Over the past 18 months, prices across the entire solar supply chain have reached rock-bottom levels. How did the market reach the imbalance that led to the PV price collapse, what does this mean for innovation, and how might it impact future technological transitions?
Overcapacity that far exceeds end-demand is unsustainable for any industry. From 2022 to 2024, the PV industry faces significant overcapacity, leading to a significant buildup of inventories and putting manufacturers in a difficult position.
By the end of 2024, global module inventories may have climbed to a point where they account for approximately 50% of that year's installations.
Notably, this oversupply is not driven by declining end-demand. PV installations saw strong growth in 2022, 2023, and 2024, with year-on-year increases of 36%, 78%, and 29%, respectively. Since then, installation growth has slowed, meaning that the room for maneuver to build excess capacity to accommodate future market growth has further shrunk.
Due to the oversupply, manufacturers face an extremely competitive market. Costs exceeding selling prices often mean module manufacturers must accept negative profit margins or risk being forced out of the market entirely.
This means, in extreme cases, some manufacturers will cut corners and minimize manufacturing costs to maintain profit margins. This, in turn, will lead to additional quality issues for the industry in 2024 and 2025, with a worrying rate of PV module quality test failures.
Module Innovation
But all is not gloom. Despite the market challenges facing manufacturers, innovation and improvements in module performance continue unabated. From the beginning of 2023 to the second quarter of 2025, the efficiency of commercial maximum tunnel oxide passivated contact (TOPCon) modules increased by 1.3% (absolute value), from 22.76% to 24.06%. During the same period, driven by Aiko Solar and LONGi Solar, the peak efficiency of commercial back-contact modules increased by a significant 3.0% (absolute value), from 22.53% to 25.54%, demonstrating that innovation continues to thrive.
Comparing the average efficiency of the two technology categories, the increase is more modest. During the same period, the average efficiency of TOPCon modules increased by approximately 1.0% (absolutely), while the average efficiency of back-contact modules increased by 1.2% (absolutely).
Currently, the most common question we receive from customers and industry insiders is: When will downward price pressure ease and the supply-demand balance return to equilibrium?
Generally speaking, there are two scenarios for the industry to regain supply-demand balance. One scenario requires end-user demand to grow to a level where excess inventory is no longer considered "excess." However, with global demand growth slowing in the coming years, this path to equilibrium is unlikely. A more likely scenario is for manufacturers to scale back production, gradually eliminating excess inventory.
In 2024, it was widely believed that prices could begin to rebound in mid-to-late 2025. This was based on the prediction that a large number of small manufacturers would be forced to cease production due to bankruptcy in 2024. However, the pace of bankruptcies and decisions to exit the PV market has been slower than manufacturers and analysts anticipated.
Now, in mid-2025, the unsustainable overcapacity situation is beginning to turn around. Since the beginning of 2025, "self-regulatory" agreements among major Chinese manufacturers have helped reduce production—polysilicon production fell by over 45% year-on-year from January to April, and wafer production fell by over 20%. While this has eased overcapacity, polysilicon and module inventories remain stubbornly high in many regions.
An opportunity to address excess inventory may be approaching as manufacturing giants announce more conservative targets (at least by PV industry standards), both in terms of capacity expansion and output guidance for 2025. Rumors suggest that major players are planning further production cuts. If manufacturers adhere to less aggressive production growth in 2025, downward price pressure across the entire PV supply chain seems more likely to begin easing in early to mid-2026.
Over the past 18 months, prices across the entire solar supply chain have reached rock-bottom levels. How did the market reach the imbalance that led to the PV price collapse, what does this mean for innovation, and how might it impact future technological transitions?
Overcapacity that far exceeds end-demand is unsustainable for any industry. From 2022 to 2024, the PV industry faces significant overcapacity, leading to a significant buildup of inventories and putting manufacturers in a difficult position.
By the end of 2024, global module inventories may have climbed to a point where they account for approximately 50% of that year's installations.
Notably, this oversupply is not driven by declining end-demand. PV installations saw strong growth in 2022, 2023, and 2024, with year-on-year increases of 36%, 78%, and 29%, respectively. Since then, installation growth has slowed, meaning that the room for maneuver to build excess capacity to accommodate future market growth has further shrunk.
Due to the oversupply, manufacturers face an extremely competitive market. Costs exceeding selling prices often mean module manufacturers must accept negative profit margins or risk being forced out of the market entirely.
This means, in extreme cases, some manufacturers will cut corners and minimize manufacturing costs to maintain profit margins. This, in turn, will lead to additional quality issues for the industry in 2024 and 2025, with a worrying rate of PV module quality test failures.
Module Innovation
But all is not gloom. Despite the market challenges facing manufacturers, innovation and improvements in module performance continue unabated. From the beginning of 2023 to the second quarter of 2025, the efficiency of commercial maximum tunnel oxide passivated contact (TOPCon) modules increased by 1.3% (absolute value), from 22.76% to 24.06%. During the same period, driven by Aiko Solar and LONGi Solar, the peak efficiency of commercial back-contact modules increased by a significant 3.0% (absolute value), from 22.53% to 25.54%, demonstrating that innovation continues to thrive.
Comparing the average efficiency of the two technology categories, the increase is more modest. During the same period, the average efficiency of TOPCon modules increased by approximately 1.0% (absolutely), while the average efficiency of back-contact modules increased by 1.2% (absolutely).
Currently, the most common question we receive from customers and industry insiders is: When will downward price pressure ease and the supply-demand balance return to equilibrium?
Generally speaking, there are two scenarios for the industry to regain supply-demand balance. One scenario requires end-user demand to grow to a level where excess inventory is no longer considered "excess." However, with global demand growth slowing in the coming years, this path to equilibrium is unlikely. A more likely scenario is for manufacturers to scale back production, gradually eliminating excess inventory.
In 2024, it was widely believed that prices could begin to rebound in mid-to-late 2025. This was based on the prediction that a large number of small manufacturers would be forced to cease production due to bankruptcy in 2024. However, the pace of bankruptcies and decisions to exit the PV market has been slower than manufacturers and analysts anticipated.
Now, in mid-2025, the unsustainable overcapacity situation is beginning to turn around. Since the beginning of 2025, "self-regulatory" agreements among major Chinese manufacturers have helped reduce production—polysilicon production fell by over 45% year-on-year from January to April, and wafer production fell by over 20%. While this has eased overcapacity, polysilicon and module inventories remain stubbornly high in many regions.
An opportunity to address excess inventory may be approaching as manufacturing giants announce more conservative targets (at least by PV industry standards), both in terms of capacity expansion and output guidance for 2025. Rumors suggest that major players are planning further production cuts. If manufacturers adhere to less aggressive production growth in 2025, downward price pressure across the entire PV supply chain seems more likely to begin easing in early to mid-2026.
