China's leading solar manufacturers collectively reduced their workforces by an average of 31% last year, shedding approximately 87,000 staff, as the industry grapples with severe overcapacity and intense price wars. This significant contraction, previously unreported in detail, underscores the profound economic pain within a sector Beijing once championed for economic growth, now facing an estimated $60 billion in losses last year. The global solar market currently produces twice as many panels as it consumes, with the vast majority originating from China, exacerbating the market imbalance.

A Reuters review of public filings from major players including Longi Green Energy, Trina Solar, Jinko Solar, JA Solar, and Tongwei revealed the substantial workforce reductions. Analysts suggest these cuts represent a blend of layoffs and attrition, driven by companies' efforts to stem mounting losses through reduced pay and hours. Despite the politically sensitive nature of job cuts in China, where employment stability is paramount, most firms have not publicly acknowledged these significant reductions, beyond a 5% cut disclosed by Longi.

Since 2024, over 40 solar firms have either delisted, declared bankruptcy, or been acquired, according to the photovoltaic industry association. This wave of distress follows a period between 2020 and 2023 when Chinese manufacturers rapidly expanded production capacity, fueled by state redirection of resources from the struggling property sector into what were termed the "new three" growth industries: solar panels, electric vehicles, and batteries. This aggressive expansion led directly to the current brutal price war, further complicated by U.S. tariffs on Chinese-owned factories in Southeast Asia.

In response to the escalating crisis, Beijing is increasingly signaling its intent to intervene to stabilize prices and reduce excess capacity. This has already seen polysilicon prices surge nearly 70% in July, with solar panel prices also showing modest increases. Major polysilicon producer GCL indicated plans for an OPEC-like entity to control supply and prices, alongside a proposed 50-billion yuan vehicle to acquire and shut down approximately one-third of the industry's lower-quality production capacity. President Xi Jinping's recent call to end "disorderly price competition" and the industry ministry's subsequent pledge to address price wars and retire outdated capacity highlight the central government's determination.

However, implementing these capacity cuts faces significant hurdles, primarily from provincial governments. These local authorities, often evaluated on job creation and economic growth metrics, are reluctant to sacrifice local champions to meet broader national targets. Trina Solar's chairman noted in June that new projects were still commencing despite earlier directives from the National Development and Reform Commission (NDRC) to halt new manufacturing. Jefferies analyst Alan Lau estimates that at least 20-30% of current manufacturing capacity must be eliminated for companies to regain profitability, underscoring the unprecedented scale of losses in an industry roughly one-tenth the size of China's crisis-hit real estate sector.