China's Oversupplied Solar Sector Sees Hints Of Stabilization

The leading solar cell maker is looking for capital support from a Hong Kong listing to tide it over while it waits for recovery in its oversupplied sector

Key Takeaways:

• Solar Space has filed for a Hong Kong IPO, reporting it swung from a profit in 2023 to a 1.29 billion yuan loss last year
• The entire solar sector is suffering from oversupply, but saw hints of stabilization as PV module prices ticked up in February for the first time in 30 months

While Chinese companies have dominated the global market for photovoltaic (PV) products, the fiercely competitive group has created its own overheated space by building up too much capacity, causing prices to plunge. That's sent most companies into the red, forcing them to rely on their own cash reserves or raise new money until the air clears.

One of the last non-listed majors, SolarSpace Technology Co. Ltd., is turning to the latter option, hoping investors will look past its sea of red ink to buy into its story of better times ahead for a leader that was the world's second-largest PV cell producer in 2024.

SolarSpace previously applied and was approved to list on Shenzhen's Nasdaq-style ChiNext Market in 2023. But it withdrew that application in June last year, after falling into the red in the year's first quarter amid strong sector headwinds and a weak domestic stock market. The company has pivoted to Hong Kong this year, boasting an A-list of domestic underwriters including Haitong Securities, China Securities International and Citic Securities.

Founded in 2011, SolarSpace is a leading manufacturer of solar cells that are at the core of each electricity-producing solar panel. It has broadened its scope in recent years to include PV modules as well. According to third-party market data in the listing application filed earlier this month, SolarSpace ranked second among PV cell makers globally in 2024, with 14.6% of the market. Its primary buyers are major PV module makers, with nine out of the world's top 10 as its customers. The company now operates in more than 29 countries and regions and has more than 1,000 customers.

The PV cells that are SolarSpace's bread-and-butter are the most basic unit of photovoltaic panels, responsible for converting sunlight into electricity. Revenue from PV cells currently accounts for more than 80% of the company's total. Its newer PV module business is also growing steadily, with sales rising from 0.9GW in 2022 to 2.9GW in 2024, growing from 7.5% to 18.7% of its revenue over that period.

But like many of its peers up and down the solar equipment chain, the broader industry slump created by slowing demand and a massive addition of new capacity dragged SolarSpace into the red last year. As prices plunged, SolarSpace's revenue tumbled by 45.68% year-on-year to 11.32 billion yuan ($1.56 billion) last year. It recorded a loss of 1.29 billion yuan for the year – a stark contrast to its profit of 1.67 billion yuan in 2023.

Accumulating inventory

The average selling prices of PV cells, as well as the silicon wafers used to make them, have been sliding nonstop since the fourth quarter of 2023, driving down profitability for everyone. SolarSpace's application document shows that from 2022 to 2024, the overall average selling price of its PV cells dropped by roughly two-thirds from 0.99 yuan/W to just 0.32 yuan/W. In the process, its gross margin also plummeted from 11.8% in 2022 to a negative 10.1% last year.

As we've already noted, SolarSpace is hardly the only one suffering. Based on statistics cited by other media, 31 PV enterprises reported losses last year, accounting for more than 70% of the industry. Silicon wafer and battery module producers took the hardest hit, with big names like Eging Photovoltaic (600537.SH), TCL Zhonghuan (002129.SZ), Tongwei (600438.SH) and Drinda (002965.SZ) all now operating in the red.

Meanwhile, SolarSpace's debt-to-asset ratio, inventory and inventory turnover days are all deteriorating. Its debt-to-asset ratio rose from 79.1% in 2022 to 83.7% last year, while its inventory jumped 150% from 937 million yuan in 2022 to 2.4 billion yuan in 2024. As the market became flooded with solar cells, the company's inventory turnover days – the time needed to sell an average product – also more than tripled from 19.7 days in 2022 to 68 days last year. As its situation deteriorated, the company's cash fell from 1.92 billion yuan at the end of 2023 to 1.11 billion yuan at the end of last year.

Given its deteriorating situation, it's no wonder SolarSpace is desperate for an IPO. In such dire times, the company could have difficulty selling its story to investors, who are closely watching for when the situation might finally stabilize.

Glimmers of hope?

Such hope could be coming soon, following some positive signals since the start of the year. Part of that is coming from Beijing, which says new commercial and industrial distributed photovoltaic projects approved before the end of April can get big electricity subsidies. Moreover, all power generated by new distributed PV projects that launch after May 31 can enter the power market, using a bidding system with no more state subsidies.

These two looming dates have spurred a short-term boom in new projects and installations, helping to support PV battery and module prices. In February 2025, China's PV module prices rose 0.4%, marking their first increase in 30 months. The uptick, while quite small, has been enough to hearten industry players that the bottom of the current downturn could be near.

SolarSpace has also been active overseas in recent years, building presences in the U.S., Europe, the Middle East, Southeast Asia and South Asia. That's boosting its overseas revenue, which rose from 1.44 billion yuan in 2022, or 11.5% of its total, to 3.72 billion yuan last year, or 32.9%. The company said it plans to use funds from the listing to establish a new overseas production base in the U.S. state of North Carolina to produce high-efficiency photovoltaic cells.

While SolarSpace looks strong as a leading solar cell maker, its increasingly dire financial situation could still keep investors away if it makes it to the IPO finish line. At the end of the day, photovoltaic companies are still very much a group whose fate hinges on their industry's outlook. Accordingly, the latest state of the sector is likely to be the most important factor determining whether investors give SolarSpace a warm reception or the cold shoulder.