Silver Prices Hit Record Highs: The Imminent Industrialization of Copper Substitution in Photovoltaics

Date: December 21, 2025
Sector: Power Equipment / Photovoltaics (PV)
Source: Hualong Securities Research Institute
Analysts: Yang Yang, Xu Zijing
Rating: Overweight (Maintained)

Executive Summary

The global photovoltaic (PV) industry is approaching a critical inflection point driven by the convergence of macroeconomic commodity trends and technological imperatives. On December 19, 2025, international spot silver prices surged to a historic high of $67.049/oz, marking a year-to-date increase of over 132%. This unprecedented rally, fueled by dual drivers of industrial demand and financial safe-haven seeking, has fundamentally altered the cost structure of PV manufacturing. With silver paste accounting for more than 50% of non-silicon costs in solar cells, the economic viability of traditional silver-based metallization is under severe pressure.

Consequently, the transition from "silver reduction" to "silver substitution" has evolved from an optional optimization strategy into a survival imperative for margin preservation. Copper, possessing electrical conductivity second only to silver, has emerged as the primary candidate for substitution. We identify 2026 as the pivotal window where copper substitution technologies—specifically Silver-Coated Copper (SCC), Copper Plating, and Pure Copper Paste—will transition from laboratory validation to mass production scale.

Leading manufacturers are accelerating this timeline. Huasheng New Energy has already reduced silver consumption in Heterojunction (HJT) cells to 5.5mg/W via 0BB (Zero Busbar) and SCC technologies, with targets to reach 2–3mg/W by 2026. Similarly, LONGi Green Energy has achieved breakthroughs in patterned vacuum coating and base metal pastes for Back Contact (BC) cells, with规模化 (scale-up) expected in Q2-Q3 2026.

We maintain our "Overweight" rating on the PV sector. The urgency of cost reduction creates a favorable environment for upstream material suppliers specializing in copper powders and advanced pastes, as well as cell manufacturers who successfully integrate these low-cost metallization techniques. We recommend focusing on key beneficiaries in the paste/powder segment, including Boqian New Material, Polymer Materials, and DKEM, alongside leading cell manufacturers such as LONGi, Aiko Solar, JinkoSolar, Risen Energy, and Junda Shares.

Key Takeaways

1. Macro Driver: Silver Price Surge Redefines Cost Baselines

The primary catalyst for the current industry shift is the dramatic appreciation of silver prices. As of December 19, 2025, spot silver breached the $67/oz threshold, closing at $67.049/oz with a daily gain exceeding 2%. This represents a cumulative yearly increase of >132%.

• Industrial vs. Financial Demand: The price rally is not speculative alone; it is underpinned by robust industrial demand, particularly from the green energy sector, compounded by financial investors seeking避险 (safe-haven) assets amidst global macroeconomic uncertainty.
• Supply Inelasticity: Unlike other industrial metals, silver supply exhibits long-term inelasticity. Mining output cannot rapidly scale to meet sudden demand spikes, creating a structural deficit that supports elevated price floors.
• Impact on PV Cost Structure: In crystalline silicon solar cells, silver paste is the single largest component of non-silicon costs, constituting >50% of this category. As silver prices rise, the absolute cost per watt increases significantly, eroding the already thin margins of PV manufacturers. This dynamic forces the industry to treat metallization cost reduction not merely as an efficiency improvement but as a critical determinant of corporate solvency and competitiveness.

2. Technological Imperative: The Acceleration of "Copper for Silver"

The high cost of silver has accelerated the R&D and commercialization timeline for copper-based metallization. Copper is the most logical substitute due to its high electrical conductivity (approx. 95% of silver’s conductivity) and significantly lower cost (typically <2% of silver’s price per unit weight).

Three primary technical routes are gaining traction:

The industry consensus is shifting from "how much silver can we save?" to "how quickly can we replace silver with copper?" The urgency is driven by the fact that further silver reduction via traditional means (e.g., thinner lines, multi-busbar designs) is reaching diminishing returns.

3. 2026: The Critical Window for Mass Adoption

Our analysis indicates that 2026 will be the defining year for the commercial scalability of copper substitution. The technology is moving out of the pilot phase and into gigawatt-scale production.

A. HJT (Heterojunction) Route: Huasheng New Energy’s Breakthrough

Huasheng New Energy, a leader in HJT technology, has demonstrated significant progress in combining 0BB (Zero Busbar) technology with Silver-Coated Copper (SCC) pastes.
* Current Status: Silver consumption has been reduced to 5.5 mg/W.
* 2026 Target: Further reduction to 2–3 mg/W.
* Implication: This level of reduction implies a near-total substitution of bulk silver with copper, retaining only minimal silver for interface contact. This drastically lowers the Bill of Materials (BOM) cost for HJT modules, enhancing their competitiveness against TOPCon and PERC technologies.

B. BC (Back Contact) Route: LONGi Green Energy’s Innovation

LONGi, a global module giant, has focused on BC technology, which requires precise metallization on the rear side of the cell.
* Technological Breakthroughs: LONGi’s team has achieved original breakthroughs in two areas:
1. Patterned Vacuum Deposition: Allows for precise placement of conductive materials without screen printing masks.
2. Base Metal Pastes: Development of non-precious metal pastes that maintain high conductivity and adhesion.
* Validation: Both reliability (PID, thermal cycling, damp heat) and manufacturability (yield rates, throughput) have passed internal and third-party validations.
* Timeline: Scale-up is projected for Q2-Q3 2026. This timing aligns with the anticipated launch of next-generation BC modules, positioning LONGi to capture market share through superior cost-performance ratios.

4. Investment Implications: Value Chain Redistribution

The shift to copper substitution redistributes value within the PV supply chain. Traditional silver paste manufacturers face margin compression unless they pivot to copper-based formulations. Conversely, companies with expertise in copper powder synthesis, surface treatment, and advanced paste formulation stand to gain significant market share.

• Upstream Materials (Powders & Pastes): Companies that have secured IP and production capacity for high-quality spherical copper powder and silver-coated copper powder are best positioned. The barrier to entry lies in the consistency and oxidation resistance of the powder, not just the raw material cost.
• Cell Manufacturers: Early adopters of copper metallization will enjoy a distinct cost advantage. In a commoditized market, a cost reduction of $0.01-$0.02/W can be the difference between profitability and loss. Therefore, cell makers with verified copper-tech roadmaps (like Huasheng, LONGi, Aiko) are preferred.

Sector Analysis & Company Recommendations

We maintain a "Recommended" (Overweight) rating on the Photovoltaic sector. The fundamental logic is that technological innovation in metallization is the key lever to restore profitability in a post-subsidy, high-silver-price environment.

Focus Areas:

1. Paste & Powder Segment: High elasticity to volume growth as copper substitution ramps up.
2. Leading Cell Manufacturers: Those with proven low-silver/copper tech pathways.

Detailed Company Analysis

1. Boqian New Material (605376.SH)

• Rating: Accumulate (增持)
• Price (Dec 19, 2025): CNY 61.66
• Core Logic: Boqian is a leading supplier of ultra-fine metal powders, including nickel, copper, and silver-coated copper powders. As the demand for SCC paste rises, Boqian’s high-end copper powder products are expected to see substantial volume growth. Their technological moat in particle size control and surface modification is critical for high-efficiency pastes.
• Financial Outlook:
  • EPS Forecast: 2025E: 0.94 | 2026E: 1.78 | 2027E: 2.58
  • P/E Ratio: 2025E: 65.6x | 2026E: 34.6x
  • Analysis: The sharp drop in forward P/E from 65x to 34x reflects anticipated earnings acceleration in 2026, coinciding with the mass adoption of copper substitution.

2. Polymer Materials (688503.SH)

• Rating: Accumulate (增持)
• Price (Dec 19, 2025): CNY 56.77
• Core Logic: A dominant player in the PV paste market. Polymer Materials has been aggressively developing copper-based pastes and has strong relationships with major cell manufacturers. Their ability to transition their product mix from pure silver to silver-copper hybrids will protect margins and drive volume.
• Financial Outlook:
  • EPS Forecast: 2025E: 2.79 | 2026E: 3.29 | 2027E: 2.60
  • P/E Ratio: 2025E: 20.35x | 2026E: 17.26x
  • Analysis: Valuation is reasonable relative to growth. The slight dip in 2027 EPS forecast may reflect market saturation or pricing pressure, but the 2026 growth story remains intact.

3. DKEM (300842.SZ)

• Rating: Not Rated (Monitor)
• Price (Dec 19, 2025): CNY 60.02
• Core Logic: Another key paste manufacturer with strong R&D capabilities in low-temperature pastes for HJT. DKEM is well-positioned to benefit from the HJT expansion, particularly if its copper-containing paste formulations gain traction with major HJT producers like Huasheng.
• Financial Outlook:
  • EPS Forecast: 2025E: 1.37 | 2026E: 2.94 | 2027E: 4.25
  • P/E Ratio: 2025E: 43.9x | 2026E: 20.4x
  • Analysis: High earnings growth expected in 2026 (doubling of EPS). The valuation compresses significantly, suggesting the market may be underpricing the impact of copper substitution on their product mix.

4. LONGi Green Energy (601012.SH)

• Rating: Not Rated (Key Benchmark)
• Price (Dec 19, 2025): CNY 18.08
• Core Logic: As the global module leader, LONGi’s successful validation of copper-based metallization for BC cells is a sector-wide signal. Their scale allows them to drive down the cost of new technologies faster than competitors. A return to profitability in 2026 (EPS 0.40) marks a turnaround from the losses in 2024-2025.
• Financial Outlook:
  • EPS Forecast: 2024A: -1.14 | 2025E: -0.51 | 2026E: 0.40
  • Analysis: The swing from loss to profit in 2026 is contingent on both market stabilization and the cost benefits of new technologies like copper substitution.

5. Aiko Solar (600732.SH)

• Rating: Not Rated (Key Benchmark)
• Price (Dec 19, 2025): CNY 13.04
• Core Logic: A pioneer in ABC (All Back Contact) technology. Aiko has long emphasized low-silver processes. Their early adoption of copper plating and paste technologies gives them a structural cost advantage in the premium segment.
• Financial Outlook:
  • EPS Forecast: 2025E: 0.01 | 2026E: 0.58 | 2027E: 0.98
  • Analysis: Expected to break even in 2025 and deliver strong growth in 2026.

6. Other Notable Mentions

• JinkoSolar (688223.SH): Leading TOPCon producer. While TOPCon uses less silver than PERC, the push for copper substitution is still relevant for further cost downs. Expected return to profitability in 2026.
• Risen Energy (300118.SZ): Strong in HJT and hybrid modules. Beneficiary of HJT cost reductions via SCC.
• Junda Shares (002865.SZ): Focused on N-type cells. Turnaround expected in 2026 with significant EPS growth projected.

Summary Table: Key Financial Metrics & Valuations

Note: Data sourced from Wind and Hualong Securities Research. Unrated companies' forecasts are based on Wind consensus estimates.

Risks / Headwinds

While the thesis for copper substitution is strong, investors must consider the following risks:

1. Technological Execution Risk:

   • Reliability Issues: Copper is prone to oxidation and migration, which can lead to cell degradation over time. If long-term reliability tests (e.g., 25-year lifespan simulations) fail to meet industry standards, adoption could be delayed or restricted to lower-tier markets.
   • Yield Rates: Mass production of copper-plated or SCC-based cells requires precise process control. Lower yields compared to mature silver processes could offset material cost savings in the initial rollout phase.

2. Silver Price Volatility:

   • If silver prices correct significantly from their current highs (e.g., due to reduced industrial demand or monetary policy shifts), the economic urgency for copper substitution diminishes. This could slow down CAPEX allocation towards new copper-compatible production lines.

3. Macro Economic & Policy Risks:

   • Global Demand Slowdown: A recession in key markets (EU, US, China) could reduce overall PV installations, leading to overcapacity and price wars that overshadow technology-driven cost advantages.
   • Trade Barriers: Tariffs or trade restrictions on Chinese PV products (including those using specific copper technologies) could limit market access for recommended companies.

4. Competitive Intensity:

   • The PV sector is characterized by fierce competition. If multiple players simultaneously achieve copper substitution, the cost benefit may be passed entirely to consumers, resulting in lower module prices without proportional margin expansion for manufacturers.

5. Company-Specific Performance:

   • The financial forecasts for companies like LONGi and Aiko assume a successful turnaround. Failure to execute on production targets or unexpected operational issues could lead to earnings misses.

Rating / Sector Outlook

Sector Rating: Overweight (Recommended)

The photovoltaic industry is currently navigating a period of intense consolidation and technological iteration. The surge in silver prices acts as a forced accelerator for innovation, specifically in metallization. We believe that companies capable of successfully implementing copper substitution technologies will emerge as the winners in the next cycle, enjoying superior cost structures and improved margins.

The year 2026 is identified as the breakout year for this trend. Investors should position themselves ahead of this curve by focusing on:
1. Enablers: Suppliers of copper powders and specialized pastes (Boqian, Polymer Materials).
2. Adopters: Cell manufacturers with verified, scalable copper-tech roadmaps (LONGi, Aiko, Huasheng partners).

We expect the sector to outperform the broader market as these technological efficiencies translate into tangible financial improvements in the 2026-2027 period.

Investment View

Strategic Allocation Recommendation

For institutional investors, we suggest a barbell strategy within the PV sector:

1. Core Holding (Stability + Turnaround): Allocate to integrated giants like LONGi Green Energy and JinkoSolar. These companies have the balance sheet strength to weather the current downturn and the R&D budget to lead the copper substitution charge. Their expected return to profitability in 2026 offers a compelling risk-reward profile at current valuations.

2. Satellite Holding (High Growth/Elasticity): Increase exposure to specialized material suppliers like Boqian New Material and Polymer Materials. These firms offer higher beta to the "copper substitution" theme. As the penetration rate of SCC and copper pastes increases from single digits to double digits in 2026, their earnings growth is likely to outpace the broader sector.

Key Monitoring Indicators

Investors should closely monitor the following data points in the coming quarters:
* Silver Price Trends: Sustained levels above $50/oz reinforce the substitution thesis.
* Pilot Line Yields: Public announcements from LONGi, Huasheng, and others regarding yield rates and reliability test results for copper-based cells.
* CAPEX Guidance: Look for increased capital expenditure guidance from cell makers specifically allocated to copper-plating or SCC-compatible production lines in 2025 budgets.
* Paste Pricing: Monitor the pricing power of paste manufacturers. If they can maintain margins while switching to lower-cost copper inputs, it indicates strong competitive moats.

Conclusion

The intersection of record-high silver prices and mature copper-substitution technologies presents a rare, clear-cut investment opportunity in the PV sector. The transition is no longer theoretical; it is imminent and economically mandatory. By focusing on the enablers and early adopters of this technological shift, investors can capitalize on the structural cost reductions that will define the next generation of solar manufacturing. We reiterate our Overweight stance on the sector and highlight the specified equities as primary vehicles for capturing this value creation.

Disclaimer: This report is based on information available as of December 21, 2025. The views expressed are those of the analysts and do not constitute a guarantee of future performance. Investors should conduct their own due diligence and consider their risk tolerance before making investment decisions. The risk rating of this report is R4, suitable for clients with a risk tolerance of C4 or higher.