Sinolink Securities has released a research report indicating that solar glass is among the fastest-clearing and most competitively structured segments in the photovoltaic supply chain. Leading players enjoy stable profitability advantages, while differentiated overseas capacity further consolidates their edge. As weaker tail-end capacity and smaller players continue to exit, top companies are poised for a high-probability recovery in profitability and market share. Currently, both Xinyi Solar and Flat Glass Group are trading at historically low price-to-book ratios. Given that the PV sector's attention, market expectations, and institutional positioning are all subdued, the room for further valuation compression is limited. This, combined with the potential for significant upward revaluation alongside profit recovery at the leaders, offers a strong margin of safety.

Amid deep losses, the industry is accelerating furnace repairs, driving a rapid decline in supply and a bottom-up price recovery.

With softening PV demand projected for 2026, supply-demand pressure in solar glass is intensifying. By late May, industry inventory had climbed to a record high of 53.4 days, while 2.0mm glass prices bottomed out at RMB 8-8.5 per square meter, pushing the entire sector into cash losses, according to the report. Under operational strain, furnace shutdowns have accelerated. Data from Zhuochuang Information shows that since the start of the year, the industry has halted a combined 19,600 tons of furnace capacity, corresponding to an annualized module demand of roughly 127GW. As of September 10, global and domestic solar glass production capacity stood at 85,000 tons and 72,000 tons, respectively, supporting annualized module demand of about 553GW and 466GW. Given that some players are reducing output through furnace preservation and kiln port plugging amid profit pressures, actual supply is expected to be even lower. Following supply contraction, inventory has fallen from its peak, and glass prices have risen three times consecutively from mid-July through early September to RMB 10.25 per square meter, up 24% from the previous low.

The cost curve is relatively steep, leaving room for further supply reduction.

The solar glass cost curve is notably steep. At current prices of RMB 10-10.5 per square meter, second- and third-tier players remain in cash loss territory, suggesting additional supply cuts ahead. Domestically, furnaces below 1,000 tons per day total 5,900 tons, equivalent to annual module demand of about 38GW, largely concentrated among smaller players. Of this, 2,550 tons come from furnaces under 700 tons per day, which are likely to be shut down if prices stay low. Furthermore, some tail-end firms, struggling with sustained deep losses, are operating just a single furnace to preserve market share or resorting to kiln plugging to control output and inventory. If prices remain depressed, these players face a high probability of permanently exiting the market due to cash flow and debt pressures.

Substantial capacity rationalization has already occurred, while smaller players lack both the willingness and capability for reactivation, keeping potential supply additions limited and manageable.

Furnace repair involves replacing refractory materials and upgrading kilns, requiring significant capital. Since the second half of 2024, second- and third-tier companies have endured nearly two years of sustained losses, meaning most lack the financial means to execute actual repair work on halted lines. Additionally, restarting a repaired line requires a 3-6 month ramp-up period, and once operational, output is rigid and hard to adjust. Unless glass prices and profitability recover significantly and sustainably, most smaller players are unlikely to restart. Among currently idled lines, Sinolink estimates roughly 33,000 tons of capacity, either below 700 tons per day or belonging to companies with no remaining active production, can be deemed effectively cleared. Looking ahead, leading players hold over 8,000 tons of ready-to-ignite capacity. Given the wide cost disparities, capacity releases over the next two to three years will primarily come from top-tier and leading second-tier firms, making potential supply additions both limited and controllable.

Leading players' profitability advantages are stable, overseas differentiated capacity strengthens barriers, and profit recovery with market share gains carries high certainty.

Solar glass leaders like Xinyi Solar and Flat Glass Group have maintained gross margin gaps of over 10 percentage points versus smaller rivals through advantages in raw material self-supply, scale procurement, energy efficiency, and yield rates. In recent years, the gap has widened further thanks to premium-priced overseas capacity. With limited overseas supply growth ahead, leading firms' cost advantages abroad are expected to sustain these premiums amid ongoing profitability pressure. As domestic capacity at second- and third-tier players clears faster, top companies are set for a high-certainty profit recovery while leveraging their profitability and capital strength to outpace the industry in capacity growth, thus reclaiming market share.

Key risks include lower-than-expected downstream installation demand, excessively rapid supply releases, deteriorating international trade conditions, and raw material price volatility.