers in key markets (EU, US, India) could further restrict export channels, compounding the impact of the removed tax rebates.
5. Technological Obsolescence: Rapid iteration in PV technology (e.g., the shift from PERC to TOPCon to HJT/BC) poses inventory write-down risks for companies holding outdated production lines or materials.

Rating / Sector Outlook

Sector Rating: In-line with Market (Maintained)

We maintain a neutral stance on the broader sector due to the mixed signals of short-term price recovery versus long-term structural margin compression from policy changes. However, the industry is clearly moving towards a healthier equilibrium through supply-side discipline.

Investment Themes:
1. Technology Leadership (BC Route): Companies leading in Back Contact (BC) technology are commanding significant premiums and are less susceptible to commoditization.
2. Supply Side Consolidation: Leaders in polysilicon and glass with lowest-cost structures will survive the margin squeeze and gain market share as weaker players exit.
3. Energy Storage & Grid Integration: As renewable penetration increases, the value shifts towards storage solutions and grid management software.
4. Domestic Substitution: Materials critical for both semiconductor and high-end PV applications (like high-purity quartz) benefit from national security and self-sufficiency drives.

Top Picks & Ratings

Watch List:
Longi Green Energy, Hengdian Group DMEGC Magnetics, Boway Alloy, GCL Tech, Tongwei Co., Deye Shares, TCL Zhonghuan, JA Solar, Trina Solar, JinkoSolar, Maxwell Technologies, Jingsheng Mechanical & Electrical.

Investment View

1. The "BC Technology" Alpha: Aiko Solar

The persistent premium of BC modules (11-14% over TOPCon) underscores the market's willingness to pay for efficiency and aesthetics, particularly in distributed generation. Aiko Solar has positioned itself as a pure-play leader in this segment. Its ABC technology offers higher conversion efficiencies and better temperature coefficients. As the industry moves away from homogeneous price competition, Aiko’s differentiated product portfolio allows it to maintain healthier gross margins compared to peers stuck in the TOPCon red ocean. We recommend accumulating positions on dips, viewing BC as the next mainstream technology iteration.

2. Supply Side Discipline: Daqo New Energy & Flat Glass

The recent production cuts and the resulting price stabilization in polysilicon and wafers validate the thesis that the industry is bottoming out. Daqo New Energy, with its low-cost production capabilities, is well-positioned to generate positive cash flow even at moderate price levels. As higher-cost产能 (capacity) exits the market, Daqo’s market share and pricing power should improve. Similarly, Flat Glass Group operates in a highly concentrated market. The stability in 3.2mm glass prices and its scale advantages make it a defensive yet profitable play within the volatile PV supply chain.

3. The Storage & Grid Imperative: Hyperstrong & Sungrow

With PV utilization rates holding steady but grid congestion becoming a chronic issue in certain provinces, energy storage is no longer optional—it is mandatory. Hyperstrong (ESS integration) and Sungrow (Inverters + Storage) are direct beneficiaries of this trend. Sungrow’s global diversification provides a hedge against domestic policy shocks, while Hyperstrong’s deep integration with grid operators positions it well for the growing domestic utility-scale storage market. The cancellation of battery export rebates in 2027 gives these companies a two-year window to optimize their global supply chains and pricing strategies.

4. Digital Energy & Market Reform: Longshine Technology

As China deepens its electricity market reforms, the ability to trade power flexibly becomes a key value driver. Longshine Technology provides the digital infrastructure for this transition. Its platforms enable virtual power plants (VPPs) and efficient energy management for commercial and industrial users. This business model offers higher visibility and recurring revenues compared to hardware manufacturing, making it an attractive hedge against cyclical hardware downturns.

5. Strategic Material Security: Quartz Shares

The surge in satellite applications and the continued demand for high-efficiency PV cells drive the need for high-purity quartz. Quartz Shares is a critical node in this supply chain. The material is essential for producing quartz crucibles used in monocrystalline silicon pulling. Given the technical barriers and limited global supply of high-grade quartz ore, Quartz Shares enjoys strong pricing power and strategic importance, aligning with national goals for material self-sufficiency.

Conclusion

The week of January 5-11, 2026, marks a turning point where policy intervention actively reshapes the competitive landscape of the new energy sector. The cancellation of export rebates is a painful but necessary step towards high-quality development, forcing companies to compete on technology and brand rather than just price.

For institutional investors, the strategy should shift from broad beta exposure to selective alpha generation. Focus on companies with:
1. Technological Moats: (e.g., BC technology leaders).
2. Cost Leadership: (e.g., Top-tier polysilicon and glass producers).
3. Grid/Storage Exposure: (e.g., ESS integrators and digital energy platforms).
4. Critical Materials: (e.g., High-purity quartz).

While short-term volatility is expected due to the "rush-to-export" dynamics and policy adjustments, the long-term trajectory of global energy transition remains intact. The current valuation adjustments offer a prudent entry point for high-quality assets that will emerge stronger from this consolidation phase.

Disclaimer: This report is based on information available as of January 14, 2026. It is intended for institutional investors only and does not constitute individual investment advice. Past performance is not indicative of future results. Investors should conduct their own due diligence.