Behind the layoffs in China’s solar industry

In July, China’s solar power generation capacity surpassed coal for the first time. Yet this historic milestone coincided with more than two years of widespread financial losses, layoffs, and incessant controversy surrounding cutthroat competition within the industry.

Data from 2026 interim reports reveals a widespread contraction in revenue across the solar photovoltaic (PV) industry during the first half of the year. In 2025, over 70% of leading companies had fallen into the red, and more than 50 firms declared bankruptcy.

Between 2024 and 2025, China’s top 110 listed PV firms laid off 222,800 employees; that excludes many of the small- to medium-sized firms being squeezed out of an overcrowded industry.

The workforce reductions follow two years of net losses for Chinese solar firms, spurred by an industry-wide supply glut that sent module spot prices plunging by over 50%.

But the layoffs also reveal how China’s solar industry is remaking itself: by consolidating – through mergers, bankruptcies and capacity retirements; and also by automating production, ending overexpansion and shifting workers from factory floors to sales and advanced products. 

The hidden scale of layoffs

China’s PV industry created 4.6 million jobs in 2023, according to the International Renewable Energy Agency. This expansion came to an abrupt end in 2024, when firms shed 140,000 jobs. Layoffs continued in 2025, with annual reports for China’s top 110 listed firms identifying another 68,255 job cuts. Beyond official layoffs, PV firms are embracing a variety of tactics to curb production and “optimise” labour costs.

In December 2025, a solar factory in Anhui issued a five-month holiday. Shortly afterwards, the company posted a severance offer for voluntary resignations. Forced production pauses for “holidays” were common in 2024, but have been getting longer in the past year.

Firms are also struggling to pay wages. More than half of firms cut wages at all levels in 2025, and reports of company-wide salary cuts continued this year. For factory employees, this often means pay drops below minimum wage, with ripple effects on local economies.

These tactics are designed to encourage voluntary resignations. Coraline Goron of Duke Kunshan University cautioned against interpreting such tactics as purely exploitative, as they are often used by firms that can neither afford to pay wages nor lay off staff.

The tactics obscure the true extent of unemployment in China’s solar industry. Some estimates suggest de facto layoffs may bring the total to 200,000 job cuts in 2024 alone. 

Past challenges and current crisis

This is not the first oversupply crisis faced by China’s solar industry. As the 2008 financial crisis reduced European demand, local governments expanded subsidies for solar firms, creating a glut of exported panels. The EU and the US responded with anti-dumping duties in 2012, sharply curtailing demand for Chinese solar products as supply was ramping up.

Chinese solar firms faced another shock in 2018. Concerned about looming excess capacity, the central government abruptly ended subsidies for new solar projects in May. Demand for solar modules plummeted overnight, but the downturn proved short-lived, and new policies promoting solar over coal power revived the industry in 2019.

The industry entered another boom in 2020 after Xi Jinping announced national goals to peak carbon emissions and bring them down to zero. Included was a target of 1,200 gigawatts (GW) of installed solar and wind capacity by 2030. This spurred a rush of new Chinese solar firms, many subsidised by local governments hoping to capitalise on a growing industry. 

By 2023, China had 600,000 registered PV firms, with 22.4% founded in 2022 alone.

Solar factories operating at 54% capacity produced more modules than markets could absorb by 2024. Global PV production capacity in 2025 exceeded 1,100 GW, almost double global installations of 570-630 GW. The excess production capacity sank module prices to 1 yuan (about USD 0.14) per watt, below production costs, necessitating the current cuts.

While such challenges are familiar territory for Chinese solar firms, Wang Bohua, honorary chairman of the China Photovoltaic Association, warns that current losses far exceed any previous cycle.

For firms losing money on every panel sold, labour cost reductions are a survival tactic, and restructuring is necessary to cut the bloat accumulated during years of unchecked expansion.

Automation reshapes the industry

Even as the industry gradually steadies, manufacturing jobs are unlikely to return as automation fundamentally shifts how, or by whom, solar panels are made.

Automated production lines, including fully automated “lights-out factories” requiring no or few human staff, are spreading rapidly across the industry. Solar manufacturing is relatively easy to automate, says Cosimo Reis of Trivium China, and companies that do not switch to robotic production lines and AI systems will struggle to compete. As early as 2024, 90% of production at solar giant LONGi’s factory in Jiaxing was automated, a process that only took nine months. Since automation, production cycles at the factory have shortened 84%, while output has increased 35% per hour.

Even if competition eases and prices rise, production line jobs are unlikely to recover. The solar industry is shifting toward fewer, more skilled workers overseeing automated systems. The future of China’s renewable energy industry will be high-tech, but not labour-intensive.

Restructuring and shift to advanced products

Layoff trends show firms are shifting their focus from production to sales, advanced products, and downstream services. Factory floors were hit hardest by the layoffs, with 75% of production jobs impacted. LONGi laid off more than half of production staff. Technical and administrative staff were also heavily impacted, and 2025 saw job losses extend to managerial positions. Sales teams were one of the few areas of continued job growth as companies focused on moving products off shelves.

A LONGi booth at the Intersolar Africa expo in Nairobi, Kenya (Image: Xie Jianfei/Xinhua/Alamy)

Inverter firms were one of the few areas of industry growth last year, as demand for energy storage solutions increased. The gap reflects a broader industry shift away from traditional manufacturing toward installing solar systems, energy storage projects and integrated systems. As companies restructure, jobs are moving from production lines to downstream services. 

Firms are continuing to expand production of advanced yet expensive modules and batteries. These production lines require more technical expertise than older modules, and with firms cutting training budgets, only workers with existing skills will find jobs in these factories.

Caroline Goron, of Duke Kunshan University, notes that while local governments are adept at competing for industry and attracting new jobs and revenue to their jurisdictions, their strategies rarely consider how to retain industry and often neglect social policy. Now, as the industry is forced to consolidate, local governments have little to offer the workers losing their jobs.

What comes next?

The central government has rejected claims that there is overcapacity in the industry, preferring to address the problem of “involution” (内卷), meaning excessive competition, and launched campaigns to address it. The question is how much the industry will need to consolidate before firms become profitable again. 

Some observers estimate 20-30% capacity reductions are required, but demand shrinkage could increase that figure. “I’m particularly worried about the downstream side,” says Reis. “Even as prices collapsed, demand remained robust for three years, but power market reforms are now upending the entire renewables market.” 

China’s power market reforms since 2025 have added greater uncertainty to the market for renewables. Since last July, prices for power from new renewable projects have been determined by a market-based mechanism. Investors in new projects face uncertain returns and are responding with greater caution. This threatens to slow China’s historic solar installation rate, at least in the short term, making the supply-demand mismatch even harder to resolve. 

“The best plan I’ve seen for reducing overcapacity so far is the fund to consolidate and shut down one-third of polysilicon capacity,” Ries says. The price of polysilicon, a key input material for PV modules also mired in oversupply, began rising in July 2025 after plans were announced for a USD 7 billion fund for China’s large producers to acquire and retire one-third of production capacity. It was the first concrete sign of discipline in solar supply chains.

But the trend was thrown into disarray in January 2026 when the State Administration for Market Regulation accused the fund of anti-competitiveness. It forbade any coordination on “production or sales volumes, capacity, pricing, output quotas, profit sharing, market division, or exchange of price and production information.” Despite this ruling, in August, eight polysilicon manufacturers, who account for 90% of China’s polysilicon supply, agreed not to sell below the cost of production, coordinating a price floor to tackle “involution”.

Analysts have anticipated the industry will begin stabilising in the second half of this year or next, providing a welcome respite to a beleaguered sector. This will only be possible through brutal consolidations and production cuts that bring supply closer to demand. When the dust settles, China’s solar firms will be leaner, more efficient, and a source of far fewer jobs.