{"text":[[{"start":8.28,"text":"China’s annual political season that kicks off next week has always been a closely watched event for people trying to determine where national priorities will lie in the year ahead. The country’s solar manufacturing sector is one group that will be watching the event, known as the “Two Sessions,” with special attention, looking for signs of how Beijing plans to further support the sector mired in cutthroat competition that has resulted in a sea of red ink."}],[{"start":36.57,"text":"Adding to the anticipation this year is the expected unveiling of China’s 15th Five Year Plan, which will run from 2026 to 2030, and is expected to include specific discussion on how Beijing will tackle the solar sector’s overheated competition. The anticipation – and resulting current uncertainty surrounding a nascent rebound for the sector – were present throughout the latest earnings report released on Thursday by Daqo New Energy Corp. (DQ.US; 688303.SH), a leading solar materials supplier."}],[{"start":75.65,"text":"The company’s report for the final quarter of 2025 showed the sector that manufactures polysilicon, a key ingredient in solar cells, continued to stabilize at the end of last year after showing signs of bottoming out in the third quarter. Reflecting that, Daqo reported a second consecutive quarter of year-on-year revenue growth, ending a difficult period of 10 straight quarters of sharp contraction."}],[{"start":103.13000000000001,"text":"But it’s far from clear the industry has truly reached bottom just yet. Underscoring that, Daqo said repeatedly that the sector will be looking for more specifics at the Two Sessions and in the 15th Five Year Plan on how Beijing will tackle the problem and keep such irrational competition, known locally as “involution,” from occurring again."}],[{"start":128.26000000000002,"text":"The irrational competition now plaguing the sector didn’t evolve overnight, and is the result of a confluence of factors. Chief among those is a huge buildup in China’s polysilicon sector over the last four years, fueled by booming demand for solar panels and generous policy support as Beijing identified the industry as an important development priority."}],[{"start":153.31000000000003,"text":"The resulting buildup has left China with capacity to produce more than 3 million MT of polysilicon annually, or more than double actual global demand. To tackle that huge mismatch, China plans to remove roughly half of the industry’s capacity by retiring older facilities with less advanced technology."}],[{"start":175.59000000000003,"text":"It took a big step in that direction last December by leading the establishment of a joint venture, Beijing Guanghe Qiancheng Technology, invested by most of the largest polysilicon manufacturers, including Daqo. The venture will presumably buy up much of the less advanced capacity and then quietly retire it, though its actual role hasn’t been specified just yet."}],[{"start":200.28000000000003,"text":"“It's not an easy task, with lots of back and forth within the participants and also with the government entities,” Daqo’s deputy CEO Anita Zhu said on the earnings call. “But I want to say that discussions are actively ongoing with a strong emphasis on maintaining a more market-oriented approach to ensure that we meet the competition and we are abiding by the guidelines, the regulatory guidelines.”"}],[{"start":228.68000000000004,"text":"No selling below costs"}],[{"start":231.16000000000003,"text":"The regulatory guidelines Zhu referred to cover a number of areas rolled out by Beijing in patchwork fashion last year to address the overcapacity and resulting involution. One of the most important is a mandate that no company should sell its products at prices below costs, which would presumably be determined by an industry benchmark. Another rule would set standards only allowing production of polysilicon above a certain quality level, forcing users of older technology to halt production."}],[{"start":261.91,"text":"Daqo executives said they expect to see many of those changes reflected in updated versions of China’s anti-unfair competition and price laws that could be announced at the Two Sessions and discussed in more detail in the new Five Year Plan."}],[{"start":278.55,"text":"“Looking ahead, we expect anti-involution initiatives will remain a central theme for the solar PV industry, supporting a more balanced supply and demand dynamic and driving higher-quality growth through 2026,\" said Zhu. “For the anti-involution initiative, (we expect) it would extend over a number of years given that … the excess problem is very deep rooted.”"}],[{"start":302.03000000000003,"text":"Zhu and other company executives provided their outlook as Daqo reported its revenue rose 14% year-on-year in the fourth quarter to $222 million from $195 million a year earlier. While any increase is generally a good thing, we should also point out the growth rate marked a slowdown from the 23% revenue rise in the third quarter – the first time Daqo reported positive year-on-year revenue growth in more than two years."}],[{"start":334.71000000000004,"text":"The company’s other major metrics all told a similar story, namely, that the industry was stabilizing after two difficult years. The company produced 42,181 MT of polysilicon during the quarter, up from 30,650 MT in the third quarter, and said it was producing at 55% capacity by year-end compared with 33% at the start of last year. It sold its polysilicon for an average of $5.83 per kilogram in the latest quarter, up slightly from $5.80 in the third quarter and well above the $4.62 per kilogram it was selling for a year earlier."}],[{"start":379.04,"text":"As China enforces the new rule banning sales below production costs, Zhu said Daqo expects industry prices to be at least 53 yuan to 54 yuan per kilogram, or about $7.82, in the next few quarters, which could provide stability to the market."}],[{"start":398.48,"text":"But such measures require everyone to play by the same rule book, which isn’t always easy to enforce – especially among smaller players that may desperately need money and thus be willing to sell at less than cost. There’s also the element of foreign competition, since foreign companies aren’t subject to China’s anti-involution rules. But most of those have been put out of business by now – a frequent complaint among foreign countries who say their local firms are being undermined by China’s strong state support."}],[{"start":432.47,"text":"In another positive sign, Daqo reported it returned to positive cash flow last year, after recording a massive outflow of $435 million in 2024. Its net loss also narrowed sharply to $7.3 million in last year’s fourth quarter from a $180 million loss a year earlier."}],[{"start":455.35,"text":"Investors were underwhelmed by the latest results, with Daqo’s shares falling 4.6% on Thursday in New York after the results announcement. The stock has gotten off to a rocky start in 2026, down about 20% since the start of the year, and has lost about three-quarters of its value over the last five years."}],[{"start":479.25,"text":"Discussion of the industry at the upcoming Two Sessions and its inclusion in the new Five Year Plan could provide some lift for both the polysilicon makers and their stocks. But it will be difficult for investors to get too excited about this group again anytime soon due to its heavy reliance on government intervention to operate profitably."}],[{"start":510.67,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1772270584_3088.mp3"}