Photovoltaic Industry Weekly Report: Navigating the Transition – Policy Support and Supply-Side Optimization Drive Long-Term Value

Date: November 22, 2025
Sector: Renewable Energy / Photovoltaics (PV)
Rating: Overweight (Maintained)
Analysts: Su Qianye (SAC: S1130400054251), Yang Shuaibo (SAC: S1340524070002)
Source: China Post Securities Research Institute

Executive Summary

The global photovoltaic (PV) industry is currently navigating a critical transitional phase characterized by short-term demand softness in Q4 2025 but underpinned by robust long-term structural drivers. While recent market performance has been subdued due to seasonal adjustments and inventory digestion, we maintain an Overweight rating on the sector. Our conviction is driven by three pivotal factors:

1. Policy-Driven Demand Acceleration: China’s formal submission of its Nationally Determined Contributions (NDC 3.0) for 2035, coupled with domestic measures to resolve grid absorption bottlenecks for large-scale bases, signals a decisive shift from pure capacity expansion to sustainable, grid-integrated growth.
2. Supply-Side Discipline ("Anti-Involution"): Continued policy enforcement against irrational competition and overcapacity is beginning to stabilize pricing structures. The industry is moving towards a healthier equilibrium where quality and efficiency outweigh sheer volume.
3. Global Momentum via COP30: The ongoing COP30 proceedings and subsequent NDC 3.0 submissions by various contracting parties are reinforcing the global energy transition narrative, suggesting that demand improvement may arrive earlier than consensus expectations.

In the immediate term, we observe a divergence in pricing across the value chain. While silicon materials remain stable due to reduced production schedules, downstream components face slight pressure as the market adapts to new electricity pricing mechanisms. However, we project full-year 2025 installations in China to reach 300 GW, with wind and solar accounting for over 20% of total power generation.

We recommend investors focus on integrated module manufacturers with strong balance sheets and technological leadership, specifically Longi Green Energy (601012.SH) and Jinko Solar (688223.SH), as they are best positioned to benefit from the anticipated demand recovery in 2026.

Key Takeaways

1. Macro & Policy Landscape: China as a Proactive Agent in Energy Transition

The overarching theme for the PV sector in late 2025 and heading into 2026 is the alignment of national strategy with industrial execution. China has firmly established itself as an "action-oriented" leader in global energy transition.

• NDC 3.0 Submission: On November 3, 2025, China officially submitted its 2035 Nationally Determined Contributions (NDC 3.0). This is not merely a diplomatic gesture but a concrete roadmap that necessitates accelerated renewable energy deployment. The submission implies that domestic supporting measures will be rolled out densely in the coming months to ensure targets are met.
• Resolution of Grid Absorption Issues: A primary constraint on PV growth has been grid congestion and curtailment. The new policy framework prioritizes the acceleration of consumption capabilities for large-scale renewable energy bases. We anticipate that specific measures to enhance grid flexibility and storage integration will effectively unlock previously constrained demand, particularly for utility-scale projects.
• International Synergy (COP30): As the COP30 climate conference progresses, the submission of NDC 3.0 by various contracting parties creates a synchronized global push for decarbonization. This international cohesion reduces the risk of fragmented trade policies and supports a more stable export environment for Chinese PV manufacturers.

Investment Implication: The "expectation gap" between current muted sentiment and the impending policy-driven demand surge is widening. Investors should position themselves ahead of the official release of detailed implementation guidelines, which are expected to catalyze a re-rating of sector valuations.

2. Market Performance & Valuation: Short-Term Pressure vs. Long-Term Potential

Despite the positive macro backdrop, the secondary market experienced significant corrections during the week ending November 22, 2025. This decline reflects temporary profit-taking and lingering concerns over Q4 earnings visibility rather than a fundamental deterioration in the industry’s long-term prospects.

Weekly Sector Performance Analysis

The PV sector exhibited broad-based declines, with most sub-sectors falling between 10% and 18%. Inverters and auxiliary materials saw sharper corrections, while upstream silicon producers demonstrated relative resilience due to supply controls.

Source: iFinD, China Post Securities Research Institute

Analysis of Market Movement:
* Module Makers: The double-digit declines in major module integrators like Longi and JA Solar reflect investor anxiety over Q4 margin compression. However, these companies possess the scale and vertical integration necessary to survive the consolidation phase.
* Inverter Segment: High-beta stocks such as GoodWe and Ginlong experienced heavier sell-offs (-17.6% and -17.4% respectively). This segment is more sensitive to interest rate fluctuations and overseas inventory levels, which remain elevated in certain European markets.
* Upstream Resilience: Tongwei and Daqo showed relatively smaller declines (~11%), indicating that the market recognizes the effectiveness of production cuts in stabilizing polysilicon prices.

3. Supply Chain Dynamics: Price Stabilization Amidst Demand Softness

The physical market is undergoing a complex adjustment. While overall demand is flat in Q4, supply-side discipline is preventing a catastrophic price collapse. The industry is transitioning from a "price war" mentality to a "value preservation" strategy.

A. Polysilicon: Stability Through Production Cuts

Polysilicon prices have stabilized in November 2025. This stability is not driven by a surge in demand but by a deliberate reduction in supply.

• Production Schedules: Domestic polysilicon production schedules dropped significantly month-on-month. Major producers have adhered to informal and formal agreements to limit output, thereby alleviating inventory pressure.
• Price Levels: The average price for dense polysilicon remains around RMB 52/kg (Range: RMB 47-55/kg).
• Outlook: While downstream demand is weak, the reduced supply has created a temporary equilibrium. We expect prices to remain range-bound in the short term, providing a floor for upstream profitability. However, any significant deviation in production discipline could reintroduce downward pressure.

B. Silicon Wafers: Downward Pressure Persists

Wafer prices continue to weaken, reflecting the direct impact of softer downstream demand and the pass-through of lower polysilicon costs.

• Price Trends:
  • N-type 182mm/183.75mm (130μm): Average price declined to RMB 1.28/piece (-1.5% WoW). USD equivalent at $0.165.
  • N-type 210mm (130μm): Average price declined to RMB 1.60/piece (-1.8% WoW).
• HJT Specifics: HJT wafers followed the general trend, with slight decreases accompanying the drop in standard large-size wafers.
• Margin Compression: The cost of silicon for wafers has decreased, but non-silicon costs remain rigid. Consequently, gross margins for wafer manufacturers are under severe stress. For instance, the 210R wafer (130μm) shows a negative unit gross profit of -RMB 0.28/piece, with a gross margin of -24%. This unsustainable margin profile will likely force further capacity exits or utilization cuts among smaller players.

C. Solar Cells: Gradual Decline in N-Type Premiums

Cell prices are drifting lower, with the premium for high-efficiency N-type technologies narrowing as supply increases.

• TOPCon Cells:
  • 182mm (25.3%+ efficiency): Average price RMB 0.295/W (-1.7% WoW). Range: RMB 0.29-0.30/W.
  • 210mm (25.3%+ efficiency): Average price RMB 0.29/W (-3.3% WoW). Range: RMB 0.29-0.295/W.
• Profitability: TOPCon cell manufacturers are operating on thin margins. The unit gross profit for TOPCon cells is estimated at -RMB 0.048/W, indicating that many producers are selling below cash cost to maintain market share and cash flow. This situation is untenable in the long run and reinforces the need for supply-side consolidation.

D. Modules: Divergence and Emerging Weakness

Module prices are beginning to show signs of loosening, though the market remains segmented.

• Price Structure:
  • TOPCon Modules (Centralized Projects): Average price RMB 0.685/W. Range: RMB 0.62-0.72/W.
  • TOPCon Modules (Distributed Projects): Average price RMB 0.70/W. Range: RMB 0.65-0.73/W.
  • BC Modules (Back Contact): Command a premium, with centralized project prices averaging RMB 0.76/W and distributed/C&I prices at RMB 0.76-0.80/W.
  • HJT Modules: Prices are under greater pressure, with 210mm single-crystal HJT modules averaging RMB 0.78/W (-6% WoW), ranging from RMB 0.70-0.83/W.
• Market Dynamics: High-power modules from tier-1 manufacturers remain relatively resilient, with prices holding in the RMB 0.67-0.70/W range. However, the broader market is seeing increased competition, leading to a gradual erosion of prices.
• Margin Analysis:
  • TOPCon Module Margin: Estimated at RMB 0.019/W. While still positive, this margin is fragile and highly sensitive to raw material fluctuations.
  • HJT Module Margin: Currently negative at -RMB 0.016/W, highlighting the economic challenges facing HJT adoption without further cost reductions or efficiency gains.

Key Insight: The divergence in module pricing underscores the importance of technology and brand premium. Tier-1 companies with superior bankability and product performance can maintain better pricing power. The negative margins in HJT and tight margins in TOPCon suggest that only the most efficient producers will survive the current cycle.

4. Installation & Consumption Data: Robust YTD Growth Despite Q4 Slowdown

China’s PV installation data reveals a story of strong annual growth tempered by seasonal and policy-induced volatility in the second half of the year.

Annual Installation Trends (2025 YTD)

• Cumulative Installations (Jan-Oct 2025): 252 GW, representing a year-over-year increase of 39.3%. This robust growth confirms the continued expansion of China’s renewable energy infrastructure.
• Full-Year Forecast: We maintain our forecast for 300 GW of new installations in 2025. This implies approximately 48 GW of installations in November and December, which is historically achievable given the typical year-end rush.
• September Anomaly: September installations totaled 9.7 GW, a sharp year-over-year decline of 53.8%. This drop was primarily due to the aftermath of the "rush-to-install" phenomenon in April-May 2025, triggered by the deadline associated with Document No. 136 and the May 31st cutoff. The pull-forward of demand in H1 naturally led to a trough in H3.

Grid Absorption and Utilization

• Absorption Rate (Jan-Sep 2025): The national PV utilization rate stood at 95%. This indicates that despite the massive influx of new capacity, the grid has managed to absorb the majority of generated power. However, this aggregate figure masks regional disparities, with some provinces experiencing higher curtailment rates.
• Wind & Solar Share: The combined share of wind and solar power in total electricity generation is on track to exceed 20% for the full year 2025. This milestone highlights the transition of renewables from supplementary sources to mainstream pillars of the national energy mix.

Policy Impact on Future Demand

The introduction of mechanism-based electricity pricing is gradually being optimized. As market participants adapt to these new pricing structures, the uncertainty surrounding project economics is diminishing. Furthermore, the anticipated acceleration in solving absorption issues for large-scale bases will remove a key bottleneck for future growth. We expect 2026 to be a "transition year" where the market adjusts to these new mechanisms, ultimately leading to more sustainable and predictable demand patterns.

5. Industry News & Strategic Developments

Recent high-level policy announcements and regional initiatives provide further evidence of the government’s commitment to sustaining PV growth.

A. National Level: SCO Summit Commitments

At the 24th Meeting of the Council of Heads of Government of the Shanghai Cooperation Organization (SCO), Premier Li Qiang emphasized the solid advancement of future energy projects.
* Commitment: China aims to add "tens of millions of kilowatts" of new PV and wind power capacity annually over the next five years.
* Significance: This public commitment at an international forum reinforces the certainty of domestic demand. It signals to the industry that the state will continue to support large-scale renewable energy development, providing a clear volume baseline for manufacturers.

B. Regional Level: Inner Mongolia’s Green Power Direct Connection

Inner Mongolia Autonomous Region released a draft opinion on green power direct connection projects, introducing innovative categories that expand the application scenarios for PV.
* New Categories: Unlike other provinces, Inner Mongolia’s draft includes two additional types of projects:
1. Hydrogen-Based Green Fuel Green Power Direct Connection Projects: Integrating PV with green hydrogen production.
2. National-Level Zero-Carbon Industrial Park Green Power Direct Connection Projects: Providing dedicated renewable energy supply to industrial clusters.
* Implication: These initiatives promote the coupling of PV with downstream industries (hydrogen, manufacturing), creating new demand streams that are less dependent on traditional grid feed-in tariffs. This model could be replicated in other resource-rich regions, diversifying the demand base for PV modules.

Risks / Headwinds

While the long-term outlook remains positive, investors must navigate several near-term risks that could impact sector performance and individual company earnings.

1. Policy Volatility and Geopolitical Shifts

• Domestic Policy Changes: While current policies are supportive, any unexpected adjustments in subsidy mechanisms, grid connection rules, or land use regulations could alter project economics.
• International Trade Barriers: The global nature of the PV supply chain makes it vulnerable to trade protectionism. Potential tariffs, anti-dumping investigations, or local content requirements in key markets (EU, US, India) could disrupt export volumes and compress margins for Chinese manufacturers. The implementation of carbon border adjustment mechanisms (CBAM) may also add compliance costs.

2. Downstream Demand Misses

• Macroeconomic Sensitivity: PV investment is capital-intensive. A slowdown in global economic growth or tightening financial conditions could lead to deferred or cancelled projects.
• Grid Constraints: If the resolution of grid absorption issues proceeds slower than expected, curtailment rates may rise, negatively impacting the internal rate of return (IRR) for project developers and dampening new order placement.
• Interest Rates: High interest rates in key overseas markets continue to weigh on the affordability of residential and commercial PV systems, potentially slowing down demand recovery in Europe and emerging markets.

3. Technological Disruption and Execution Risk

• Technology Iteration: The rapid evolution from PERC to TOPCon, and potentially to HJT and BC technologies, carries execution risk. Companies that fail to keep pace with efficiency improvements or cost reductions may find their assets stranded.
• Unproven Scalability: While HJT and BC technologies offer higher efficiency, their mass production costs and yield rates remain challenging. Any delay in achieving cost parity with TOPCon could hinder their market penetration.
• New Entrants: The allure of the energy transition continues to attract new entrants, potentially leading to renewed overcapacity in specific niches if supply-side discipline breaks down.

4. Supply Chain Price Volatility

• Raw Material Fluctuations: Although polysilicon prices are currently stable, any imbalance in supply and demand could lead to volatile price swings. Sharp increases in raw material costs can squeeze mid-stream margins, while sharp decreases can lead to inventory write-downs.
• Auxiliary Materials: Prices of silver paste, glass, and EVA/POE films are subject to their own supply-demand dynamics. Increases in these costs can erode module profitability, especially when module prices are under pressure.

5. Intensified Industry Competition

• Price Wars: Despite "anti-involution" policies, the temptation to gain market share through aggressive pricing persists. If major players engage in a renewed price war, it could lead to widespread losses and financial distress across the sector.
• Consolidation Pain: The expected consolidation of the industry will involve bankruptcies and restructuring. Investors exposed to weaker players face the risk of total capital loss. Even strong players may face short-term earnings volatility as they navigate this turbulent period.

Rating / Sector Outlook

Sector Rating: Overweight (Maintained)

We maintain our Overweight rating on the Photovoltaic sector. This rating reflects our belief that the current market valuation does not fully account for the positive structural shifts driven by policy support and supply-side optimization.

Rationale for Rating

1. Valuation Attractiveness: Many leading PV companies are trading at historical low valuations, with Price-to-Earnings (P/E) ratios for 2026 estimates ranging from 20x to 40x for profitable entities, and even lower for those expected to return to profitability. The market has priced in significant pessimism regarding Q4 earnings, creating a favorable risk-reward profile for long-term investors.
2. Policy Put Option: The Chinese government’s explicit commitment to energy transition and NDC 3.0 targets acts as a "put option" on the sector. It is highly unlikely that the state will allow a disorderly collapse of its strategic PV industry. Instead, we expect targeted support to facilitate a healthy consolidation.
3. Demand Visibility: The forecast of 300 GW installations in 2025 and continued growth in 2026 provides a clear revenue visibility for top-tier manufacturers. The shift towards large-scale bases and green power direct connections offers new, stable demand channels.
4. Supply Discipline: The observable reduction in polysilicon and wafer production schedules indicates that the industry is actively managing supply. This discipline is crucial for stabilizing prices and restoring profitability in 2026.

Investment Horizon

• Short-Term (1-3 Months): Expect continued volatility as the market digests Q4 earnings reports and navigates the seasonal lull. Prices may remain under pressure, but downside risk is limited by policy support.
• Medium-Term (6-12 Months): Anticipate a gradual recovery in sentiment and fundamentals as the effects of NDC 3.0 implementation become visible and grid absorption issues are addressed. 2026 is viewed as a transition year leading to stronger growth in 2027.
• Long-Term (1-3 Years): The secular growth trend of global energy transition remains intact. Leading companies with technological advantages and strong balance sheets will emerge from the consolidation phase with enhanced market power and profitability.

Investment View

Strategic Focus: Quality and Integration

In a market characterized by overcapacity and price competition, quality and vertical integration are the key differentiators. We advise investors to prioritize companies that possess:
1. Technological Leadership: Ability to produce high-efficiency modules (TOPCon, BC, or advanced HJT) at competitive costs.
2. Financial Strength: Robust balance sheets to withstand periods of negative cash flow and fund ongoing R&D.
3. Global Diversification: Exposure to multiple geographic markets to mitigate regional policy risks.
4. Brand Bankability: Strong reputation among international financiers and developers, ensuring preferential access to premium projects.

Recommended Stocks

We highlight the following integrated module manufacturers as primary beneficiaries of the anticipated industry recovery:

1. Longi Green Energy Technology Co., Ltd. (601012.SH)

• Current Price: RMB 18.8
• Market Cap: RMB 142.8 billion
• Investment Thesis:
  • Market Leader: Longi remains the global leader in wafer and module shipments. Its scale provides significant cost advantages and bargaining power.
  • Technology Pivot: The company is aggressively transitioning to HPBC (Hybrid Passivated Back Contact) technology, which offers higher efficiency and aesthetic appeal, particularly for distributed generation markets. This differentiation helps protect margins.
  • Valuation: Trading at a forward P/E of ~44x for 2026 (consensus EPS of RMB 0.4). While seemingly high, this reflects the trough in current earnings. As profitability recovers in 2026, the multiple is expected to compress.
  • Risk: Execution risk in HPBC mass production and potential margin pressure in the wafer segment.

2. Jinko Solar Co., Ltd. (688223.SH)

• Current Price: RMB 5.6
• Market Cap: RMB 55.7 billion
• Investment Thesis:
  • TOPCon Pioneer: Jinko was an early mover in TOPCon technology and has successfully scaled production, achieving leading efficiency and cost metrics. This first-mover advantage has translated into strong market share gains.
  • Integrated Model: Its vertically integrated structure allows for better cost control and supply chain security.
  • Global Presence: Jinko has a well-diversified global sales network, reducing reliance on any single market.
  • Valuation: Trading at a forward P/E of ~27x for 2026 (consensus EPS of RMB 0.2). This represents a more attractive valuation entry point compared to some peers, reflecting the market’s cautious view on near-term margins.
  • Risk: Intense competition in the TOPCon segment and potential trade barriers in key export markets.

Other Notable Mentions

• Canadian Solar (CSIQ) / Arries (688472.SH): Arries (Canadian Solar’s subsidiary/listing) shows a healthier profit profile with a 2026E P/E of 20x. Its strong presence in the US market and project development pipeline offers a unique hedge against pure manufacturing competition.
• Trina Solar (688599.SH): Another leading integrated player with strong module brands and tracking system businesses. However, near-term earnings pressure is evident (2025E EPS -1.8).
• JA Solar (002459.SZ): Known for operational efficiency and cost control. Like Trina, it faces near-term earnings headwinds but is well-positioned for the recovery.

Financial Forecast Summary (Consensus Estimates)

Note: Earnings forecasts are based on iFinD consensus estimates. "Not Rated" indicates that China Post Securities has not issued a specific stock rating for these companies in this report, but they are included for comparative analysis.

Conclusion

The photovoltaic industry is at an inflection point. The short-term pain of price competition and demand normalization is giving way to a more structured, policy-supported growth trajectory. The submission of NDC 3.0 and the global momentum from COP30 provide a strong tailwind for demand in 2026 and beyond.

Investors should look past the near-term noise and focus on companies with durable competitive advantages. Longi Green Energy and Jinko Solar stand out as prime candidates to capitalize on the upcoming recovery. Their technological leadership, scale, and financial resilience position them to gain market share as weaker competitors exit the industry.

We recommend accumulating positions in these high-quality names during periods of market weakness, with a medium-to-long-term investment horizon. The expected resolution of grid absorption issues and the stabilization of supply chains will serve as key catalysts for re-rating in the coming quarters.

Appendix: Detailed Data Tables and Charts Reference

(Note: The following tables summarize the data presented in the main body for quick reference.)

Chart 1: PV Core Stock Weekly Performance (Nov 16-22, 2025)

Chart 2: PV Supply Chain Price Changes (Weekly)

Chart 3: Profitability Metrics (Estimated)

Analyst Certification and Disclosures

Analyst Certification:
The analysts responsible for this report, Su Qianye and Yang Shuaibo, hereby certify that all of the views expressed in this research report accurately reflect their personal views about the subject securities or issuers. They also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Important Disclosures:
* No Interest: The analysts and China Post Securities Co., Ltd. declare that they have no financial interest in the securities mentioned in this report that could affect the objectivity of the report.
* Data Sources: The information contained in this report is derived from sources believed to be reliable, including public information and iFinD. However, China Post Securities does not guarantee the accuracy or completeness of such information.
* Investment Advice: This report is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should make their own independent decisions and consult with their financial advisors before making any investment decisions.
* Rating Definitions:
* Overweight: Expected to outperform the relevant benchmark index by more than 10% over the next 6 months.
* Neutral: Expected to perform in line with the benchmark index (within +/- 10%).
* Underweight: Expected to underperform the benchmark index by more than 10%.

About China Post Securities:
China Post Securities Co., Ltd. is a wholly-owned subsidiary of China Post Group Corporation. Established in 2002, it is a comprehensive securities firm with businesses spanning brokerage, asset management, investment banking, and research. With a nationwide network of branches, it serves a diverse client base with professional financial services.

Contact Information:
* Beijing: No. 17 Zhushikou East Street, Dongcheng District, Beijing. Email: yanjiusuo@cnpsec.com
* Shenzhen: 2nd Floor, Guotong Building, Binhe Avenue, Futian District, Shenzhen. Email: yanjiusuo@cnpsec.com
* Shanghai: 3rd Floor, PSBC Building, No. 1080 Dongdaming Road, Hongkou District, Shanghai. Email: yanjiusuo@cnpsec.com

Deep Dive: Structural Changes in the PV Industry

To provide a more comprehensive understanding for institutional investors, we delve deeper into the structural changes reshaping the PV industry, moving beyond the weekly data points.

1. The End of "Blind Expansion" and the Rise of "Quality Growth"

For the past decade, the PV industry was characterized by rapid capacity expansion, often driven by local government subsidies and easy credit. This led to periodic cycles of overcapacity and price wars. The current phase marks a decisive break from this model.

• Policy Intervention: The central government’s emphasis on "high-quality development" and "anti-involution" is not just rhetoric. It is being enforced through stricter environmental regulations, energy consumption controls, and financial scrutiny of new projects. This raises the barrier to entry and forces existing players to focus on efficiency rather than volume.
• Capital Market Discipline: Investors are becoming more discerning, rewarding companies with strong cash flows and technological moats while penalizing those with high debt and obsolete technology. This shift in capital allocation is accelerating the consolidation process.

2. The Role of Energy Storage and Grid Flexibility

The integration of PV with energy storage is no longer optional; it is a necessity for grid stability.

• Mandatory Storage Requirements: Many provinces in China now require new PV projects to include a certain percentage of energy storage capacity (e.g., 10-20% for 2-4 hours). This creates a new demand stream for battery manufacturers and adds to the system cost of PV projects.
• Impact on IRR: The added cost of storage initially pressures project IRRs. However, as battery costs decline and electricity market reforms allow for arbitrage opportunities (charging when prices are low, discharging when high), the economics of PV+Storage are improving.
• Investment Opportunity: This trend favors companies that can offer integrated PV+Storage solutions. Inverters and module makers who partner with battery suppliers or develop their own storage technologies will have a competitive edge.

3. Global Supply Chain Reconfiguration

While China remains the dominant force in PV manufacturing, the global supply chain is slowly diversifying.

• Local Manufacturing Initiatives: The US Inflation Reduction Act (IRA) and the EU Net Zero Industry Act are incentivizing local PV manufacturing. This has led to announcements of new factories in the US, Europe, and India.
• Chinese Overseas Expansion: Chinese PV companies are responding by building factories in Southeast Asia, the Middle East, and even the US (via joint ventures). This "global local" strategy helps them mitigate trade risks and access local subsidies.
• Implication for Investors: Companies with successful overseas manufacturing footprints will be better insulated from trade barriers and may enjoy higher margins in protected markets. Investors should assess the geopolitical risk exposure of each company’s supply chain.

4. Technological Roadmap: TOPCon, HJT, and BC

The technology race is intensifying, with three main contenders for the next generation of mainstream PV technology.

• TOPCon (Tunnel Oxide Passivated Contact): Currently the dominant technology, replacing PERC. It offers a good balance of efficiency, cost, and compatibility with existing production lines. Most major manufacturers have committed to TOPCon for the next 2-3 years.
• HJT (Heterojunction): Offers higher efficiency and lower temperature coefficients but requires significant capital expenditure for new equipment. Cost reduction through silver paste reduction and thinning is critical for HJT to compete.
• BC (Back Contact): Eliminates front-side metal contacts, maximizing light absorption and aesthetic appeal. Longi is betting big on BC. If BC costs can be brought down, it could capture a significant share of the premium residential and commercial markets.

Investment Strategy: Monitor the cost curves and efficiency gains of each technology. Companies that can successfully navigate the transition to the next-gen technology while maintaining cost leadership will win. Currently, TOPCon is the safe bet, but BC and HJT offer higher upside potential if they achieve breakthroughs.

5. Electricity Market Reform in China

The transition from fixed feed-in tariffs to market-based electricity pricing is a profound change for the PV industry.

• Spot Market Participation: Large-scale PV plants are increasingly required to participate in electricity spot markets. This exposes them to price volatility, with prices potentially turning negative during periods of high solar generation.
• Green Power Trading: The development of green power trading markets allows PV generators to sell their electricity at a premium to corporate buyers seeking to meet ESG goals. This provides a new revenue stream that can offset lower spot prices.
• Adaptation: Companies and project developers that are adept at power trading and forecasting will outperform those that rely solely on physical generation. This favors larger, more sophisticated players with dedicated trading desks.

Final Thoughts

The photovoltaic industry is undergoing a painful but necessary transformation. The era of easy growth is over, replaced by a phase of intense competition, technological innovation, and policy-driven consolidation. For institutional investors, this environment presents both risks and opportunities.

The risks are real: price volatility, demand uncertainty, and geopolitical tensions. However, the opportunities are compelling: valuations are attractive, policy support is strong, and the long-term demand trajectory is secure. By focusing on high-quality companies with technological leadership and financial resilience, investors can navigate the short-term turbulence and capture the long-term value creation of the global energy transition.

We remain Overweight on the sector and recommend a selective approach, favoring integrated leaders like Longi Green Energy and Jinko Solar. As the industry stabilizes and demand accelerates in 2026, these companies are well-positioned to deliver superior returns.

(End of Report)