INDUSTRY BRIEF: Polysilicon makers to set up company to absorb struggling smaller rivals

China’s major makers of polysilicon, one of the key components used to make solar panels, plan to set up a company to buy their Chinese smaller rivals, in an effort to clean up a sector plagued with massive overcapacity, Caixin reported on Wednesday.

Major companies participating in the initiative include Tongwei (600438.SH) and GCL Technology (3800.HK), Caixin said, citing unnamed sources familiar with the plan. The new company would be able to work with the larger producers to better control the industry’s output and support prices, which have been plunging over the last year due to oversupply.

Negotiations for the new company’s formation began at the start of this year, and the parties involved, including major polysilicon makers, potential acquisition targets, and financial institutions, have reached a consensus on how to proceed.

“This proposal was born out of desperation,” Lü Jinbiao, deputy head of the silicon branch at the China Nonferrous Metals Industry Association (CNIA), told Caixin. “It is an emergency plan pushed forward by the leaders of the biggest companies.”

An example of the industry’s recent woes is Daqo (DQ.US; 688303.SH), which reported the average price for its polysilicon in the first quarter of 2025 was $4.37 per kilogram, down 43% from $7.66 per kilogram a year earlier. But Daqo’s average production cost in the first quarter of 2025 was $7.57 per kilogram, meaning it lost $3.20 for every kilogram of polysilicon it sold.

In the face of such losses, most polysilicon producers have sharply lowered their output and now produce at less than half of their capacity.

By Doug Young

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