Tongwei’s acquisition of Lihao promotes a polysilicon oligopoly

The plan of polysilicon market leader Tongwei to acquire Qinghai Lihao, the fifth largest manufacturer, has advantages for both parties; however, it weakens the foundations for a perfect market.

Analysis by Johannes Bernreuter, Head of Bernreuter Research

The announcement of polysilicon market leader Tongwei that it is planning to acquire 100% of the equity of its competitor Qinghai Lihao has created a stir in Chinese media.

When the world’s largest and fifth largest manufacturers of an industry sector are going to merge into one company, this will be a major event indeed.

Plan B with advantages for both Tongwei and Lihao

For Tongwei, the planned acquisition may be Plan B after China’s market regulator has stopped the domestic polysilicon industry’s acquisition fund to buy up excess production capacity.

It is not the worst Plan B. Qinghai Lihao has been the most successful new entrant in the polysilicon market since 2021. Not only has it quickly made it into the ranks of the world’s top ten manufacturers since its production start in August 2022, it has also become a recognized supplier of high-quality material for n-type ingots. A better asset is hardly imaginable.

For Qinghai Lihao, Tongwei may be the white knight in a difficult market environment. In 2024 Lihao was considering an initial public offering at the Hong Kong Stock Exchange to raise around CNY1 billion (about US$140 million) as early as the second half of 2025. In a period when all leading Chinese polysilicon manufacturers were making losses, Lihao was obviously looking for a source of fresh capital.

Tongwei may now become this source although it is itself deeply in the red: The company incurred a net #loss of CNY7.039 billion (US$978 million) in 2024 and a projected loss of CNY9 billion to CNY10 billion (US$1.25 billion to US$1.4 billion) in 2025. Tongwei is planning to purchase Lihao’s shares through a mixture of share issuance and cash payment, and to finance the acquisition by raising “supporting funds.”

Tongwei’s anti-cyclical, long-term strategy

In August 2024 Tongwei already announced a plan to acquire the majority of shares in a competitor; however, it was not able to reach an agreement  with Runergy Solar (also known as Runyang) on the terms of the transaction.

Apart from the financial challenge, the prospects for an acquisition of Lihao are better: The company’s founder and chairman Duan Yong was formerly the director of Tongwei’s polysilicon business unit. Hence, management culture and manufacturing approach are similar at both companies.

The plan reminds observers of a similar move that Tongwei made during the downturn in 2013: At the time, it purchased LDK Solar’s cell factory in Hefei (Anhui province), which laid the ground for Tongwei to become the world’s largest solar cell manufacturer. Likewise, the acquisition of Lihao could be part of an anti-cyclical, long-term strategy to solidify Tongwei’s leadership in the polysilicon industry.

From a market perspective, however, the planned acquisition is essentially no good news: Although it may somewhat relax the competition in the oversupplied Chinese polysilicon market, the enlarged Tongwei would increase its market share to 36% and promote the trend to an oligopoly.