CITIC Construction Investment Zhu Yue: Photovoltaic Cycle Bottoming Out Shows Differentiation, Industry Enters a New Stage of Value Competition

Since the beginning of 2026, the A-share photovoltaic sector has shown a trend of oscillating recovery, with the pace of sector revival and industry transformation directions attracting widespread market and investor attention.

Recently, Zhu Yue, Chief Analyst of the Power Equipment and New Energy Industry at CITIC Construction Securities, told China Securities Journal that the current photovoltaic market is driven by policy-driven internal regulation and industry chain price stabilization. In 2026, the industry will exhibit significant structural differentiation, with competitive logic shifting from scale expansion to competition in technology, branding, and cash flow. Investors should focus on high-quality leading companies and innovative tracks to seize structural opportunities amid industry transformation.

Bottoming, Repair, and Structural Differentiation Coexist

On February 3rd, the A-share photovoltaic sector performed remarkably, with the Wind Photovoltaic Concept Index soaring 5.99%. Since the beginning of this year, the index has increased by 21.42%.

“The recent trend of the A-share photovoltaic sector reflects the market’s consensus that the industry’s darkest hours are over, while also implying a game over the recovery pace,” Zhu Yue said. From a technical and sentiment perspective, after two years of deep correction, valuations are at historical lows, providing a safety margin for rebounds. However, fundamentally, the current market is more driven by policy expectations and the stabilization of prices in certain segments, representing a restorative trend rather than a full-scale performance explosion. The market is shifting from a one-sided decline to oscillating bottoming, with funds tentatively allocating to leading companies capable of crossing cycles.

Looking ahead to 2026, the trend of the photovoltaic sector is expected to show increasing differentiation and coexistence of structural repair. Zhu Yue believes that the intensification of differentiation stems from the fact that the previous all-industry chain boom driven by demand explosion is unlikely to recur, and 2026 will enter a deep reshuffling phase. Companies with technological iteration capabilities, well-established global channels, and healthy cash flows will perform better, with leading firms likely to gain valuation premiums through market share concentration.

“In terms of structural repair, as supply and demand improve, industry chain profits will be redistributed,” Zhu Yue said. In 2026, investment focus will shift from pure manufacturing to companies capable of providing systematic solutions, with strong branding premiums and unique advantages in niche markets. The market’s focus will move from “capacity expansion stories” to the companies’ real “blood-making ability,” indicating an essential shift in industry development logic.

On the policy front, the combination of reduced export tax rebates and policies against monopolies and malicious competition marks China’s photovoltaic industry’s transition from extensive expansion to high-quality development. Zhu Yue admitted that, in terms of pricing strategies, phenomena of cost-unrelated vicious bidding have decreased, and the disappearance of tax rebate benefits has forced companies to stick to profit margins. The industry chain’s price center is gradually stabilizing, and companies are beginning to pursue reasonable gross margins. Regarding overseas strategies, product exports face challenges, with capacity and technology going abroad becoming the new normal. Companies prefer to build localized overseas supply chains or export high value-added, high-tech barrier products to offset rising costs.

Shifting from Scale Expansion to Value Deepening

The competitive logic of the photovoltaic industry is shifting from scale competition to value competition, a change driven by diminishing marginal returns from scale effects amid overcapacity.

Zhu Yue explained that, in the past, scale competition focused on reducing costs through capacity expansion, but now, excessive scale may even become a burden for companies. The new logic centers on three dimensions: first, technological premiums—higher conversion efficiency corresponds to higher per-watt selling prices; second, branding and channel services—reliable delivery and after-sales in overseas markets are more competitive than just low prices; third, intellectual property barriers—intensified competition will make patent battles routine, with core IP becoming a moat for survival. Future competition will be a comprehensive strength contest rather than a simple capacity race.

Recently, the rise of related industries in commercial aerospace and the commercialization of space photovoltaics have opened new imaginative space for the industry, but currently, they are insufficient to rewrite the core investment logic dominated by ground-based photovoltaics. Zhu Yue noted that ground PV is the main force for Earth energy replacement and carbon neutrality, forming the industry’s basic landscape; space PV mainly serves high-end fields like satellite internet and deep space exploration, representing a high value-added niche market. However, this emerging field requires investors to shift their perspective from focusing on “LCOE (Levelized Cost of Electricity)” to “functionality and extreme environment adaptability.”

Zhu Yue pointed out that this perspective shift is reflected in three aspects: first, from cost-effectiveness to performance ratio—space PV demands strict requirements on weight, radiation resistance, temperature tolerance, and conversion efficiency, where cost is not the primary concern; technological leading and reliability are key; second, from mass manufacturing to customized precision manufacturing—space PV is similar to semiconductors or precision instruments, requiring small-batch, highly customized production, which cannot be evaluated using traditional large-scale manufacturing financial models; third, differences in technical routes—mainstream ground PV uses N-type TOPCon cells, while space PV currently relies on GaAs cells, with future exploration of P-type HJT or perovskite tandem cells, necessitating re-evaluation of their feasibility.

“Low technological homology in space PV provides opportunities for new entrants to overtake,” Zhu Yue said.

Ground PV giants’ technological accumulation focuses on cost reduction and efficiency enhancement along crystalline silicon routes, while the flexible, radiation-resistant, ultra-lightweight technologies needed for space PV are outside their comfort zone. If small and medium-sized enterprises make breakthroughs in these niche technologies, they can avoid cost competition and achieve breakthroughs. The cost reduction efforts in commercial aerospace are driving the industry from space-grade customization toward industrial-grade optimization and modification, with demand primarily boosting high-efficiency cell modules, special packaging materials, precision interconnects, and advanced equipment.

Regarding competitive barriers, space PV differs significantly from traditional PV. Zhu Yue explained that, firstly, the core barrier shifts from process management to materials science—traditional PV competition focuses on yield improvement and non-silicon cost reduction, while space PV’s core lies in material formulations, such as special weather-resistant adhesive films and bandgap design of cell structures; secondly, validation cycles and qualification barriers are higher—space products require rigorous ground simulation and in-orbit verification, which are costly and time-consuming, but once integrated into the supply chain, they have high customer stickiness, unlike the frequent supplier switching and price-cutting in ground PV.

Technology and Energy Storage Open Growth Space

The photovoltaic industry is gradually moving away from low-price internal competition and extensive expansion models. Driven by policy regulation against internal competition and supply-side reforms, the industry is transitioning toward high-quality development driven by technology and cash flow, leading to a systematic restructuring of overall investment logic.

Zhu Yue believes that in the short term, investment opportunities in the photovoltaic industry chain are concentrated in leading companies of the core industry chain, with key drivers being policy-driven anti-internal competition and supply-side reforms. Anti-internal competition policies include industry associations advocating against bids below cost, strict national energy consumption limits for new capacity, and reduced export tax rebates. These policies have compressed arbitrage space for low-price exports, forcing companies to abandon “price wars for market share” strategies and shift toward price increases or cost reductions to restore profits.

Under policy influence, the competitive landscape of the industry chain has undergone profound changes. Zhu Yue explained that upstream silicon materials and wafers, as high-energy-consuming segments, are most directly affected by policies. Leading companies with compliant energy consumption indicators, electricity price advantages, and high-quality N-type capacity will benefit first from supply contraction, achieving inventory digestion and price stabilization. Downstream battery and module segments, despite facing export rebate reductions and rising costs of silicon and silver, will be forced to reshape their pricing mechanisms. Companies with branding and channel advantages can offset cost increases through price hikes, widening profit margins.

From a medium- to long-term perspective, new battery technologies and the integration of photovoltaic and energy storage are key directions for industry growth. Zhu Yue stated that new battery technologies focus on the ongoing evolution of BC technology and high-efficiency TOPCon. As crystalline silicon batteries approach theoretical efficiency limits, breakthroughs depend on achieving higher photoelectric conversion efficiency at lower costs. High-efficiency TOPCon, as the current mainstream, still has room for upgrades through edge passivation and Polyfingers; BC technology, with its front-side no-grid structure, offers higher efficiency and aesthetics, and is seen as the next-generation route after TOPCon. This can be validated through changes in technology penetration and net profit margins per watt, benefiting leading battery, module, and equipment companies.

The core opportunity for photovoltaic-storage integration lies in accelerating energy storage grid connection to overcome grid absorption bottlenecks. As PV installed capacity increases, grid absorption capacity becomes the industry’s biggest constraint. Growth in energy storage installations can reduce curtailment rates and free up new grid connection space for PV plants. “This can be monitored through global energy storage installation data and curtailment rate changes. Energy storage system integrators and upstream lithium battery material manufacturers are expected to benefit directly,” Zhu Yue said.

(From China Securities Journal)