Report Industry Investment Rating No information provided in the content. Core Viewpoints - Since 2021, the PV industry has expanded production rapidly, leading to a supply-demand imbalance in 2024, with falling capacity utilization rates, sharp price drops in PV products, and companies trapped in price wars and losses [1][4]. - The "involution-style" competition in the PV industry stems from supply-demand mismatch, including profit and policy-driven overexpansion, limited theoretical efficiency improvement of crystalline silicon PV cells, and local protection hindering capacity phase-out. Domestic and external demand challenges further exacerbate overcapacity risks [2][4]. - The hazards of "involution-style" competition are significant, including huge losses and deteriorating debt repayment capabilities of PV companies, hindering technological progress, and posing risks to China's dual-carbon targets and triggering frequent anti-dumping investigations abroad [3][4]. Summary According to the Directory 1. Performances of Involution 1.1 Overcapacity - China's PV industry entered a rapid expansion cycle since 2021. The production capacity of the four major main materials expanded from 150 - 300GW in 2020 to over 1000GW in 2024, far exceeding global market demand [12][13]. - The operating rate of each link has declined since Q2 2024. Silicon material operating rate has been around 30% for over half a year, and that of silicon wafers, batteries, and components fell to 35 - 50% initially and rebounded to 50 - 70% recently, still lower than 2022 - 2023 [12][13]. 1.2 Low Utilization - Since 2023, due to the reversal of supply-demand pattern, PV product prices turned from rising to falling, and price wars amplified the decline. By mid - 2025, N - type silicon material, wafers, and batteries prices dropped over 80% compared to early 2023, and mainstream PV modules in China fell about 30% from early 2024 [28][29]. - In 2024, listed PV companies' revenue decreased about 22% year - on - year. PV enterprises' net profits shrank rapidly in 2024 and turned into losses from Q2 2024, with losses worsening quarter by quarter [28][29]. 2. Reasons of Involution 2.1 Profit Motive and Policy Encouragement - The PV industry has low technical thresholds and fast - spreading new technologies. Upstream, production equipment and lines are standardized with low entry barriers; downstream, SMEs can assemble modules easily; and core materials can be sourced from mature suppliers. New PV technologies can be copied and spread quickly [34][36]. - Benefiting from technological innovation, PV power generation cost decreased significantly, with rapid profit growth. In 2021, the net profit of A - share PV industry was 54.2 billion yuan, up 46%; in 2022, it was 116.8 billion yuan, up 97% [35]. - PV enterprises expanded production to consolidate market position. From 2019 - 2022, their fundraising scale expanded year by year. In 2023, the industry's capital expenditure was 5.37 times that of 2018, and construction in progress was 4.39 times [45][48]. - Abundant profits attracted non - PV enterprises. At least 56 non - PV enterprises entered in 2021, 69 in 2022, with a total investment over 307.8 billion yuan in 2022 [46][48]. - Technological bottlenecks and market competition led to low - price competition. The theoretical efficiency of crystalline silicon PV cells is limited, and new technologies are easily replicated, resulting in homogeneous competition [56][61]. - Local administrative interventions distorted market competition, making it difficult to phase out outdated capacity. An example is a PV enterprise A supported by local国资, which continued to operate despite problems, hindering capacity clearance [63][64]. 2.2 Domestic and External Demand Face Challenges - The surge in new energy installations led to grid integration challenges. China's average solar equipment utilization hours declined since 2024, and PV utilization rates dropped from 97 - 98% in 2021 to about 94% in 2025. Some eastern coastal provinces restricted new installations in 2024 [65][66]. - Power sector reforms in 2025 affected new energy installations. Policies led to a high new installation in the first five months, but PV module production scheduling declined in June [72][73]. - Overseas trade protectionism limited export demand. In 2025, China's PV exports faced pressure, with the cumulative export value of four major PV materials down 25.5% year - on - year in the first five months, and PV module exports down 2.2% [77][79]. 3. Hazards of Involution 3.1 Survival Crisis for PV Enterprises - Financial reports of 22 listed PV enterprises showed that their operating conditions deteriorated in 2023. In 2024, they reported net losses exceeding 40 billion yuan. As of July 2025, most remained unprofitable [85][86]. - The EBITDA/Interest Expense ratio dropped from 50 to 10, and the EBITDA/Interest - bearing Debt ratio dropped from 4.6 to 0.1 from 2023 to now [85]. 3.2 Negative Impact on the Long - Term Development of PV Industry - Sample companies' R&D expenditures dropped from 20 billion yuan in 2023 to 3.87 billion yuan between 2024 and Q1 2025, a 11% year - on - year decrease, the lowest in three years [96][97]. - The reduction in R&D investment is due to profit losses, cash flow constraints, and lack of self - innovation. It will impede core technological advancements and prolong technology iteration cycles [96][97].

Core Viewpoint - The overall sentiment in the polysilicon market is weak, with expectations for a continued decline in prices and demand due to inventory pressures and reduced downstream procurement [1][2]. Group 1: Market Performance - On May 7, polysilicon futures experienced a sharp decline, hitting a low of 35,655.0 yuan, with a current price of 35,700.0 yuan, reflecting a drop of 2.65% [1]. - The current inventory of polysilicon is around 250,000 tons, with total industry inventory estimated at nearly 500,000 tons, indicating significant de-stocking pressure [1]. Group 2: Supply and Demand Dynamics - The polysilicon market is in a capacity reduction cycle, with production cuts across various segments, leading to a slight recovery in March production to 96,000 tons, but overall price support remains weak [1]. - Downstream silicon wafer production shows signs of stabilization, but the focus remains on depleting polysilicon inventory, with new orders being limited [1]. - The demand side is negatively impacted by the end of the photovoltaic rush, with expected declines in silicon wafer production in May and June [2]. Group 3: Price Trends and Future Outlook - The N-type silicon material price has dropped nearly 4%, and the overall market is expected to see further price declines due to weak demand and inventory accumulation [1][2]. - The average cash cost for mainstream silicon material manufacturers is around 35,000-36,000 yuan per ton, which may provide some support for prices in the near term [2]. - The market is anticipated to remain in a weak state, with potential short-term rebounds as the market approaches delivery pricing in mid to late May [2].