Facing the Cycle: Daqo Energy Holds Five Key Cards!
The reshuffling of the industry is closely tied to silicon materials, and this reshuffling is intensifying! Since mid-April, silicon material prices have experienced another decline. According to the latest data from Antaike on April 30, the average transaction price for domestic solar-grade multi-crystalline silicon n-type recharging materials was 39,200 CNY/ton, down 2.73% from the previous week, and has fallen below the 40,000 CNY mark. This price also represents a new low in the history of photovoltaics, which spans over 20 years! Prior to this, n-type recharging materials had struggled to maintain a price of 41,700 CNY/ton for three consecutive months.
While each enterprise understands its own situation, it appears that Daqo Energy is one of the few silicon material companies facing the least survival pressure. The company’s financial report indicates a full-year loss of 2.718 billion CNY for 2024, with a first-quarter loss of 558 million CNY. However, Daqo Energy has five strategies in place that give it confidence to withstand this cycle.
- Strong Cash Position: By the end of 2024, the company had 5.01 billion CNY in cash, 8.11 billion CNY in time deposits, and 400 million CNY in bank acceptance bills, totaling a cash reserve of 13.52 billion CNY.
- Lowest Debt Ratio in the Industry: As of the end of the first quarter of 2025, the company had a net asset of 39.6 billion CNY, total assets of 43.17 billion CNY, and a debt ratio of less than 8.3%.
- Proactive Inventory Management: Daqo Energy is one of the silicon material companies that has adequately accounted for inventory impairment and asset depreciation. It recorded an inventory impairment of 1.68 billion CNY and long-term asset impairment losses of 1.26 billion CNY, surpassing its peers.
- Potential Easing of Trade Barriers: The current U.S.-China trade war has seen the U.S. move away from using “Xinjiang-related” issues as an excuse, providing an opportunity for companies like Daqo Energy, headquartered in Xinjiang, to free themselves from trade war constraints. All domestic silicon material capacities may soon compete on a level playing field.
- Conservative Production Control: The company currently has a production capacity of over 300,000 tons, but in the first quarter, it produced only 25,000 tons of polysilicon and sold 28,000 tons, with an annual target set between 110,000 and 140,000 tons. In short, the less produced in the current silicon material industry, the less lost.
1. Cash is King: The Most Financially Robust Company in the Silicon Material Industry
In the management discussion section of its annual report, Daqo Energy revealed that in 2024, the mismatch in supply and demand in the polysilicon market intensified, leading to severe competition in the industry. In the face of this challenging environment, the company has demonstrated strong resilience against risks through prudent financial strategies and ample cash flow. During the reporting period, Daqo Energy strictly controlled capital expenditures, optimized its production rhythm to ensure stable core capacity operation, and achieved cost savings and efficiency enhancements through digital transformation, which provided technical support for cash flow security.
As of the end of 2024, the company held 5.01 billion CNY in cash, 8.11 billion CNY in time deposits, and 400 million CNY in bank acceptance bills, totaling approximately 13.52 billion CNY.
Among all silicon material companies, Daqo Energy has exercised extreme restraint and discipline in its capacity expansion. At the beginning of 2024, the company had ongoing projects worth 6.793 billion CNY, which reduced to 272 million CNY by the end of the year. This was due to the completion of a 100,000-ton high-purity polysilicon project in Inner Mongolia, which was converted into fixed assets. Nevertheless, Daqo Energy prudently made an impairment provision of 17.87 million CNY for these ongoing projects.
With substantial cash reserves, Daqo Energy carries minimal burden. Under an inaccurate assumption, even if Daqo Energy incurs losses at the same pace as in 2024, it could continue to sustain losses for up to five years without incurring additional debt!
2. Exceptional Stability: Debt Ratio at Only 8.3%!
As of the end of the first quarter of 2025, Daqo Energy’s total liabilities were 3.564 billion CNY, a reduction of 500 million CNY from the end of 2024. Crucially, the company has no bank loans or short-term or long-term borrowings!
Moreover, among the 43 photovoltaic equipment companies covered by Dongcai Power Equipment Industry, Daqo Energy has a tangible asset-to-liability ratio of 9.46 times, the highest among main photovoltaic material companies.
Although the company has abundant cash on hand, it has opted to hold it in banks, with 8.1 billion CNY in bank deposits by the end of 2024. Even in financial investments, Daqo Energy appears to perceive risks, investing only 115 million CNY in financial products.
What is the average debt ratio in the photovoltaic industry? As of the end of 2024, Tongwei Co., Ltd. had a debt ratio of 72.25%, GCL-Poly had 62.13%, and Xinte Energy had 56.79%. Daqo Energy’s low debt ratio stems from its relatively conservative expansion after earning 19.1 billion CNY in 2022. Currently, due to the broader photovoltaic sector’s decline, Daqo Energy’s price-to-book ratio stands at 0.96, while Tongwei’s is 1.66, GCL-Poly’s is 0.57, and Xinte’s is a mere 0.18.
3. Inventory Clearance: Industry’s Most Aggressive Impairment Provisions
In its 2024 annual report, Daqo Energy stated that to accurately reflect its financial condition and operational results for 2024, it conducted a thorough assessment of its financial assets, inventory, and long-term assets according to relevant regulations and its accounting policies. Based on the principle of prudence, the company made impairment provisions for assets showing signs of impairment.
This included an inventory impairment loss of 1.678 billion CNY and long-term asset impairment losses of 1.263 billion CNY, totaling 3.07 billion CNY in impairment losses, impacting its total profit by approximately 1.978 billion CNY800 million CNY for 2024.
In 2024, Daqo Energy produced 205,000 tons of polysilicon and sold 181,000 tons, ending 2024 with an inventory of 23,800 tons. As of the end of 2024, the company’s inventory stood at 1.196 billion CNY, which further declined to 1.013 billion CNY by the end of the first quarter of this year, making up only 6.3% of current assets. Efficient inventory management has emerged as the third major safety cushion for Daqo Energy, allowing it to minimize losses from falling silicon material prices.
4. Geopolitical Shift: Xinjiang Silicon May See Easing of Trade Barriers
In 2024, Daqo Energy recorded a long-term asset impairment of 1.26 billion CNY for its Xinjiang polysilicon capacity. However, even without this impairment, Xinjiang polysilicon capacity is likely to face a new wave of opportunity. This is because the so-called Xinjiang-related issues have been largely fabricated. Moreover, the Trump administration has become estranged from the EU, Australia, and Canada, and other economies may not necessarily follow suit.
Since the U.S. passed the UFLPA in 2021, a systemic trade restriction mechanism concerning Xinjiang products has been established. According to this law, all products from Xinjiang are presumed to be made with “forced labor,” unless importers can provide “clear and convincing” evidence to refute this presumption. In 2024, the quantity of Xinjiang-related goods detained by U.S. Customs and Border Protection (CBP) increased by 45.8% year-on-year, with polysilicon and related photovoltaic products being subject to heightened scrutiny. U.S. enforcement actions extend not only to local Xinjiang enterprises but also to third countries with supply chain links to Xinjiang. For instance, in 2024, CBP saw a surge in detained photovoltaic components from Thailand and Vietnam, citing their use of Xinjiang polysilicon as the reason. This “long-arm jurisdiction” has forced the global photovoltaic industry chain to restructure away from Xinjiang.
Crucially, the EU, Australia, Canada, and others have closely followed the U.S. in recent years and established multilateral trade barriers against Xinjiang polysilicon. Xinjiang polysilicon accounts for 40% of global capacity and has significant cost advantages, with electricity prices around 0.24 CNY/kWh and power costs only 14.4 CNY/kg. In the short term, the global photovoltaic industry is unlikely to fully replace Xinjiang’s supply.
Currently, the shift comes from the Trump administration’s broadly applied tariff policies, which have, objectively, accelerated the politicization of Xinjiang issues and the decoupling of international trade rules. The systematic disproof of allegations regarding “forced labor” in Xinjiang has provided EU, Australia, and others with legal and moral leverage to adjust their policies towards China. Under the influence of these dual factors, trade barriers faced by Xinjiang polysilicon companies are expected to structurally ease. Last year, a UN human rights council special rapporteur, after examining Xinjiang, called for the removal of unilateral sanctions against China, Chinese companies, or individuals as they do not comply with international law. Furthermore, during the 46th session of the UN Human Rights Council, over 80 countries, including more than 50 Muslim nations like Saudi Arabia and the UAE, voiced support for China’s position on Xinjiang.
The easing of unfair trade policies against Xinjiang enterprises is positive news for all Xinjiang polysilicon companies, including Daqo Energy.
5. Cost Competition: The Core of the Silicon Material Restructuring
Among photovoltaic companies, Daqo Energy is the most transparent in its information disclosure, clearly outlining cash costs and sales costs. The company’s operations are also the most straightforward, focusing solely on polysilicon production. Regardless of the robustness of its safety cushions, the ultimate battle will center around cost competition, which is fundamental to this round of polysilicon restructuring.
As shown in the table, Daqo Energy’s unit cash costs gradually decreased in 2024, from 40.5 CNY/kg in the first quarter to 35.19 CNY/kg in the fourth quarter. Recently, Tongwei Co., Ltd. disclosed that its cash costs at its Inner Mongolia base have fallen below 27,000 CNY/ton. GCL-Poly reported a cash cost of 28.17 CNY/kg for the fourth quarter of 2024. Xinte Energy’s cash costs for the first half of 2024 were 48 CNY/kg, while it indicated during investor communications that its polysilicon production costs for the third quarter were 46,600 CNY/ton. In the first quarter of this year, Xinte’s cash costs were 38,000 CNY/ton, the highest among the four companies, despite having its own power plant and acquiring electricity at a price of just over 0.2 CNY.
As for companies outside the top four in silicon materials, such as Dongfang Hope and others, they have essentially halted production, eliminating any discussion of cash costs.
In 2024, Daqo Energy filed 177 new patent applications and has a total of 429 authorized patents. Key technologies, including intelligent control of reduction furnaces and optimization of the cold hydrogenation process, have been industrialized, increasing the share of N-type monocrystalline materials from 30% in 2023 to 70% in 2024. The company’s annual report states that its strategy of “vertical integration and horizontal expansion” remains consistent and clear. In the future, Daqo Energy plans to extend its business upstream to industrial silicon and auxiliary materials and strengthen control over the quality and costs of raw and auxiliary materials to achieve stability and safety in the upstream supply chain. Horizontally, the company aims to expand into semiconductor polysilicon and organic silicon fields by continuously investing in R&D for semiconductor silicon materials, enhancing product gradation and strengthening the technical team’s innovation capabilities, thereby building a strong technological moat.
Postscript: Survival Rules at the Bottom of the Cycle
The industry has reached a bottom. In January 2025, Daqo Energy announced that based on confidence in the company’s future development prospects and its long-term value, and to enhance investor confidence and maintain capital market stability, the controlling shareholder Cayman Daqo, actual controllers Xu Guangfu and Xu Xiang, and Chongqing Daqo have voluntarily committed to extend the lock-up period for their shares.
Daqo Energy has built a financial safety net through “cash + low debt + light inventory,” opened a window for international expansion due to easing trade policies, and is patiently awaiting a reversal in the industry through cost control and technological upgrades. During the phase of clearing photovoltaic capacity, its highly conservative strategy may seem to sacrifice short-term scale, but it actually strengthens long-term competitive advantages. When the industry returns to rational growth, Daqo Energy may become the most elastic player in the market.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/five-strategic-advantages-of-daqo-energy-in-navigating-the-silicon-material-cycle/
