Summary of Key Points
In August 2026, eight leading domestic companies that account for over 90% of polysilicon production capacity (such as Tongwei and GCL) signed an "Anti-Involution Initiative," calling for product prices to be no lower than the "full cost" and urging mutual supervision and reporting to regulatory authorities. However, this initiative lacks official company seals or announcements from listed companies, making it more of a "verbal self-discipline" agreement. The industry's dire situation is evident: silicon material prices have plummeted from a peak of 3 million yuan per ton in 2022 to 31,000 yuan per ton (a 99% drop), with overcapacity (effective capacity of 2.3-2.5 million tons versus demand of only 1.16-1.27 million tons), inventory levels exceeding 500,000 tons, and an operating rate of just 33%-38%, resulting in widespread losses across the industry. The question on whether this is a form of "self-help" or a violation of anti-monopoly laws is more complex than it seems on paper.
Detailed Analysis
1. Has the industry reached such a dire state that it has to band together? — Overcapacity is the root cause
The current plight of the silicon material industry is clearly illustrated by the following figures:
- Dramatic price drop: From a peak of 3 million yuan per ton in 2022, N-type silicon materials now cost only 31,000 yuan per ton, a 99% decrease, meaning the money that used to buy 1 ton can now purchase nearly 100 tons.
- Overcapacity: Domestic effective capacity is 2.3-2.5 million tons, but this year, the silicon wafer segment only requires 1.16-1.27 million tons, indicating supply far exceeds demand.
- Inventory buildup: The industry holds over 500,000 tons of inventory, enough for 4-5 months of sales.
- Low operating rate: With an operating rate of 33%-38%, it means that 6-7 out of 10 production lines are either shut down or operating at reduced capacity.
- Widespread losses: Production volumes of silicon materials, silicon wafers, and battery cells have all declined in the first half of the year, with leading companies reporting losses in their semi-annual reports.
Why has this happened? Essentially, during the profitable years for silicon materials, companies expanded production capacity excessively. Now that demand has not kept up, supply far exceeds demand. With prices below cost, companies are forced to sell at a loss and thus seek to maintain price stability through cooperation.
2. Is this initiative just a "paper tiger" or a real binding agreement? — Legal risks lie in the details
The initiative appears serious, but it is actually quite weak:
- Lack of legal effect: It lacks company seals, board resolutions, or announcements from listed companies (important agreements from listed firms must be publicly announced), making it merely a gentleman's agreement with no legal enforcement.
- Anti-monopoly risks: The Anti-Monopoly Law applies not only to formal agreements but also to coordinated actions. Even if the eight companies do not sign anything, their collective pricing decisions could be considered monopolistic if they agree through meetings or communications. For example, if they all raise prices simultaneously, regulators might investigate.
However, there's no need for excessive concern; regulatory authorities cannot penalize them based solely on this initiative without concrete evidence of concerted action (such as synchronized price increases).
3. Does requiring prices to be no lower than the "full cost" help companies or eliminate inefficient capacity? — High-cost firms may suffer
The initiative specifies that prices should not be below the "full cost," which is different from the usual "production cost":
- Full cost: This includes raw materials, labor, and fixed costs such as depreciation (the cost of equipment spread over years) and management fees. Lower utilization rates result in higher full costs per unit of output.
- Cash cost: This only accounts for necessary expenses like raw materials and labor, which is lower than the full cost.
If the requirement is strictly enforced, high-cost companies (with older or energy-intensive production lines) may end up selling at a loss or not selling at all, leading to closure. In essence, this initiative could accelerate the elimination of inefficient capacity rather than protecting all firms. However, the industry association's cost calculation model is merely a reference and not a legal standard; courts will base their decisions on the actual costs incurred by each company.
4. Why is this considered a "prisoner's dilemma"? — Significant conflicts of interest
This situation resembles the classic "prisoner's dilemma": if all companies stick to the price agreement, they all profit; but if one lowers prices to gain market share, others will follow, leading to losses for everyone. The issues with this initiative are:
- Absence of smaller players: Many smaller silicon material companies are not part of the initiative. If they continue to sell at lower prices, the leading firms may lose market share.
- Internal conflicts among companies: Some companies (like Tongwei and GCL, which are integrated producers) have less pressure to maintain price stability since they can use their own production for internal needs. Other companies, such as Dalian and XinTe, rely heavily on silicon material sales and are more motivated to sell quickly.
- Inefficient capacity: Silicon production lines are costly to shut down and restart, so companies prefer to operate at reduced capacity rather than close down.
These conflicts make it difficult for all parties to agree unanimously, likely rendering the initiative ineffective shortly after its introduction.
5. What might be the future outcomes?
The fate of this initiative is likely one of the following:
- Scenario 1: Rapid failure: Companies face tight cash flows due to high inventory levels; some may break the price agreement first, leading to widespread price cuts and the initiative becoming meaningless.
- Scenario 2: Initial compliance, later relaxation: Companies may adhere to the agreement for a few months, but smaller firms will buy up inventory, forcing leading firms to lower prices.
- Scenario 3: Regulatory intervention: Authorities may advise against concerted action through talks, turning the initiative into a voluntary guideline (the most likely outcome, as they do not want price cartels or widespread industry collapse).
- Scenario 4: Anti-monopoly investigation: If companies are found to collude on price increases or boycotts, regulators will intervene, but this is unlikely.
In summary, maintaining price stability can only provide temporary relief. The real solution lies in eliminating inefficient capacity and advancing technological improvements. Only by using the time gained from the initiative for cost reduction and efficiency improvement (rather than further expansion) can the industry truly recover.
(Note: All data comes from industry associations and media reports and is provided for trend analysis only, not for investment purposes.)