(Yicai) Feb. 25 -- China’s Tongwei, the biggest supplier of solar-grade polysilicon globally, plans to consolidate its market position by acquiring a smaller domestic competitor despite posting heavy losses in the past two years and a prolonged downturn in global silicon prices.

Tongwei will buy all of Lihao Clean Energy in a cash and shares deal, the Chengdu-based company announced yesterday, citing a letter of intent signed with the target firm’s controller Duan Hong and the management’s equity-holding vehicle under his control. The price will be negotiated based on an asset appraisal conducted by a qualified valuer hired by Tongwei.

A trading halt was put on Tongwei’s shares [SHA: 600438] today for up to 10 trading days to ensure fair information disclosure and avoid a major impact on the stock price, it said. They closed at CNY18.16 (USD2.64) each yesterday.

Tongwei can turn out 900,000 tons of high-purity crystalline silicon material annually. After acquiring Lihao that will rise to 1.1 million tons. Lihao, the world’s sixth-largest maker of solar silicon, also has an additional 100,000 tons of capacity under construction.

Privately held Lihao was founded in 2021 by Duan, who had been a senior executive at Tongwei for many year prior to that. The Xining-based company mainly produces N-type silicon materials for high-efficiency batteries.

Global solar silicon prices began declining in November 2022 and bottomed out in the middle of last year, after tumbling by as much as 88 percent. This was mainly due to big capacity additions coming into operation between 2021 and 2023.

Many producers fell into the red as a result. Tongwei, which invested heavily in new production capacity in recent years, reported a loss of CNY7 billion (USD1 billion) in 2024 after a net profit of CNY13.6 billion (USD2 billion) in 2023. The company expects to have lost CNY9 billion to CNY10 billion last year.

To tackle overcapacity in the industry, nine major Chinese producers of solar‑grade polysilicon and an entity owned by the China Photovoltaic Industry Association set up an acquisition and restructuring vehicle last December with the intention of coordinating capacity reductions.

The joint venture company, Guanghe Qiancheng Technology, has a registered capital of CNY3 billion. Tongwei and Group Holdings own nearly half of the JV’s equity.

Editors: Tang Shihua, Futura Costaglione