China's Solar Sector: Divesting from Subsidy-Dependent Laggards, Betting on LONGi's Dominance

The Chinese solar industry, once a beacon of green innovation, now faces a critical inflection point. State subsidies, while vital for maintaining employment and social stability, have inadvertently propped up underperforming firms, exacerbating structural overcapacity. Amid this turmoil, LONGi Green Energy emerges as a lighthouse of resilience—its technological prowess, cost leadership, and global footprint positioning it as the sector's ultimate survivor. For investors, the path forward is clear: exit subsidy-dependent laggards and capitalize on LONGi's ascendance in a consolidating market.

The Crisis of Overcapacity and Subsidy Dependency

China's solar sector now operates in a paradox: it dominates 80% of global photovoltaic (PV) supply chains yet grapples with oversupply, falling prices, and ailing profitability. The 2025 polysilicon oversupply crisis, driven by a 200% surge in global capacity over the past three years, has forced smaller firms to rely on government bailouts to stay afloat. According to the National Energy Administration, 30% of Chinese solar manufacturers now operate at a loss, their survival contingent on preferential loans and regional job-retention subsidies.

This dependency creates systemic risks. Subsidies distort market signals, delaying the inevitable consolidation. Smaller firms, lacking scale and innovation, are trapped in a race to the bottom—selling modules at below $0.20/W (see ). Meanwhile, their balance sheets are strained by mounting debt, as seen in JA Solar's 2025 Q1 net loss expansion to RMB 4.2 billion—a stark contrast to LONGi's narrowed deficit.

LONGi's Unassailable Advantages: Technology, Scale, and Global Reach

1. Technological Supremacy
LONGi's HPBC 2.0 platform has set a new global benchmark, achieving 26.6% cell efficiency—a 2.3% improvement over rivals like JinkoSolar's TOPCon cells. Its BC (Back-Contact) technology, now deployed in 10GW of projects globally, reduces shading losses while enabling module lifespans exceeding 30 years. Most notably, its silicon-perovskite tandem cells, with a record-breaking 42.8% lab efficiency, are being commercialized at a cost of below $0.8/W, undercutting competitors by 15–20%.

2. Cost Efficiency and Scale
LONGi's vertically integrated model—spanning polysilicon, wafers, and modules—gives it a 20–30% cost advantage over fragmented peers. Its Q1 2025 wafer shipments hit 32GW, supporting a full-year target of 120GW, dwarfing smaller firms' capacities. This scale allows LONGi to negotiate polysilicon prices 10–15% lower than smaller players, which face supplier dominance from giants like Daqo New Energy.

3. Global Market Share and Strategic Partnerships
While smaller firms focus on domestic markets, LONGi dominates high-margin international tenders, securing 23% of EU's 2025 solar imports through its Vietnam and Malaysia factories. Its partnerships, such as the 230MW Gobustan solar plant in Azerbaijan, demonstrate its ability to deliver large-scale projects efficiently—a capability lacking in niche competitors.

Data highlights LONGi's widening lead: 2025E module shipments projected at 85GW vs. 55GW for nearest rival.

Why Divest from Subsidy-Dependent Firms?

Smaller Chinese solar firms are trapped in a cycle of diminishing returns:
- Overcapacity-induced price wars: Module prices have fallen 40% since 2022, squeezing margins to 3–5% for small players versus LONGi's 12–15%.
- Policy shifts: Beijing's 2025 pivot toward “technology-driven subsidies” (prioritizing firms with >25% cell efficiency) will starve laggards of support.
- Debt risks: Firms like Tongwei Solar carry debt-to-equity ratios exceeding 200%, rendering them vulnerable to liquidity shocks.

Investors should exit these names now. Their valuations—often trading at 5–7x P/E versus LONGi's 12x—already reflect this bleak outlook.

Investment Thesis: LONGi's Multi-Decade Opportunity

While near-term volatility persists (e.g., polysilicon gluts, U.S.-China trade tensions), LONGi's dual-tech strategy (“Green Power + Green Hydrogen”) offers asymmetric upside:
- Solar Dominance: Its BC technology roadmap aims to achieve 30% cell efficiency by 2027, securing a 30% cost lead over peers by 2030.
- Green Hydrogen Leadership: With 500MW+ projects secured in 2025, LONGi is diversifying into an $800 billion market, leveraging its electrolyzer expertise to decarbonize industries like refining and steel.

Despite sector-wide declines, LONGi's focus on innovation has outperformed broader indices by 25% over 12 months.

Final Call: Exit the Weak, Embrace the Strong

The Chinese solar sector's reckoning is inevitable. Subsidy-dependent laggards will either consolidate into LONGi's orbit or fade into irrelevance. Investors should trim exposure to smaller firms with <10GW annual capacity or >150% debt-to-equity ratios and allocate to LONGi, whose $30 billion market cap still underprices its global leadership.

While short-term headwinds like trade disputes loom, LONGi's $0.8/W cost target and 30GW green hydrogen pipeline position it as the sector's ultimate beneficiary of global decarbonization. This is a decade-long bet—buy the dips, ignore the noise, and ride LONGi to the top.

Risks: Geopolitical trade barriers, polysilicon price volatility, slower-than-expected green hydrogen adoption.
Target Price: LONGi at RMB 80/share by end-2026 (20% upside from current levels).