Daquan Energy Output Surges 75% While Sales Plunge 84%, Trapped in Deep Crisis

Introduction: A Shocking Quarterly Report

In Q1 2025, photovoltaic silicon leader Daquan Energy delivered results that stunned the market — polysilicon output surged approximately 75% year-over-year, while sales volume collapsed by roughly 84%. This rare "scissors gap" between production and sales pushed the company straight into deep losses. The data not only exposes Daquan Energy's own operational predicament but also reflects the darkest hour the entire photovoltaic silicon material industry is enduring.

Core Data: A Staggering Production-Sales Scissors Gap

Based on Daquan Energy's disclosed Q1 operational data, the company's polysilicon output climbed sharply, indicating that newly built capacity continued to come online with production running at full speed. However, a dramatic contraction in downstream demand left these products with virtually nowhere to go — sales plummeted 84% year-over-year, forcing vast quantities of silicon material to pile up in warehouses as inventory on the balance sheet.

The more produced, the less sold — the consequences of this "double whammy" are devastating:

• Soaring inventory: Massive unsold polysilicon ties up capital while warehousing costs continue to climb
• Cash flow pressure: Products go unsold, but raw material procurement, equipment depreciation, and labor costs remain unchanged
• Impairment risk: As silicon prices continue to slide, high-level inventories face enormous write-down pressure
• Massive losses: The severe production-sales inversion directly led to significant losses in Q1

Notably, Daquan Energy is far from alone. The entire photovoltaic silicon sector posted near-universal losses in Q1 2025, with leading companies such as Tongwei Co. and GCL Technology facing equally severe challenges.

Industry Analysis: Nearly 3x Overcapacity and an Endless Price War

The root cause of Daquan Energy's predicament lies in the severe overcapacity plaguing the entire photovoltaic silicon material industry.

Supply Side: The Aftermath of Frenzied Expansion

Between 2021 and 2023, riding a boom cycle in the photovoltaic industry, polysilicon prices soared above 300 yuan per kilogram, with gross margins exceeding 70%. Lured by extraordinary profits, the industry launched an unprecedented wave of capacity expansion. Established players ramped up production, new entrants rushed in, and local governments actively courted investment.

According to industry statistics, by early 2025, domestic effective polysilicon capacity had exceeded 3 million metric tons per year, while actual global demand stood at only around 1 million metric tons. In other words, industry overcapacity approached threefold. This means that even if all companies significantly reduced utilization rates, the market would still be oversupplied.

Demand Side: Slowing Growth and Inventory Buildup

Although global photovoltaic installations continue to grow, the pace has clearly decelerated. European and American markets are experiencing demand volatility due to trade barriers and policy uncertainty; the domestic market, while resilient, also faces grid absorption bottlenecks and subsidy phase-outs. More critically, the midstream and downstream segments — wafers, cells, and modules — are also suffering from overcapacity. They are destocking themselves, reducing both willingness and ability to procure upstream silicon materials.

Pricing: A Vicious Cycle Below the Cost Line

Under severe supply-demand imbalance, polysilicon prices have plummeted from their peaks. Currently, N-type silicon transaction prices have fallen to around 40 yuan per kilogram, while the industry's average production cost sits between 50 and 60 yuan per kilogram. This means most companies lose 10 to 20 yuan on every kilogram of silicon produced — truly a case of "the more you produce, the more you lose."

Paradoxically, many companies still refuse to halt production. The reasons include:

1. High fixed costs: Shutting down and restarting a polysilicon production line is extremely expensive and may damage equipment
2. Bank loan pressure: Production halts could trigger loan default clauses
3. Local government obligations: Some companies have committed to output and tax revenue targets with local governments
4. Market share considerations: Leading companies fear losing market share to competitors if they stop production

This creates a classic "prisoner's dilemma" — every company knows it should cut production, but no one is willing to go first.

Daquan Energy's Unique Predicament

Against a backdrop of industry-wide pressure, Daquan Energy faces a particularly thorny situation.

New capacity launched straight into a downturn. Daquan Energy invested heavily in capacity expansion in recent years, with new production lines coming online between the second half of 2024 and early 2025. The capacity ramp drove the 75% year-over-year output increase, but it coincided with the industry's coldest period. Rather than generating incremental revenue, the new capacity became a heavy burden.

A sales strategy dilemma. At current price levels, dumping inventory at low prices means locking in losses; holding inventory risks further price declines and continued capital tie-up. The 84% plunge in Q1 sales partly reflects the company's agonizing choice between "cutting losses to ship" and "stockpiling to bet on a rebound."

Mounting financial pressure. Having gone from a profit powerhouse to quarterly mega-losses, Daquan Energy's balance sheet is under strain. If the industry slump persists, the company may face a series of financial shocks including inventory write-downs and asset impairments.

Industry Shakeout: How Far Away Is the Dawn?

The photovoltaic silicon material industry is undergoing a brutal capacity shakeout. Based on historical experience, this process typically unfolds in several stages:

Stage One: Price war (currently underway). All companies are forced to cut prices, compressing profit margins to zero or even negative territory.

Stage Two: Capacity exit. Companies with weaker cost competitiveness begin reducing output, halting production, or even going bankrupt. Some small and medium-sized enterprises and new entrants have already announced maintenance shutdowns or project delays.

Stage Three: Supply-demand rebalancing. As inefficient capacity exits, supply-demand dynamics gradually improve and prices stabilize and recover.

Industry consensus suggests the shakeout will take at least another one to two years. During this period, only companies with cost advantages, financial strength, and technological leadership will survive. As a leading player, Daquan Energy faces severe short-term pressure but retains a degree of competitiveness in cost control and product quality. Whether it can weather this winter will depend on its cash flow management and the speed of its strategic adjustments.

Outlook and Takeaways

Daquan Energy's "double whammy" predicament is a microcosm of the cyclical volatility in China's photovoltaic industry. From polysilicon to wafers, cells, and modules, the entire supply chain is enduring the pain of overcapacity.

For investors, two risks warrant vigilance at this stage: first, corporate earnings may continue to deteriorate; second, the industry shakeout may take longer than expected. However, from a long-term perspective, photovoltaics remain a core track in the global energy transition, and the growth thesis remains intact. Companies that survive this round of consolidation will emerge into a healthier competitive landscape with more sustainable profitability.

As one industry analyst put it: "The photovoltaic industry has never lacked demand — what it lacks is rational supply." When the tide goes out, the true winners will emerge.