Summary of China Solar Industry Conference Call Industry Overview - The conference call focused on the China solar industry, particularly the dynamics of solar cell pricing and profitability trends in January 2026 [1][5][6]. Key Highlights - **Cell Price and Silver Cost Increase**: - There was a significant increase in silver paste prices for solar cells, with increases of 112% for Back-side, 34% for Front-side Busbar, and 46% for Front-side Finger in January 2026. This follows an average increase of 54% in Q4 2025 [5]. - The increase in silver costs has raised production costs for cells/modules by approximately Rmb0.03/W month-over-month, with silver now accounting for about 20% of total module production costs, up from 7% in Q3 2025 and 11% in Q4 2025 [5]. - **Solar Installation Performance**: - China’s solar installations in December 2025 were reported at 40GW, reflecting an 82% month-over-month increase but a 43% year-over-year decrease. The total for FY25 reached 315GW, which is a 14% year-over-year increase, exceeding Goldman Sachs' estimate of 283GW [5][6]. - **Market Demand and Supply Dynamics**: - The supply/demand ratio improved to 129% in January from 139% in December, indicating a slight tightening in the market despite weak transaction volumes and a 20% month-over-month decline in cell production [5][10]. - Producer-side inventory days increased to 62 days in January from 58 days in December, suggesting a buildup of inventory amid weaker demand [5][13]. Pricing Trends - **Price Forecasts**: - For Q1 2026, prices for cells and modules are expected to increase by 31% and 5% respectively, driven by higher silver costs and an export rush ahead of tax rebate removals starting April 1, 2026. However, a retreat of 24% and 8% is anticipated in Q2 2026 due to Tier 1 adoption of cost reduction technologies [6]. - Upstream prices for Poly and Wafer are projected to decline by 11% quarter-over-quarter in Q1 and Q2 2026 due to anti-monopoly measures and seasonal low electricity costs [6]. Sector Outlook - **Regulatory Environment**: - The ongoing "anti-monopoly" regulations and "anti-involution" campaigns are expected to influence industry pricing, aligning with Tier 1 cost reduction progress amid demand weakness in 2026 [6]. - **Investment Recommendations**: - The report suggests a cautious approach towards certain segments, recommending a "Buy" on high-efficiency Tier 1 module players like Longi and a "Neutral" stance on low-cost Tier 1 Poly players like GCL Tech. Conversely, a "Sell" rating is advised for Rod Poly (Daqo ADR/A, Tongwei), Wafer (TZE), Equipment (Shenzhen S.C., Maxwell), and Glass (Flat A/H, Xinyi Solar) [6]. Additional Insights - **Profitability Metrics**: - Cash profitability for cells/modules improved in January, while it deteriorated for glass/film segments. The average cash gross profit margin (GPM) for Tier 1 Poly was reported at 38%, with a notable increase in profitability metrics across various segments [7][9]. - **Market Sentiment**: - The overall sentiment in the solar market remains cautious, with a focus on company-specific cost reduction strategies and the impact of rising silver prices on the industry cost curve [6]. This summary encapsulates the key points discussed during the conference call, providing insights into the current state and future outlook of the China solar industry.

Investment Rating - The industry view is rated as Attractive, particularly for Chinese solar stocks, especially polysilicon players such as Tongwei, Daqo, GCL Poly, and Xinte, which saw share price increases of 28-36% from June 30 to July 8, compared to HSI +0.3% and SSE Composite +1.5% [2][6]. Core Insights - The central government has increased its focus on disorderly competition within the solar industry, indicating a shift in regulatory attention [2][6]. - There are execution risks due to weak demand, dominance of private firms in the market, and resistance from local governments [2][6]. - The report highlights potential uncertainties in the implementation of supply-side reforms, despite the government's heightened focus on the industry [2][6]. Summary by Sections Market Dynamics - The solar module industry is experiencing involution-style competition, as noted by People's Daily [6]. - The Central Financial Commission has taken steps to curb unregulated low-price competition, with PV being one of the highlighted industries [6]. - A forum chaired by the MIIT Minister with top PV firms and the China PV Industry Association occurred on July 3, indicating ongoing discussions about industry challenges [6]. Demand and Supply - PV demand is expected to decline in the second half of 2025 due to a policy node in May, with 198GW of solar capacity added in the first five months of 2025 [6][11]. - The solar manufacturing value chain in China is largely dominated by private firms, with significant new capacity built under local government investment promotion from 2022 [6]. - High polysilicon inventory levels exceed 300kt, equivalent to over 100GW or more than four months of demand [6]. Industry Consolidation - GCL and Tongwei have suggested potential consolidation in the polysilicon industry through the formation of a production capacity acquisition fund with other top players [6].