In recent times, the unfolding story of Tongwei Co., Ltd. has taken a dramatic turnOnce hailed as a titan in the photovoltaic industry—a sector crucial for sustainable energy—its recent projections paint a starkly different picture for 2024. The company, known for its vast production capacity of solar products, has now announced a staggering expected loss of between 70 billion to 75 billion yuan for the fiscal year, compared to a profit of approximately 135.74 billion yuan during the same period last yearSuch financial woes signal not just a lack of profitability but a challenging future for a company that was once celebrated as the 'King of Photovoltaic Profits.'

As we analyze the financial health of Tongwei, we can see that the pressure from ongoing losses has been compounding over many quartersThe process began in the fourth quarter of 2023 when the company reported a net loss of 27.28 billion yuanSubsequently, for the first three quarters of 2024, losses continued with 7.87 billion, 23.43 billion, and 8.44 billion yuan respectivelyBy the fourth quarter, projections suggest losses could reach between 30.26 billion and 35.26 billion yuan—marking a record for the company since its listing.

These losses stem from a multitude of factors, the most pressing being the dramatic fall in market prices across various segments of the photovoltaic industry value chainReports indicate that the prices have dipped significantly, often falling below production costsCoupled with a yearly asset impairment loss estimated at around 10 billion yuan, Tongwei has found it increasingly difficult to pivot back to profitability despite maintaining a positive cash flow from its business operationsOver the first three quarters of 2024 alone, the company has recorded asset impairment losses exceeding 30 billion yuan.

With its roots planted in the primary segment of the photovoltaic industry, Tongwei once prided itself on its extravagant capacity and persistent expansion plans

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In 2023 alone, they announced production boosts across various locations, including Sichuan provinces of Leshan and Chengdu, which encompassed silicon materials, modules, and solar cellsBy 2026, the company aimed for a production capacity of high-purity silicon and solar cells to reach staggering figures between 80 to 100 thousand tons, and 130 to 150 GW respectively.

However, the reality is that as of late 2024, Tongwei's production capacity for high-purity silicon has surpassed 90 thousand tons, against a backdrop of soaring nominal capacity in China that is calculated at 257 thousand tons, significantly exceeding current demandThis overproduction has led to a substantial drop in silicon prices over the past couple of years, leaving Tongwei's aggressive expansion strategies failing to deliver anticipated profits, instead pushing the company further into the red.

While the company sought to scale up operations in the photovoltaic segment, these efforts could not offset the overwhelming impact of sharp declines in product pricesAdditionally, Tongwei’s 20 thousand-ton polysilicon project in Yunnan, scheduled for operation in May 2024, has encountered early losses linked to a combination of ongoing technical adjustments and falling product prices.

As pressures mount, Tongwei finds itself compelled to halt its expansion effortsIn November 2024, during an investor relations activity, the company announced it was exploring production cut plans in response to an ongoing market slump in polysilicon pricesThe intention was to dynamically adjust production schedules based on market conditions to facilitate more economical production approaches.

On December 24, 2024, Tongwei officially communicated through its official WeChat account that it would gradually implement technology upgrades and maintenance across its four high-purity polysilicon production facilities located under Sichuan Yongxiang Co., Ltd., thus signaling a phased reduction in production output

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The specifics of resuming production will be contingent on changes in local electricity pricing and overall market conditions.

The company indicated that these strategic moves aim to adhere to directives from the central economic working conference, whereby they are keen to eliminate 'involution-style' competition and foster sustainable development within the photovoltaic sectorMoreover, the technological upgrades and production cuts are anticipated to alleviate operational losses surrounding the high-purity silicon business, hopefully leading to a more positive overall impact on company performance and profitability.

Concurrently, other industry giants like Daqo Energy and GCL-Poly Energy have also announced similar plans to cut productionCollectively, the three companies are involved with more than 160 thousand tons of polysilicon capacityThis coordinated reduction in output is predicted to contribute positively to the ongoing mismatch between supply and demand in the polysilicon marketStatistical analysis from the China Nonferrous Metals Industry Association showed a slight uptick in poly silicon transaction prices in the past week, attributed to a dual expectation of reduced output and conscious stock management by companies across the sector.

However, the journey does not end here; the ongoing adjustments in production capacity come amid a prolonged downtrend in the industryAll polysilicon producers in China are currently operating below normal output levels, particularly in regions like Sichuan where operational rates have been notably reducedAnalysts forecast that this trend of decreased output might persist well into the first quarter of the next fiscal year.

Amid all these challenges, the anticipated acquisition of Runyang Co., Ltd. by Tongwei has also emerged as a potential point of contentionInitially, this acquisition was regarded as a pivotal move to consolidate power within the industry but faced unforeseen uncertainties as the photovoltaic sector struggled to stabilize.

In a press release post-market on November 12, 2024, Tongwei indicated that negotiations regarding the acquisition of Runyang are still ongoing, with potential alterations or termination of the transaction not ruled out

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