Summary of Key Points
This article takes the photovoltaic (PV) industry's dramatic shift from "astronomical profits" to "losses across the entire supply chain" as a starting point to expose the "prisoner's dilemma" caused by excessive price competition. Companies that focus on quality and profitability are eliminated, while those that drive prices down to the lowest level can survive temporarily, only for the entire industry to fall into a self-destructive cycle. By comparing this with the healthy development of Contemporary Amperex Technology Co., Ltd. (CATL), the article highlights three hidden costs of low-price competition: declining quality, overexploitation of labor, and stifled innovation. It emphasizes that true competitiveness comes from factors such as technological barriers and brand premiumization, which grant the power to set prices, and calls for the industry to return to a focus on value-based competition rather than price-driven competition.
I. The Photovoltaic Industry: A Magic Transformation from Easy Profits to Total Losses
In 2022, the PV sector was still highly profitable—Tongwei made 25.7 billion yuan and Longi made 14.8 billion yuan. By 2025, however, the situation had turned completely around: Tongwei suffered a loss of 9.6 billion yuan, and Longi lost 6.4 billion yuan, with the gross profit margin in the high-purity silicon segment turning negative. In the first quarter of 2026, Tongwei even reported a loss of 4%. This is not a problem limited to individual companies but a "collective suicide" of the entire industry:
- The root cause is excessive price cutting: Firms are willing to sell products at prices below cost in order to gain market share, hoping to drive their competitors out before raising prices and recouping their losses.
- Excess capacity is a fatal problem: PV production capacity in 2025 was three times that of 2019, but demand only doubled, leaving one-third of the capacity idle. Coupled with local governments' efforts to support leading companies from going bankrupt, no one wants to exit the market, resulting in a vicious cycle where lower prices lead to thinner profits, less investment in research and development (R&D), and further price cuts.
II. The Three Hidden Costs of Excessive Low-Price Competition: Consumers and Society Bear the Burden
Low prices may seem like a bargain, but they come with unseen consequences:
1. Declining Quality: When companies are losing money, they cut corners by using inferior materials, simplifying production processes, and skipping quality inspection steps. This is evident in the news reports of substandard online snacks and prepared meals, which show how low prices force companies to compromise on safety standards. Ultimately, consumers bear the health risks, and society pays the price in terms of lost trust in the industry.
2. Overexploitation of Labor: To reduce costs, companies cut employee salaries and eliminate training programs. Workers' wages have not increased for years, limiting their ability to improve their skills, and they struggle to save money for healthcare and education expenses, which contributes to weak consumer spending.
3. Stifled Innovation: With chronic losses, companies barely survive, let alone invest in R&D. The PV industry is a prime example: without profits, innovation stalls, and the only way to remain competitive is through low prices, creating a cycle where lower prices deny value to every link in the supply chain.
III. The Fatal flaw of Low-Price Competition: It Doesn't Kill Competitors; It Kills You First
Many companies think that by driving out their rivals, they can monopolize the market and raise prices later on. However, this strategy fails in industries with excess capacity:
- Rivals are hard to eliminate: Local governments often provide support to key firms, giving them an advantage.
- Companies suffer first: Selling below cost depletes their cash flow, leading to financial collapse. The current situation in the PV industry proves this—no company can remain unscathed when everyone is losing money.
IV. The Lesson from Contemporary Amperex Technology Co., Ltd.: Protecting Profitability for Sustainable Growth
Despite being in the same renewable energy sector as other companies, CATL has achieved different success. In 2025, it had revenues of 423.7 billion yuan and a net profit of 72.2 billion yuan, with a stable gross profit margin of 21%-22%. Its secret lies in its focus on protecting profitability:
- Maintaining a Profit Margin: It avoids price wars below cost and ensures sufficient funds for R&D.
- Using Technology to Gain Market Share: Each new generation of its batteries (CTP, Kirin, and sodium-ion) has been launched through technological breakthroughs, not by lowering prices.
- Creating a Vicious Cycle of Success: Healthy profits drive continuous R&D, leading to technological leadership and market dominance, which in turn generates more profit. This shows that Chinese manufacturing can thrive without relying on low-price competition, as long as companies have the determination and strategic patience.
Conclusion: Competitiveness Lies Not in Low Prices but in the Power to Set Prices
The article concludes that true competitiveness does not depend on who sells the cheapest products but on who has the power to set prices. This power comes from technological barriers, brand premiumization, and ecological advantages, all of which require a solid financial foundation. Low prices may seem attractive, but they are actually harmful and can destroy an entire industry. Only by returning to value-based competition can companies, consumers, and society all benefit.