Xinjiang Daqo New Energy

Business

Xinjiang Daqo New Energy (新疆大全新能源股份有限公司) makes only high-purity polysilicon, mostly for solar wafers, and has 305,000 tonnes a year of capacity (2026 interim report, p. 9). Its plants are in Xinjiang and Inner Mongolia and use the improved Siemens process. Its main raw material is industrial silicon powder, and electricity is a large share of its cost (p. 24). It says its use of power, water and silicon per unit is well below the CPIA industry average (p. 9).

It has been listed on Shanghai's STAR Market since July 2021. Its controlling shareholder, Daqo New Energy Corp. of the Cayman Islands, has been listed on the New York Stock Exchange since October 2010 (p. 25). The figures on this page are for the Shanghai-listed company.

Results in the first half of 2026

• It produced 87,077 tonnes, up 71.3%, which it puts at 16.19% of China's output, but sold only 19,672 tonnes, down 57.4% (pp. 9, 10).
• The average selling price was ¥30.63 a kilogram, against a cash cost of ¥34.75 and a full unit cost of ¥60.69. In the second quarter the price was ¥27.48 and the cash cost ¥32.72 (p. 10).
• Revenue fell 57.63% to ¥622.8m against cost of sales of ¥1.09bn, a gross margin of about -74% (our calculation from p. 25). The net loss was ¥1.60bn, against ¥1.15bn a year earlier (p. 7).
• It wrote down its inventory by ¥1.03bn, and inventory on the balance sheet still doubled to ¥2.66bn (pp. 10, 27).
• Operating cash flow was an outflow of ¥2.24bn (p. 7).

The company says it deliberately slowed shipments while the market was weak (p. 10). It ended June with ¥10.42bn of cash and deposits, a liabilities-to-assets ratio of 7.87% and no interest-bearing debt (p. 10).

Outlook

Daqo expects to produce 40,000 to 45,000 tonnes in the third quarter and 160,000 to 180,000 tonnes in 2026 (p. 11). It signed the 6 August pledge by eight polysilicon makers not to sell below full cost as calculated under the industry's new cost-accounting standard, and expects prices to recover moderately in the fourth quarter (pp. 10, 11).

It is also diversifying. A subsidiary plans a ¥6bn manufacturing base in Kunshan for storage systems, solid-state transformers and breakers for AI data-centre power, and solid-state batteries, with ¥2.1bn in the first phase; the project is at the preparatory stage (p. 9). Separately, it is building 1,000 tonnes a year of semiconductor-grade polysilicon, a product it has not made before (p. 25).

Our view: Daqo's balance sheet lets it wait for better prices, but waiting has a cost. It produced more than four times what it sold in the half, and a price floor only helps if that stock can be sold at the floor.

The company's own caveats

• Customer concentration. Its largest customer took 15.54% of sales in the half and its top five 47.60% (p. 24).
• Input costs. Silicon powder and electricity prices drive its margins, and power curbs could interrupt supply (p. 24).
• Asset impairment. Fixed assets of ¥22.84bn could be impaired if polysilicon technology changes (p. 24).
• US restrictions. It has been on the US Commerce Department's Entity List since June 2021, which limits its purchases of US-origin materials and technology; it says the listing does not materially affect production (p. 25). It has also been on the US government's UFLPA Entity List since 21 June 2022, which presumes goods it makes to be barred from US import (CBP).