Photovoltaic companies should prioritize quality and efficiency in integration

What are the different impacts of horizontal and vertical integration paths?

Since the beginning of the year, photovoltaic companies have continuously released significant integration signals. On January 16, leading silicon wafer company TCL Zhonghuan announced plans to invest in Jidao New Energy Technology Co., Ltd. through share acquisition and capital increase, accelerating its moderate integration strategy; on February 24, leading silicon material company Tongwei Co., Ltd. announced its plan to acquire 100% equity of Qinghai Lihao Qingneng Co., Ltd. through a combination of issuing shares and cash payments while raising matching funds. These two capital operations, which have attracted considerable market attention, are not merely simple corporate mergers; they also signify that resource optimization and integration in the photovoltaic industry are expected to accelerate comprehensively.

Currently, the photovoltaic industry is experiencing a period of painful transformation. Unordered capacity expansion has led to a mismatch of production capacity, while intensified homogenized competition has resulted in a situation where the entire industry is caught in a dilemma of increased production without increased revenue. The previous booming scene where “everyone could make money” is no longer present, replaced by the predicament of “selling more but losing more.” Prices in core segments such as silicon materials, silicon wafers, and battery cells remain under pressure, with most companies trapped in profitability struggles and the survival space for small and medium-sized enterprises continually shrinking.

The mismatch of production capacity is the core driving force behind the push for integration. Over the past few years, driven by high expectations for the photovoltaic industry, various segments have initiated a wave of capacity expansion, leading to an imbalance in the supply-demand relationship across the entire industry chain. A large amount of inefficient capacity floods the market, not only lowering the overall profitability of the industry but also resulting in resource waste. Against this backdrop, leading companies, leveraging their advantages in scale, cost, and capital, are positioned to integrate quality existing capacity, while struggling small and medium-sized enterprises become important targets for integration.

The two mergers of Tongwei Co., Ltd. and TCL Zhonghuan present two typical paths of integration. Tongwei Co., Ltd., as a leading silicon material company, acquiring Qinghai Lihao, which is also a silicon material company, is a typical case of horizontal integration. This move aims to further consolidate upstream raw material advantages, expand production capacity and cost discourse power, strengthen the position of leading enterprises in the industry, and enhance the risk resistance capability of the entire industry chain. TCL Zhonghuan, as a leading silicon wafer company, extends its layout to downstream component companies through integration with Jidao New Energy, representing vertical integration. By filling the gaps in the downstream component segment, this action achieves coordinated development of the industrial chain and also confirms the new trend of the industry shifting from competition in individual segments to competition in comprehensive strength across the entire industrial chain.

Deep integration will inevitably trigger a chain reaction, reshaping the photovoltaic industry landscape. For leading enterprises, through the acquisition of quality assets, market concentration will further increase, and the bargaining power, technological research and development capabilities, and global market competitiveness of leading companies are expected to continue to strengthen. For small and medium-sized enterprises, the only way to establish themselves in the industry reshuffle is to deeply cultivate niche areas, master core technologies, focus on specific segments, or proactively partner with leading companies to seek collaborative development. Inefficient capacity lacking core competitiveness will gradually be eliminated from the market. In the long run, the increase in industry concentration will drive resources to gather towards research and innovation, and high-efficiency, low-cost photovoltaic products will accelerate in popularity, promoting a steady transition in energy.

It is essential to recognize that integration is not the endpoint of development but rather a new starting point for high-quality development. During the process of corporate mergers and integrations, it is inevitable to face issues such as cultural integration, management system connection, and capacity synergy optimization. Blindly pursuing scale expansion while neglecting internal quality improvement may instead hinder one’s own development. After years of rapid growth, China’s photovoltaic industry has reached a critical juncture of shifting from “scale dominance” to “quality first.” The core purpose of corporate integration is not to create a monopolistic “behemoth,” but to optimize resource allocation, driving the industry towards high-end technology, high-quality products, and high efficiency. (Source: Economic Daily, Author: Wang Yichen)