According to corporate filings, China’s largest solar manufacturer reportedly laid off nearly one-third of its employees in 2023, signaling that what was once considered a key industry driving economic growth by Beijing is now mired in a quagmire of plummeting prices and massive losses.
The layoffs highlight fierce price wars engulfing several industries in China, including the solar and electric vehicle sectors. These industries have long struggled with overcapacity and weak demand, with global solar panel production exceeding actual demand by twice the amount annually, the majority of which are manufactured by Chinese companies.
Based on Reuters’ analysis of public documents, the top five companies in the industry including Longi Green Energy, Trina Solar, Jinko Solar, JA Solar, and Tongwei collectively laid off around 87,000 employees in 2023, averaging 31% of their total workforce.
Analysts suggest that these undisclosed layoff figures may include both voluntary and natural attrition, and are related to companies generally cutting salaries, and reducing working hours in order to control losses.
Layoffs are a politically sensitive topic in China, where Beijing has always viewed stabilizing employment as a core component of social stability. While Longi Green Energy admitted to a 5% layoff, the other companies have not disclosed or responded to questions from Reuters.
Morningstar analyst Cheng Wang stated, “The industry has been in a downturn since late 2023, worsened in 2024, and there seems to be no improvement in sight for 2025.”
According to a briefing by the China Photovoltaic Industry Association in July, over 40 solar energy companies have delisted, gone bankrupt, or been acquired since 2024.
From 2020 to 2023, Chinese solar manufacturers massively expanded production facilities, benefiting from a surge in investments following authorities diverting resources from real estate to so-called “new three” – solar panels, electric vehicles, and batteries.
However, this capacity surge led to price collapses and intense competition. The US government has also imposed new tariffs on Chinese solar products manufactured in Southeast Asia, further squeezing profits. The industry collectively reported losses of up to $60 billion in 2023.
It remains unclear if the layoffs will continue in 2025, but signs indicate that Beijing is preparing to address the overcapacity issue.
A local solar energy company director mentioned that all new capacity projects since 2025 require “verbal approval” from the National Development and Reform Commission (NDRC).
Despite the apparent tightening by the central government, analysts point out that local governments may resist cooperation as officials still prioritize employment and GDP growth as core indicators, unwilling to easily sacrifice local leading companies.
The chairman of Trina Solar admitted at an industry conference in June that despite the NDRC calling for a halt on new projects as early as February, most new factories continued to be established, highlighting the challenges of reducing capacity and implementing decisions at the local level.
Jefferies analyst Alan Lau estimated that only by eliminating 20% to 30% of capacity can companies potentially return to profitability.
“The issue of overcapacity is not only seen in the solar energy industry but also exists in sectors like steel and cement. However, we have never seen an entire industry experiencing continuous cash loss for a year and a half,” stated Lau.
He further added that while the solar energy industry is only about a tenth the size of real estate, its scale of losses is comparable to the real estate crisis.
“This situation is extremely unusual and abnormal,” he emphasized.