Polysilicon Prices Continue To Decline: Dual Challenges Of Overcapacity And Technological Iteration

In April 2025, China's polysilicon spot prices continued the downward trend since 2024. The average transaction price of N-type recycled materials fell by 1.71% month-on-month to 40,300 yuan/ton, and the price of P-type polysilicon fell by 1.49% to 33,000 yuan/ton. Behind this phenomenon is the structural contradiction between the expansion of global polysilicon production capacity and the slowdown in downstream demand growth.

Data show that in 2023, global polysilicon production capacity increased by 71.6% year-on-year to 2.256 million tons, of which China's production capacity accounted for as high as 93%, while the global photovoltaic new installation growth rate in the same period was only 7.67%. The imbalance between supply and demand has led to an inventory backlog in the industry, and companies are forced to reduce load. Although leading companies such as Tongwei and GCL have supported prices by reducing production, market transactions are sluggish and prices have rebounded weakly.

Capacity expansion and supply-demand mismatch

The high prosperity of the photovoltaic industry in 2022-2023 stimulated the large-scale release of polysilicon production capacity, and China alone added 1.28 million tons of new capacity in 2023. However, the downstream silicon wafer link was affected by the iteration of N-type technology. In 2023, global silicon wafer shipments fell by 14.35% year-on-year, resulting in a backlog of polysilicon inventory. Taking April as an example, the inventory turnover days of silicon material companies extended from 15 days in March to 22 days, and some companies even suspended the signing of new orders.

Technology iteration accelerates the elimination of P-type silicon materials

The penetration rate of N-type silicon wafers has increased rapidly from 54% in 2023 to 75% in 2024. It has higher requirements for polysilicon purity (boron content must be less than 0.1ppba), and P-type silicon materials cannot meet N-type demand, and the price has fallen significantly. In April, the price of P-type polysilicon was 18% lower than that of N-type, and demand continued to shrink. Some companies turned to producing low-quality products such as cauliflower materials to reduce inventory.

Policy and international trade impact

The United States imposed tariffs of up to 3521% on photovoltaic modules in four Southeast Asian countries, resulting in obstruction of China's module exports. Although direct exports of polysilicon accounted for less than 5%, module companies turned to the Middle East and Latin American markets, indirectly reducing the demand for polysilicon purchases. In addition, the EU carbon tariff (400kg CO₂/kW) pushed up China's module export costs by 12%, further suppressing the demand for polysilicon.

Downward shift of the cost curve and corporate competition

The production cost of polysilicon continues to decline due to technological progress. The power consumption of granular silicon is 40% lower than that of rod-shaped silicon. Combined with the low electricity price advantage in Xinjiang and Inner Mongolia (0.25 yuan/kWh), the cash cost of leading companies has dropped to less than 30,000 yuan/ton. However, the cost of second-tier enterprises is generally 35,000-40,000 yuan/ton, and the downward price has forced the industry to reshuffle. In 2024, 5 small and medium-sized enterprises have withdrawn from the market.

Upstream: profit compression and capacity clearance

The gross profit margin of polysilicon enterprises has dropped from 60% in 2022 to 15% in 2024. Leading enterprises such as Tongwei Co., Ltd. have maintained prices by reducing production and controlling quantity, but second-tier enterprises are under great inventory pressure. It is expected that the domestic polysilicon capacity utilization rate will drop from 85% in 2023 to 65% in 2025, and about 300,000 tons of backward production capacity will face elimination.

Midstream: cost dividend and technological differentiation

Silicon wafer enterprises benefit from the price reduction of polysilicon, and the proportion of non-silicon costs has increased from 40% in 2023 to 55%. However, N-type silicon wafers have strict requirements on silicon material quality. First-tier companies such as Longi and Zhonghuan have locked in high-quality silicon materials through long-term contracts, while second-tier companies are forced to purchase low-quality silicon materials, resulting in a 3-5 percentage point drop in silicon wafer yield.

Downstream: Component price transmission and market differentiation

The price reduction of polysilicon has pushed the price of components down to below 0.7 yuan/W, but the European and US markets maintain high prices due to trade barriers (0.18 euros/W in Europe and 0.35 US dollars/W in the United States). Chinese component companies are accelerating their layout in Southeast Asia. In 2024, the component production capacity of Vietnam and Malaysia will increase by 60% year-on-year, but US tariffs will cause their exports to the United States to fall by 40%.

Short-term: price pressure and inventory reduction

With the arrival of the flood season in May, the polysilicon production capacity in Sichuan, Yunnan and other places will increase by 10%. Coupled with the low willingness of silicon wafer companies to replenish inventory, prices may further drop to 38,000 yuan/ton (N-type) and 31,000 yuan/ton (P-type). Enterprises need to hedge price risks through futures tools (such as Guangzhou Futures Exchange polysilicon futures), and some enterprises have tried to lock in profits through the "basis point price" model.

Medium-term: Technology iteration and capacity optimization

The proportion of N-type silicon material demand will increase from 60% in 2024 to 80% in 2025, which will promote the accelerated upgrading of polysilicon enterprises. GCL Technology plans to reach 1 million tons of granular silicon production capacity in 2025, and its CCZ continuous direct pulling technology can reduce the unit consumption of silicon materials by 15%. At the same time, policy restrictions on new production capacity (such as the "2024-2025 Energy Conservation and Carbon Reduction Action Plan") will slow down the expansion of production capacity.

Long-term: Supply and demand rebalancing and global layout

In 2025, global polysilicon demand is expected to be 1.7 million tons, while production capacity will reach 4 million tons, with a surplus rate of more than 50%. Industry integration is inevitable, and leading companies have improved their risk resistance through vertical integration (such as Tongwei's "silicon material-silicon wafer-battery-module" full industry chain). In addition, China's polysilicon export share will increase from 8% in 2023 to 15% in 2025, with a focus on the Middle East and Latin American markets.

The downward trend in polysilicon prices is an inevitable result of overcapacity and technological iteration. The industry is undergoing a transformation from "quantity increase" to "quality improvement". Companies need to focus on technological innovation (such as N-type silicon material purification and granular silicon technology), optimize cost structure (such as layout in low-electricity price areas), and manage price risks through futures tools.

At the policy level, it is necessary to strengthen capacity regulation and international trade coordination to avoid disorderly competition. In the long run, with the continued growth of global photovoltaic installations (estimated to reach 587GW in 2030), the polysilicon industry will usher in a new round of growth cycle after the reshuffle, but technological leadership and cost advantages will become the core of competition.