Beijing has been striving to rein in severe overcapacity in the solar industry. But the sector is still plagued by illegal facilities, an insider says
For nearly two years, China has been waging an intense campaign to eliminate severe overcapacity in the solar industry – an issue that has sparked vicious price wars, undermined domestic firms’ bottom lines, and fuelled protectionist policies overseas.
Illicit production lines are so numerous that China’s solar glass production is about 5 per cent to 10 per cent higher than the industry’s total permitted capacity, according to an industry veteran from the Chinese Architectural and Industrial Glass Association, who asked not to be identified due to the sensitivity of the matter.
Beijing has introduced tough policies in an attempt to eliminate overcapacity, with the Ministry of Industry and Information Technology enforcing strict “capacity quotas”. China’s solar glass industry now has a permitted capacity of just over 80,000 tonnes per day, down from a peak of nearly 130,000 tonnes in 2024, the insider estimated.
However, some factories simply ignored the new rules – either breaking ground without obtaining quotas or building production lines that exceeded their approved capacity. Often, they did so with the tacit consent of local governments, which wanted to “attract hi-tech companies to boost the local economy and tax revenues”, the person said.
Timing has also been a factor. In 2020 and 2021, China’s solar glass industry experienced a “gold rush”, as prices soared to about 40 yuan (US$6) per square meter, giving producers a hefty profit margin on costs of 13 yuan. That led a wave of firms to set up factories, “including companies with no background in glass manufacturing”, the insider recalled.
But solar glass facilities typically take up to two years to build – and by the time the new facilities began to come online, the market had totally transformed. Demand had plunged, supply was saturated, and China was already introducing tighter policies.
Solar glass prices have now collapsed to just 8.5 yuan to 9 yuan per square metre, while costs remain unchanged, the person said. The result is firms across the supply chain running severe losses.
China’s top three solar panel and battery manufacturers – Tongwei, Longi Green Energy Technology and TCL Zhonghuan Renewable Energy Technology – have reported net losses since late 2023, or 10 consecutive quarters.
The downturn in demand stemmed from two factors, the insider observed. In China, there was a frantic race to build solar farms between 2020 and 2025, with firms effectively “front-loading” several years of demand. But that frenzy inevitably came to an end.
Meanwhile, global orders cooled amid the war in Ukraine, as countries facing economic headwinds and energy challenges rethought their carbon-reduction plans. Global photovoltaic installations jumped 33 per cent in 2024, but the growth rate dropped to 10 per cent a year later, according to the non-profit organisation SolarPower Europe.
Beijing continues to step up its fight against toxic price wars in the solar photovoltaic sector. In March, the “anti-involution” campaign was included in China’s 15th five-year plan, which outlines the country’s policy trajectory for the rest of the decade.
That policy shift has already had a significant impact, the insider said. Many solar panel manufacturers have suspended operations since April, causing inventory levels for solar glass to surge.