Minmetals Securities has released a research report indicating that amid lackluster demand, the natural supply-side consolidation in the solar photovoltaic industry, combined with anti-involution policy measures, is already generating premiums for high-quality production capacity both domestically and internationally. The report highlights that notable natural exit events involving leading producers are worth monitoring, as these developments are expected to improve the industry's supply-demand balance and support a recovery in valuations and earnings for related companies. From an industry perspective, the current environment does not yet favor large-scale deployment of BC (back contact) capacity, with multiple polysilicon technology routes likely to coexist in the medium term, and strengthening tandem product offerings may serve as a viable breakthrough strategy.

Where the demand picture stands globally

The report outlines that primary solar installation regions are experiencing subdued demand. In the Chinese market, following the full market-based electricity pricing reform for new energy, pressure on electricity tariffs persists, with settlement prices for solar power in most provinces falling below coal benchmark prices and the levelized cost of electricity. This has weakened project economics, leading to disappointing tender activity and grid connections in the first half of 2026, with a noticeable temporary decline in demand. In the United States, demand is declining under the influence of OBBBA-related factors, particularly in the residential segment, contributing to slower industry growth. Meanwhile, major European countries such as Germany, France, and the Netherlands are progressively eliminating new energy subsidies, while grid congestion and negative electricity prices have emerged as significant constraints on solar installations, pointing to decelerating growth momentum in the future. With major installation regions showing subpar growth rates, medium-term industry demand is expected to remain relatively flat.

Active and passive forces driving supply consolidation

The industry's main production chain has recorded losses for eleven consecutive quarters, with high polysilicon inventory levels keeping price pressure on the entire value chain. At current low utilization rates, companies are suffering severe cash burn, and tail-end capacity has already begun to exit the market naturally. Industry concentration, however, has remained largely stable until a few merger and acquisition cases among leading companies emerged in 2026, marking the initial phase of natural consolidation. The anti-involution campaign continues to advance, with mandatory standards guiding high-quality industry development through a 'quality, efficiency, and energy consumption' framework. On the quality front, price monitoring and quality inspections create baseline constraints to prevent extreme low-price competition, alongside mandatory requirements for module safety and nameplate labeling. On the efficiency front, raising the threshold prevents inefficient capacity from producing and selling, while guiding the market promotion of high-efficiency products. On the energy consumption front, establishing energy usage standards forces older, high-energy-consuming production lines to face rising compliance costs or shutdowns, with BC technology receiving considerable support as modules can more readily achieve the top-tier energy efficiency standard.

BC penetration rises amid technology diversification

BC modules are gaining increasing share in domestic procurement tenders, commanding premiums over TOPCon modules both at home and abroad. A growing number of companies are joining the BC technology camp, even as the technology itself is experiencing convergence followed by renewed divergence. Approaches have consolidated around chip lithography and laser solutions, with laser-based methods emerging as the mainstream, while post-printing lithography has recently appeared, with its cost, yield, and efficiency progress worthy of attention in the fourth quarter of 2026 through the first quarter of 2027. BC patent competition has also moved into the public spotlight, and against the backdrop of weak domestic demand, global trade conflicts, and the trend toward localized manufacturing capacity, patent requirements are expected to become increasingly important.

Key risks to watch

The report identifies several risk factors: underperformance in the execution of anti-involution policies, leading to sustained internal industry competition; weaker-than-expected demand with intensifying competitive pressures; escalating trade frictions that obstruct domestic exports and exacerbate supply oversupply; and faster-than-expected foreign capacity expansion, which would intensify competition for domestic producers.