Targeting the "dark horse" in the acquisition industry, why is Tongwei defying the trend? | Sichuan Stock Observation

Sichuan Online Reporter Shi Xiaolu Peng Yuheng

On the evening of February 24, Tongwei Co., Ltd. announced a trading halt, stating that the company is planning to acquire 100% equity of Qinghai Lihao Qingneng Co., Ltd. (“Lihao Qingneng”) through issuing shares and paying cash. Both Tongwei and Lihao Qingneng are leading companies in the silicon material industry, with Tongwei’s high-purity silicon capacity ranking first globally for many years. Industry experts generally see this acquisition as a landmark event for industry capacity integration.

Why acquire against the trend?

According to the announcement, Tongwei’s stock, convertible bonds, and bond conversions will be suspended from the market opening on February 25, expected to last no more than 10 trading days. This transaction will not change Tongwei’s controlling shareholder or actual controller, is not a related-party transaction, and is not expected to constitute a major asset restructuring.

Although the deal is still in planning, this contrarian move has already attracted widespread market attention.

Currently, the photovoltaic industry remains in a downturn, with performance at a low point. Recent forecasts from several leading PV companies project combined losses exceeding hundreds of billions of yuan for 2025. Among them, Tongwei expects a loss of 9 to 10 billion yuan in 2025, marking its second consecutive year of losses, with the scale further expanding compared to 2024.

Why choose to acquire now against the trend?

Industry insiders point out that although both companies are silicon material producers, Lihao Qingneng has differentiated competitive advantages. This move is not just about capacity expansion.

Founded in April 2021, Lihao Qingneng mainly engages in R&D, production, and sales of photovoltaic-grade high-purity silicon and electronic-grade polysilicon for semiconductors. Despite its short history, it is regarded as a “dark horse” in the industry, with silicon capacity ranking sixth and being listed among the “2025 Global Unicorn Top 500.”

First, it has technological advantages in electronic-grade polysilicon. In an interview during the Qinghai provincial two sessions in January, Chairman Duan Yong stated that Lihao Qingneng is advancing a 2,000-ton electronic-grade polysilicon project, a key material for semiconductors, which currently relies heavily on imports. The company aims to complete and put into operation in the first quarter of this year.

Second, it has significant cost advantages. “Lihao Qingneng’s core team comes from top PV silicon companies, and its Qinghai base leverages local green electricity, keeping production costs among the lowest in the industry,” said an analyst who has long followed the PV industry. “This acquisition by Tongwei is not just about scale; it’s about strengthening in technological breakthroughs and cost control, especially in electronic-grade polysilicon.”

However, some industry insiders note that the demand for electronic-grade polysilicon is currently small, with annual consumption of only about 20,000 tons. Tongwei also has related production capacity and may value its traceability system more. “Lihao Qingneng has an especially well-developed supply chain traceability system, which helps open up overseas markets, especially under the current complex international trade environment,” they said.

It’s worth noting that the leader of Lihao Qingneng has deep ties with Tongwei. Public records show that Chairman Duan Yong previously served as a director of Tongwei Co., Ltd. and as chairman of Sichuan Yongxiang Co., Ltd., working at Tongwei for nearly seven years.

In 2023, Lihao Qingneng also established Sichuan Lihao Qingneng Co., Ltd. in Yibin, investing in a project with an annual capacity of 200,000 tons of photovoltaic-grade high-purity silicon, 5,000 tons of electronic-grade high-purity silicon, and 250,000 tons of industrial silicon, helping Yibin develop into a national silicon PV industry cluster worth hundreds of billions. “Geographically, this is close to Tongwei’s existing production bases in Leshan and Meishan, which could enable future supply chain integration and further reduce logistics costs,” said an industry analyst.

This is not Tongwei’s first attempt at acquisitions. In August 2024, Tongwei announced plans to acquire Ruyang Co., Ltd., the world’s fifth-largest battery manufacturer, for no more than 5 billion yuan. However, the deal was ultimately terminated in February 2025 due to unresolved commercial terms.

Industry consolidation remains a long-term challenge

Currently, Tongwei has not disclosed detailed plans for acquiring Lihao Qingneng, and whether the deal will proceed smoothly or improve the company’s profitability remains to be seen.

From the industry environment, the phase-overcapacity problem in the PV supply chain has not yet eased. Additionally, recent high silver prices have sharply increased costs for battery manufacturers, leading to a new wave of production cuts. Some PV module companies have told reporters that industry capacity utilization is now only around 30%.

Tongwei also disclosed in its earnings forecast that PV new installed capacity will slow significantly in the second half of 2025. The industry’s phase-overcapacity issue persists, with lower operating rates across the supply chain, and prices of key raw materials like silver continuing to rise. Product prices are still declining year-over-year, putting significant pressure on operations.

Financially, Tongwei’s asset-liability ratio remains high. As of the end of September 2025, total assets were 201.315 billion yuan, with total liabilities of 144.855 billion yuan, and an asset-liability ratio of 71.95%. Return on equity (ROE) was -11.44%. Industry insiders note that, given two years of losses, the capital expenditure involved in this acquisition could place higher demands on the company’s cash flow management.

Nevertheless, contrarian expansion has long been part of Tongwei’s strategy. In 2023, during the downturn caused by anti-dumping and countervailing measures in Europe and the US, Tongwei spent 870 million yuan to acquire the bankrupt Hefei Sanyi, gaining the world’s largest monocrystalline solar cell factory at the time and maintaining its position as the top global supplier of solar cells. “During industry cleanup, high-quality assets are undervalued, and acquisitions enable ‘overtaking on curves,’ skipping long capacity-building cycles,” said an industry expert.

Chairman Liu Hanyuan of Tongwei Group has repeatedly emphasized the importance of industry “big trends.” “Prices will rise and fall, but ultimately they will go higher again,” he said. “With the unfolding of China’s 14th Five-Year Plan, we remain confident in the development of the PV industry. The entire Chinese PV industry will maintain high-quality growth for 10, 20 years or even longer.”

From an industry perspective, this acquisition is also a result of “policy-guided + market-driven” industry integration. Last July, the industry launched a comprehensive “anti-involution” campaign. Recently, the Ministry of Industry and Information Technology held a symposium with PV industry entrepreneurs, deploying measures to curb “involution” and emphasizing market-based and legal approaches to promote healthy, rational industry development.

Industry experts generally believe that through mergers and acquisitions of leading companies, the industry can move away from homogeneous, low-price competition toward more concentrated and orderly development. M&A activity has become more common this year. In January, leading wafer manufacturer TCL Zhonghuan announced plans to acquire the module company Yida New Energy.

Jiang Hua, Deputy Secretary-General of the China Photovoltaic Industry Association, said that Tongwei’s proposed acquisition of Lihao Qingneng is another move to promote industry consolidation. Under increasing competition, leading companies through mergers and restructuring can better optimize resources, complement advantages, and further upgrade the industry’s structure, enhancing overall competitiveness.

【Source: Sichuan Online】