Leading Chinese solar silicon supplier Tongwei announced plans to invest CNY28 billion (USD3.9 billion) to expand its production capacity despite the photovoltaic industry’s overcapacity.

Tongwei will build a new silicon plant in Ordos, Inner Mongolia Autonomous Region, a Chinese provincial-level region rich in raw materials and energy resources, the Chengdu-based company announced late yesterday. The new plant will be built in two phases, each of which will have a construction period of 15 to 18 months, Tongwei noted.

The first phase, which is expected to be completed and put into operation by the end of December 2025, will have an annual production capacity of 200,000 tons of high-purity polysilicon materials and 200,000 tons of raw material of industrial silicon products, Tongwei added. The total investment of the first phase will likely be CNY13 billion to CNY14 billion.

The second phase, which will begin construction at an appropriate time based on the market environment, will have an annual capacity of 200,000 tons of high-purity polysilicon materials and 300,000 tons of industrial silicon products, the company pointed out.

Tongwei did not explain on what kind of energy the plant would run but mentioned that it would be a green factory. If the project fails to meet the expected energy consumption targets by the end of June 2024, either Tongwei or the local government can terminate the project, the firm noted.

Tongwei’s stock price [SHA: 600438] was trading .04 percent down at CNY23.61 (USD3.30) as of lunch break in Shanghai today.

Tongwei has three production bases for high-purity crystalline silicon in China’s southwestern Sichuan and Yunnan provinces and in Baotou in Inner Mongolia. It has a total annual production capacity of over 420,000 tons, which is expected to expand to over 800,000 tons by the end of next year.

In the first three quarters of the year, Tongwei sold about 280,000 tons of high-purity crystalline silicon, up 53 percent from a year earlier. However, its revenue grew only 9.2 percent, and its net profit fell 25 percent in the period, given the declining product prices.

As more production capacity has come on stream, the average transaction prices of polysilicon fell to about CNY70,000 (USD9,800) per ton from about CNY170,000 (USD23,801) early this year. Despite that, industry giants started to unveil new capacity expansion plans recently.

On Dec. 13, Xinjiang Daqo New Energy, another silicon material giant, announced that it plans to build a high-purity polysilicon plant with an annual production capacity of 100,000 tons with a fixed asset investment of about CNY15 billion.