Tongwei Co, the world's largest manufacturer of a crucial material for solar panels, has revealed plans to construct an extensive new facility in northern China, a strategic move occurring amidst an industry grappling with a price war and imminent consolidation.
In a stock exchange filing on Monday, Chengdu-based Tongwei announced its agreement with local authorities in Ordos, Inner Mongolia, to invest 28 billion yuan (US$3.9 billion or RM18.15 billion) in a two-phase project. The new factory is projected to have the capacity to produce 500,000 tonnes of industrial silicon and 400,000 tonnes of polysilicon annually.
Shares of Tongwei experienced a dip of up to 0.8% on Tuesday, while South Korean competitor OCI Holdings Co witnessed a drop of as much as 3%.
This expansion initiative unfolds against the backdrop of diminishing profitability for solar manufacturers. Despite the accelerated growth in China's solar output, demand is not keeping pace, leading to a complex situation exacerbated by overcapacity. Last week, a polysilicon maker in Inner Mongolia ceased production, signaling the industry's struggles.
Tongwei's newly announced plant aims to capitalize on low raw material costs and is anticipated to enter the market in 2026, aligning with the sector's projected recovery from the ongoing consolidation phase, according to a separate statement by the company.
Global polysilicon production capacity stood at 1.1 million tonnes as of late March, with an additional 2.6 million tonnes of manufacturing capacity either announced or under construction, as reported by BloombergNEF.
The first phase of Tongwei's project is slated to deliver approximately half of its planned capacity by the end of December 2025, with the timing of the second phase contingent on market conditions. Funding for the facility will be sourced from the company's existing capital and loans from financial institutions.
GCL Technology Holdings Ltd, a prominent polysilicon maker, predicts that China's solar sector is entering a challenging phase of consolidation, expecting a reduction in the number of manufacturers over the next 12 to 18 months. Approximately a quarter of polysilicon makers could face closure during this period, according to a top executive at GCL Technology Holdings Ltd in an interview earlier this month.