20 Billion in New Logistics Opportunities: “Follow the Light”

Key Takeaway:

1) Ample potential customer base: From an industry perspective, the photovoltaic value chain is long and comprises numerous links that collectively influence profitability across the entire chain. This creates room for specialized division of labor and a sufficiently large market size, while making it unlikely that any single company will achieve comprehensive dominance across all segments.

2) Long-term model stability: From the perspective of production‑line layout, the inherent demand for lighting and spatial resources within closed‑loop industries ensures that intensive, end‑stage production lines will remain concentrated in Northwest and Southwest China, while high‑value‑added lines and processes will be clustered in East and South China. This cluster‑based model, characterized by frequent, long‑distance interactions, exhibits robust long-term stability.

3) The value of the three parties is becoming increasingly evident: From the perspective of corporate development, the industry’s competitive focus has shifted from scale and cost to overall enterprise competitiveness. There is a clear trend toward deeper, more comprehensive development; supply chain management is crucial but difficult to balance effectively.
There is a prevailing view in the market that, as subsidy-driven growth fades, the photovoltaic sector—a high‑barrier niche—faces renewed pressure on both profit margins and demand scale, rendering it no longer worthy of attention. Really?

Opportunity Perspective: Domestic Photovoltaic Development Relies on “Genuine quality and real substance,” not a subsidy “bubble”
1.1 The domestic photovoltaic industry chain is essentially complete, and its international competitiveness has been steadily confirmed.
1) The early “cold snap” in the photovoltaic industry does not mean that the sector itself lacks value.
In the past, China’s photovoltaic industry exhibited With a “two‑ends‑outward” structure, 90% of the core raw materials and equipment are sourced from abroad, and after assembly, 90% of the finished products are exported overseas.
The domestic industrial chain remains incomplete, leaving profit margins beyond the control of Chinese firms. Low‑margin, high‑volume overseas orders have failed to sustain the market expectations of the first wave of photovoltaic companies led by Wuxi Suntech, while domestic subsidies have not been sufficient to shield them from the headwinds brought on by shifting international conditions.
2) As the subsidy “bubble” subsides, the growth in capacity underscores the hard power of China’s photovoltaic industry.

Today, China has transitioned from a major player in photovoltaic manufacturing to a leading manufacturing nation and is steadily emerging as a major consumer market, with each link in the industry chain being progressively strengthened and refined by domestic enterprises.
From 2019 to 2020, China’s photovoltaic sector gradually entered a phase of market competition and grid parity. In resource zones II and III, feed-in tariffs declined significantly, with prices falling from an initial 4 yuan/kWh to as low as 0.35 yuan/kWh; nationwide, the vast majority of PV benchmark prices were lower than the benchmark coal-fired power tariff.

As the subsidy wave subsides (subsidies for residential photovoltaic and solar‑thermal demonstration projects have also… By the end of 2022, China’s photovoltaic industry had entered the era of grid parity without subsidies, yet new installed capacity remained substantial. This means excluding subsidies. “Bubbles”—China’s photovoltaic industry’s strength and value have already been validated by the global market.  
1.2 Within the country, there are numerous players with market capitalizations in the hundreds of billions, which have operated steadily for many years and possess substantial growth potential.
As of In 2021, China had as many as 54,000 active enterprises in the photovoltaic industry, which has developed a relatively complete, pyramid‑shaped industrial chain and boasts significant growth potential.

Among them are Tongwei Co., Ltd., LONGi Green Energy, Sungrow Power Supply, and Chint Group, TCL Zhonghuan, TBEA, and Oriental Risen are all companies that have been in operation for more than 20 years. With prudent management, they have secured substantial market shares in both domestic and international markets.

1.3 The logistics market exceeds RMB 20 billion in size, and the industry’s complex structure ensures broad customer coverage.
As a continuously expanding growth market, the photovoltaic industry boasts a substantial logistics market. According to the share of logistics costs in several key production stages along the industry chain ( (3%–5%) for market‑size estimation; as of 2020, China’s logistics market had exceeded RMB 20 billion. Among these, logistics costs for wafers, solar cells, and modules each surpassed RMB 6 billion, accounting for 26.6%, 28%, and 25.9% of the total, respectively.
 

Furthermore, the photovoltaic industry encompasses numerous links across the entire value chain, with relatively clear divisions of labor. From a cost perspective, many segments influence the overall profitability—such as silicon wafers, silver paste, and inverters—and, of course, there are also rapidly evolving pieces of machinery and equipment.
This industrial-chain foundation makes it difficult for any single company to evolve into an absolute dominant player across multiple segments, thereby ensuring, to a certain extent, the broad customer base of photovoltaic logistics.

Stable Perspective: A nationwide scattered distribution, with long-term clusters exhibiting frequent long-distance interactions.
After years of development, China’s photovoltaic industry has now achieved a relatively stable industrial layout. — Polysilicon producers are concentrated in regions such as Xinjiang, Ningxia, and Inner Mongolia, while monocrystalline silicon manufacturers locate their facilities near polysilicon plants. Wafer‑cutting facilities are predominantly situated in southern China, with many belonging to the same corporate groups as their upstream polysilicon suppliers.
2.1 Early Stage: Cost‑Driven Operations, with Emerging Industrial Clusters in Northwest and Southwest China
1) Cost advantages in electricity pricing; Xinjiang and Inner Mongolia have attracted the first wave of players.
In the early stages of a project’s development, excessively high upfront and operating costs can hinder the growth rate of first‑generation companies. Because the production process is highly energy‑intensive and generates byproducts that pose significant environmental risks, silicon‑material plants must consider not only the location of quartz sand deposits but also local electricity prices and environmental regulations when selecting a site.
Deconstructing the upstream key links of the photovoltaic industry — From the perspective of polysilicon production costs, electricity expenses account for nearly 40%. With raw material costs and other operating expenses broadly similar across firms and technology still in the early stages of refinement, reducing energy consumption is a key competitive differentiator for early‑stage players.
Based on the current distribution of photovoltaic industry clusters, energy-intensive operations such as monocrystalline silicon production typically locate their facilities in relatively remote regions like Xinjiang, Hohhot, and Inner Mongolia. A key common feature of these areas is their low electricity prices.
2) “Following the Light”: Industrial clusters in Northwest and Southwest China are taking shape.
Of course, beyond electricity prices, for photovoltaics to ultimately achieve a closed-loop system and maximize energy efficiency—whether in centralized power plants or distributed installations—a critical resource is indispensable. — That is light.
Based on solar irradiance levels, regions are classified into three resource categories: Class I, Class II, and Class III. Class III areas, predominantly located in the northwest and southwest, feature mountainous terrain at high elevations, with solar irradiance and daylight hours far exceeding those of the first two classes. Moreover, these regions typically have limited cultivation of cash crops, meaning that deploying photovoltaic systems can significantly boost per‑mu yields and economic returns. Consequently, during the initial boom phase of new‑energy development, Class III resource areas exhibited the highest project density.
 

2.2 Mid-term: Technology‑driven innovation, with key production lines relocated to the Yangtze River Delta and the Pearl River Delta.
As the industrial chain continues to mature, technologies in the photovoltaic manufacturing sector are steadily advancing, with products undergoing rapid iteration. For example, the transition between silicon wafers of different sizes can go from initial introduction to mainstream adoption in less than a month. In 2020, product 166 surpassed product 158 to become the mainstream offering in just one month. This places extremely high demands on a company’s R&D capabilities and the pace of equipment upgrades.
Accordingly, taking into account resources such as equipment and personnel, low‑energy‑consumption processes—such as silicon wafer production—are typically located in economically more developed regions. Against this backdrop, the photovoltaic industry in East China has gradually evolved into a industrial cluster, generating a strong agglomeration effect.
As the market environment evolves and competition intensifies, traditional silicon wafer manufacturers are expanding into the cell and module sectors, while downstream application markets continue to upgrade. Coastal regions and the southwestern areas, benefiting from favorable policies, abundant solar irradiance, and a robust labor pool, have attracted a large concentration of leading photovoltaic companies.
2.3 Post‑Phase: Risk‑Control Oriented, with Downstream Production Lines Established Along the Port
Overseas orders account for a significant share of photovoltaic companies’ business (for leading firms, the proportion of export orders is…). (Over 60%), with typically tight delivery schedules and large order volumes. To meet shipping deadlines, companies often use container‑truck services to transport goods directly from factories to ports; however, road‑transport costs are steadily rising. To reduce last‑mile logistics expenses, most photovoltaic manufacturers are establishing facilities in the Jiangsu and Zhejiang regions, reflecting a clear trend toward relocating production closer to port‑adjacent areas.
Of course, given the high prices of port‑side terminals, it makes sense to locate supporting production lines in nearby satellite cities—such as Chuzhou and Suqian, which are non‑core cities in the Yangtze River Delta—and then leverage multimodal transportation to reduce costs. For example, the Astronergy Suqian manufacturing base. Seventy percent of our products are exported, with shipments routed via the Suqian Inland Port to the Yangshan Port’s river-sea intermodal foreign‑trade route—at a cost roughly 20% of road transport.
2.4 Overall, the photovoltaic industry exhibits a nationwide dispersed distribution with clusters engaging in long-distance interactions.
Looking back at the earliest stages of China’s photovoltaic industry, business activities were primarily focused on PV modules, with overall technological capabilities and profit margins remaining relatively low. This, to a certain extent, shaped the early site‑selection strategies of PV manufacturers: they gravitated toward regions characterized by modest upfront capital expenditures and low operating costs.

Image source: LONGi, Xiangshan, Zhejiang 300 MW Coastal Tidal Flat Photovoltaic Power Generation Project

Subsequently, as China’s domestic industrial chain gradually matured, market competition became increasingly robust. Compared with resource endowments, companies placed greater emphasis on technological R&D and continuous product iteration, as well as on building strong brands and distribution networks. Economically advanced regions such as the Suzhou–Wuxi–Changzhou area emerged as the preferred destinations for leading firms to expand production capacity, while the concentration of more top-tier enterprises further spurred coastal cities to enhance their infrastructure and supporting facilities, creating a virtuous cycle among them.
Overall, China’s photovoltaic industry is distributed across the country in a scattered pattern. High-value-added production line /In this phase, the focus is on East and South China, while intensive production lines persist in Northwest and Southwest China, with frequent long-distance interactions among industrial clusters.

Value Perspective: The trend toward deepening vertical integration at the top end is pronounced; supply chain management is crucial but difficult to balance.
3.1 Application upgrades, diversification of end‑user scenarios, and increased delivery complexity
In the past, photovoltaic projects were predominantly large-scale centralized power plants, characterized by a project‑based structure and strong seasonality. Consequently, PV logistics was limited to a single, closed‑loop scenario, primarily involving full‑truckload shipments, with logistics costs accounting for a significant share of module sales expenses. Around 1%. Consequently, major companies do not place a high priority on the logistics function, and photovoltaic logistics itself exhibits traditional contract‑logistics characteristics, such as fragmentation and a strong reliance on closed‑loop networks.
However, as photovoltaics enter the grid-parity era, the share of new residential PV installations in China has reached a record high, and the installation landscape has shifted from… From 2G commercialization to 2B, and gradually evolving into a hybrid 2B2C model, the share of logistics costs has risen significantly (with component‑related logistics costs now accounting for 3%–5%).
3.2 Industry competition has intensified significantly, requiring greater focus on professional expertise.
Driven by policy and other external factors, an increasing number of cross-industry investors and companies are entering the photovoltaic sector, intensifying market competition. The industry’s competitive focus has shifted from scale and cost‑driven strategies to a broader assessment of firms’ overall competitiveness, encompassing areas such as business model innovation, technological R&D, and marketing.

Against this backdrop, multiple segments have entered a state of full competition, with gross margins on silicon material, wafers, and equipment remaining higher than… 20%, while downstream segments such as modules and power plants are squeezed at both ends, with gross margins below 15%. Overall, profits are trending upward, yet they remain highly sensitive to external factors; relying solely on first-mover advantages (scale effects) is insufficient to ensure stable profitability.
As a typical example of in-depth development — LONGi Green Energy reported total revenue of RMB 50.4 billion in its first-half 2022 financial report. Although revenue grew 44% year over year, its gross margin has been on a downward trend (28.9% in 2019 and 20.1% in 2021). This to some extent indicates that while vertical integration has enhanced LONGi’s revenue‑generating capacity, its capabilities in end-to-end supply-chain management still have room for improvement.
3.3 Supply chain management capabilities will become the key differentiator among industry leaders.
Leading players in the photovoltaic industry are clearly pursuing vertical integration, with production lines strategically dispersed across multiple locations nationwide. Coupled with the re‑emergence of distributed PV into a period of rapid growth under policy guidance, this signals a shift in key‑node interactions—from unidirectional and low‑frequency to multidirectional and high‑frequency. Accordingly, supply-chain management capabilities will become a decisive factor in industry competition.
Today, with the pandemic becoming a new normal, both domestic and international logistics are severely constrained, and silicon material prices remain at high levels. In the industry… With 80% of profits concentrated upstream, downstream manufacturers face margin compression and rising cash‑flow risks. How quickly to align warehousing capacity with production lines is a critical challenge that Tier‑2 and Tier‑3 module makers must address when confronted with the game‑changing competitive pressure from silicon‑material giants.
And for companies like Tongwei that are intent on… As industry giants shift from “specialization” to “vertical integration,” logistics and procurement costs have risen sharply, adding complexity to production planning and product transportation. This trend has also created room for PV companies to outsource third-party logistics, ensuring delivery reliability while optimizing line efficiency and controlling costs.