Conference Operator: Welcome to the Daqo New Energy second quarter 2026 results conference call. At this time, all participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s prepared remarks, there will be an opportunity to ask questions. To ask a question, please press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Investor Relations Director. Please go ahead.
Jessie Zhao, Investor Relations Director, Daqo New Energy: Hello everyone. I am Jessie Zhao, the Investor Relations Director of Daqo New Energy. Thank you for joining our conference call today. Daqo New Energy just issued its financial results for the second quarter of 2026, which can be found on our website at www.daqosolar.com. Today attending the conference call, we have our Chairman and CEO, Mr. Xiang Xu, our Deputy CEO, Ms. Anita Zhu, our CFO, Mr. Ming Yang, and myself. Today’s call will begin with an update from Mr. Xu on market conditions and company operations, followed by a translation from Ms. Zhu for Mr. Xu, and then Mr. Yang will discuss the company’s financial performance for the quarter. After that, we will open the floor to Q&A from the audience.
Before we begin the formal remarks, I want to remind you that certain statements on today’s call, including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary view as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties.
All information provided in today’s call is as of today, and we undertake no duty to update such information, except as required under applicable law. Also, during the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We will offer these translations into U.S. dollars solely for the convenience of the audience. Now I will turn the call to our Chairman and CEO, Mr. Xiang Xu. Mr. Xu, please go ahead.
Anita Zhu, Deputy CEO / Translator, Daqo New Energy: Hello everyone. This is Anita, and I’ll now translate our Chairman, Mr. Xu’s remarks. In the second quarter of 2026, market sentiment across the solar PV industry remained cautious amid weak domestic demand and elevated inventory levels, which drove prices lower across the solar value chain. Despite these headwinds, we resumed sales in June, delivering a sequential increase in revenue and a narrowing of our quarterly operating and net losses. Throughout this period, we continued to maintain a robust and healthy balance sheet with zero debt. As of June 30, 2026, we held a cash balance of $555.3 million, short-term investments of $250 million, bank deposits and vaults of $71.7 million, held-to-maturity investments of $51 million, and fixed-term bank deposit balance of $994.8 million. Together, these readily convertible assets totaled $1.9 billion, providing us with ample liquidity, confidence, and strategic flexibility to navigate the current market downturn.
On the operational front, we continued to take proactive measures to navigate challenging market conditions with our nameplate capacity utilization rate operating at approximately 57% during the period. Total production volume at our two polysilicon facilities was 43,675 metric tons for the quarter, exceeding our guidance range of 35,000 metric tons to 40,000 metric tons. Polysilicon market prices remaining below production costs since the first quarter of 2026. We initially refrained from engaging in below-cost sales in line with Chinese self-regulation guidelines and adopted a disciplined wait-and-see approach pending further implementation of the national anti-involution policies. However, after an extended period without clear policy updates, we adjusted our sales and pricing strategies toward a more market-oriented approach in June. As a result, our sales volume increased from 4,482 metric tons last quarter to 15,190 metric tons, with average selling price falling to $4.04 per kilogram.
Our polysilicon transaction and shipment volumes have continued to pick up in the third quarter, reflecting increased confidence in the quality and an ongoing preference for product from customers. On the cost side, solar production costs remained flat sequentially at $5.95 per kilogram, with cash costs edging down by 0.4% to $4.57 per kilogram, and manufacturing costs in R&D terms declining slightly. In light of the current market dynamics, we expect total polysilicon production volume third quarter 2026 to be approximately 40,000 metric tons to 45,000 metric tons. For the full year of 2026, we expect production volume to be in the range of 160,000 metric tons to 180,000 metric tons.
Polysilicon market prices came under further downward pressure during the second quarter, with untied polysilicon prices falling from CNY 35-37 per kilogram at the end of the first quarter to CNY 31-34 per kilogram at the end of the second quarter. Amid subdued demand, depressed pricing, and accumulating industry-wide inventories, polysilicon producers operated at low utilization rates, with aggregate outputs of 5,308 thousand metric tons in the first half of 2026, representing a 9.8% year-on-year decrease. As we make our way through the third quarter, the continued roll-out of anti-involution measures is gaining momentum. In July, a series of mandatory national standards were issued for energy consumption and product efficiency across the solar PV value chain, including the final official version of a new standard setting energy consumption limits per unit of polysilicon output, which will take effect on January 1, 2027.
Polysilicon manufacturers whose unit energy consumption exceeds 6.3 kilograms of coal equivalent per kilogram must complete a corrective improvement by that date or face the risk of plant shutdown. Notably, the threshold of 6.3 per kilogram is stricter than the 6.4 proposed in the draft, signaling regulators’ commitment to accelerating the phase-out of inefficient capacity. On July 27th, the China Photovoltaic Industry Association issued the General Principles for Cost Accounting Models in the Photovoltaic Industry, an initiative to regulate market competition and advance standardized industry governance to lay the foundation for price regulation enforcement. On July 31st, the State Administration for Market Regulation issued price compliance guidance for the solar PV sector, promoting a structural shift from price competition to value-driven differentiation.
The SAMR emphasized that solar PV companies must conduct price compliance self-reviews and curb irrational low-price competition, and that CPIA should strengthen industry self-regulation, promote the General Principles, and guide companies away from illegal pricing practices such as below-cost dumping. The SAMR also indicated that it will take enforcement action against non-compliant entities. Together with seven other polysilicon manufacturers, we jointly signed an initiative to eliminate below-cost sales and fully comply with energy consumption standards on August 6th. As a result of these selective measures, polysilicon prices are beginning to show signs of recovery, with spot prices stabilizing and forward prices rebounding by more than 10% from their recent lows. We are also diversifying beyond our core polysilicon business to hedge against solar PV cyclicality, targeting the fast-growing AIDC power infrastructure market.
On June 3rd, 2026, we announced the signing of an investment agreement to establish a manufacturing base focused on the R&D, manufacturing, and sale of next-generation energy solutions and related equipment for AIDCs. This includes energy storage systems, solid-state transformers, and solid-state circuit breakers. These technologies support the industry’s transition to high-voltage direct current architecture, such as the 800-volt DC standard advanced by NVIDIA and other leading AI infrastructure providers. The platform is anchored by Daqo Group, our affiliated entity under common beneficial ownership with Daqo New Energy, which brings over 40 years of power equipment manufacturing expertise, established technology, deep talent, and customer relationships to accelerate our entry into the segment. We view AIDC power infrastructure as a structural growth opportunity that complements our core business and broadens our earnings base.
Consistent with our strong track record, having navigated several polysilicon cycles, we intend to pursue this expansion in a disciplined manner that preserves our balance sheet strength. Despite a challenging environment, the solar PV industry continues to exhibit compelling long-term growth prospects. Growing vulnerabilities in global energy markets have sparked widespread concerns about national energy security, in which the solar PV and renewable energy sectors can play a crucial role. As one of the world’s lowest-cost producers of the highest quality N-type polysilicon, backed by a robust balance sheet and zero debt, we remain optimistic about the sector and are well-positioned to capitalize on anticipated market recovery and long-term growth opportunities.
We’ll continue to strengthen our competitive edge through advancements in high-efficiency N-type technology and cost optimization via digital transformation and AI adoption. As the world accelerates its transition to clean energy, we’re confident in our ability to play a leading role in shaping that future. Now I’ll turn the call to our CFO, Mr. Ming Yang, who will discuss the company’s financial performance for the quarter. Ming, please go ahead.
Ming Yang, CFO, Daqo New Energy: Thank you, Anita, and hello, everyone. This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining on our new conference call today. I will now go over the company’s second quarter 2026 financial performance. Revenues were $62.7 million, compared to $26.7 million in the first quarter of 2026 and $75 million in the second quarter of 2025. The increase in revenue compared to the first quarter of 2026 was primarily driven by higher sales volume. The company resumed normal sales activities starting in June, following a prolonged period with no new policy developments. Gross loss was $82.7 million, compared to $139 million in the first quarter of 2026 and $81.4 million in the second quarter of 2025. Gross margin was negative 132%, compared to negative 520% in the first quarter of 2026 and negative 108% in the second quarter of 2025.
The sequential improvement in group gross margin was primarily due to a decrease in provisions for inventory impairment, which was $55.7 million in the second quarter of 2026, compared to $98.9 million in the first quarter of 2026. The SG&A expenses were $13.8 million, compared to $12.2 million in the first quarter of 2026 and $32 million in the second quarter of 2025. The sequential increase was primarily due to higher sales volume in the second quarter of 2026. The year-over-year decrease was also due to the companies recognizing $18.6 million in non-cash share-based compensation costs related to its share incentive plan in the second quarter of 2025. R&D expenses were $1.6 million, compared to $0.8 million in the first quarter of 2026 and $0.8 million in the second quarter of 2025. The increase is primarily due to R&D of next-generation energy solutions for AIDC power infrastructure.
R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. Loss from operations was $98 million, compared to $160.8 million in the first quarter of 2026 and $115 million in the second quarter of 2025. Operating margin was negative 156%, compared to negative 560% in the first quarter of 2026 and negative 152% in the second quarter of 2025. Net loss attributable to Daqo New Energy Corp shareholders was $81 million, compared to $88 million in the first quarter of 2026 and $76.5 million in the second quarter of 2025. Loss per basic ADS was $1.20, compared to $1.31 in the first quarter of 2026 and $1.14 in the second quarter of 2025.
Adjusted net loss attributable to Daqo New Energy shareholders, excluding non-cash share-based compensation cost, was $81 million, compared to $88.4 million in the first quarter of 2026 and $67.9 million in the second quarter of 2025. Adjusted loss per basic ADS was $1.20, compared to $1.31 in the first quarter of 2026 and $0.86 in the second quarter of 2025. EBITDA was negative $29 million, compared to negative $83 million in the first quarter of 2026 and negative $48 million in the second quarter of 2025. EBITDA margin was negative 46.8%, compared to negative 311% in the first quarter of 2026, and negative 64% in the second quarter of 2025. Now on the company’s financial condition. As of June 30, 2026, the company had $555 million in cash and cash equivalents, compared to $559.4 million as of March 31, 2026, and $598.6 million as of June 30, 2025.
As of June 30, 2026, short-term investment was $215 million, compared to $288 million as of March 31, 2026, and $118 million as of June 30, 2025. As of June 30, 2026, note receivable balance was $71.7 million, compared to $20.8 million as of March 31, 2026, and $49 million as of June 30, 2025. Note receivable balance, which represent bank notes with maturity within six months. As of June 30, 2026, held-to-maturity investment was $51 million, compared to $50.3 million as of March 31, 2026, and zero as of June 30, 2025. As of June 30, 2026, the balance of fixed-term deposits within one year was $928.9 million, compared to $1 billion as of March 31, 2026, and $960.7 million as of June 30, 2025. Now on the company’s cash flows.
For the six months ended June 30, 2026, net cash used in operating activities was $276 million, compared to $105 million in the same period of 2025. For the six months ended June 30, 2026, net cash used in investing activities was $169.6 million compared to $342.7 million in the same period of 2025. Net cash used in investing activities in 2026 was primarily related to the purchase of short-term investments and fixed-term deposits. For the six months ended June 30, 2026, net cash used in financing activities was $7.8 million, compared to $32,000 in the same period of 2025. Net cash used in financing activities in 2026 was primarily related to $7.8 million in stock purchases made by the company’s subsidiary, Xinjiang Daqo, from its minority shareholders. That concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin.
Conference Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Philip Shen with ROTH Capital Partners. Please go ahead.
Oscar Chen, Analyst, ROTH Capital Partners: Hi, this is Oscar Chen for Phil. Can you hear me okay?
Ming Yang, CFO, Daqo New Energy: Yes, you’re loud and clear.
Oscar Chen, Analyst, ROTH Capital Partners: Okay. I have two questions. First question is on government support on poly pricing. Even with the recent 10% rebound in forward prices, poly ASP remained below industry production costs since late Q1. How would you characterize the central government stance on supply rationalization? Are you anticipating any incremental regulatory support that could help establish a sustainable price floor in the near term? I have a follow-up.
Ming Yang, CFO, Daqo New Energy: Okay. We’re going to translate your question. I will translate for our CEO, Mr. Shi. On August 6th, led by the China Photovoltaic Industry Association, there is a strong initiative for self-discipline. Based on the CPIA cost model, the industry average production cost is estimated to be around RMB 50,000 per ton, so about RMB 50 per kilogram. Due to the current market environment where demand activity is relatively low and there’s still approximately 500,000 to 600,000 tons of poly inventory in the industry. We think this price recovery might take a little bit longer than anticipated. There is strong consensus within the industry for self-discipline and also with the urging of the government and the related departments that the industry consensus is that it’s no longer viable to sell below cost.
What we are seeing in the market is that the quotations for polysilicon pricing from different manufacturers have already exceeded about CNY 40 per kilogram. We are optimistic about the current policy development, and we are waiting to see how the policies may be enforced going forward.
Xiang Xu, Chairman and CEO, Daqo New Energy: 是没有任何的商业模式是不允许的。所以我想这个局面，我想时间不会太长，应该会变。其实大家去年在12月份的时候，反内卷的第一步的时候，我们大全现金流是不亏现金的。去年是积极的预计，2022我们预计。我想这个动作，这个行动可能会影响到后续会影响到我们多晶硅的价钱。
Ming Yang, CFO, Daqo New Energy: Let me translate for Mr. Xu. Right now, the industry in terms of the value chain between the buyers and sellers of polysilicon. Some of the buyers are still observing the market and the policy development. They are taking a wait-and-see approach. But in terms of the polysilicon manufacturers are expecting a reasonable price where they would not be selling at a loss or below their cost. There is still some, you can call it a wait-and-see between the polysilicon manufacturers and the downstream. But we do believe that the past industry practice of selling below cost, especially in the first 6 months of this year, is likely to end, where the government is very adamant about preventing dumping of the products and selling below cost.
Within the law framework for price laws and for the anti-involution, our expectation is that this is likely to move forward optimistically over the next several months. We know that over the past few years, the polysilicon manufacturers or the whole industry in general have seen significant losses, and we do not think that this is long-term sustainable. In fact, it is very unsustainable, and this is likely to lead to the industry in trouble. If we look at DQ, especially in December of last year, when the anti-involution policy was more successful, right? DQ had no cash loss in Q4 of 2025. We were able to achieve a positive operating cash flow during that period. We think that that is a more sustainable timing or framework going forward.
Oscar Chen, Analyst, ROTH Capital Partners: Thank you for the color, Mr. Xu and Mr. Yang. My second question is on the self-discipline agreement signed in August. Previous rounds of sale regulation kind of struggled to maintain compliance once prices fluctuated. Just wondering what makes this framework structurally distinct from past attempts? Regarding the energy consumption requirements, what is your estimate of total industry capacity that could be phased out?
Conference Operator: Our next question comes from Alan Lau with Jefferies. Please go ahead.
Ming Yang, CFO, Daqo New Energy: We are still answering, not translating. Hold on. Okay. Give us a minute.
Conference Operator: All right. We have Philip Shen back on the podium. My apologies.
Xiang Xu, Chairman and CEO, Daqo New Energy: 对，这种是怎么能成功。
Ming Yang, CFO, Daqo New Energy: Right.
Xiang Xu, Chairman and CEO, Daqo New Energy: 因为这次是这样。
Ming Yang, CFO, Daqo New Energy: 还。
Xiang Xu, Chairman and CEO, Daqo New Energy: 上一次的这个反内卷是想通过成立一个基金、成立一个公司收购的形式。
Ming Yang, CFO, Daqo New Energy: 嗯 哼 。
Xiang Xu, Chairman and CEO, Daqo New Energy: 对吧？这个可能跟中国的证券监管局的这个反垄断是有冲突的，从法律上造成了这种冲突。应该讲设计的不是太合理。
Ming Yang, CFO, Daqo New Energy: Mm-hmm.
Xiang Xu, Chairman and CEO, Daqo New Energy: 但这一次是大家在自律的基础之上，对吧？还有一点是根据各家公司的自身的情况，比如大全，我们有足够的现金流，我们开。我们在这个当中，我们生产制造的成本，我们技术的优势就很明显，我们就能往下走。有些企业自身的技术的原因，能耗高，它也不会那么能耗的标准不达标，对吧？现金流也不够，所以这些企业慢慢会按照市场的规律去做调整。所以这次来讲是不计成本，不计这个成本价，大家都抱着成本来说。如果计成本，我想还有各种配套的措施，所以来说一般的企业就很难活得下来。因为这次还是有一些，应该讲在法律的框架之下能够走得更远。
Ming Yang, CFO, Daqo New Energy: Okay. Let me translate for Mr. Xu. Okay. We believe that the current round of anti-involution policy and with the price law enforcement is likely to sustain. What we saw in the previous round was that there was this proposal for the industry consolidation platform to accelerate the exit of excess capacity. But the State Administration for Market Regulation stepped in because they were very worried about anti-monopoly practices between the leading manufacturers. So they were worried that this would bring non-market activities or behaviors by the main manufacturers. But this time, the current effort is led by the State Administration for Market Regulation, and this is bringing self-discipline forward. Also, there is no coordination between the manufacturers on pricing or allocation of sales volume, for example.
This time it is really based on each individual manufacturer’s own production costs, in terms of their manufacturing efficiencies, and for them to sell products based on their ability to produce product at a lower cost. We think that this time it is actually much more sustainable and is being supported by the government. We think that through these two efforts, one is by being one of the lowest cost producers within the industry, as well as with the regulations on energy usage. We think that this time it will promote a more market-oriented approach to both capacity exits and to the selling of products at reasonable price. This is all under the current legal framework brought forward by the government. Hello?
Xiang Xu, Chairman and CEO, Daqo New Energy: Yeah. That is all my question. Thank you. Thank you, Yan.
Ming Yang, CFO, Daqo New Energy: Good. Thank you.
Conference Operator: Our next question comes from Alan Lau with Jefferies. Please go ahead.
Alan Lau, Analyst, Jefferies: Thanks management for taking my question. My first question is a follow-up on the overall initiative to avoid selling below cost. My understanding is that current inventory in the industry is at quite a high level, and the end demand is also quite weak at the same time. When would you expect the polysilicon price, for example, you mentioned their price quotes at above RMB 40 per kilogram. But given that their inventory at the wafer players and demand is not that strong, when would you expect the first batch of transaction at a higher price to happen? Because in the past 2 weeks all the data have halted. I would like to know when we would expect the real transaction is coming out.
Ming Yang, CFO, Daqo New Energy: Okay. Let me translate for Mr. Xu.
Alan Lau, Analyst, Jefferies: Yeah. Thanks.
Ming Yang, CFO, Daqo New Energy: Give us a minute.
Xiang Xu, Chairman and CEO, Daqo New Energy: Okay. Today in the market, they told me that there were fewer transactions, about 40,000, because there is still demand. Although demand is relatively soft, many companies, including our downstream enterprises, are managing their inventory. In the context of managing inventory, they don’t have inventory, so they just buy a small amount. This production demand still exists. According to the information we understand, there are transactions of more than 40,000 tons. I think the transactions of more than 40,000 tons are still below our limited cost of RMB 50,000. I think this is a test. I think what we are talking about is below the limited cost. Not only is it an illegal act to conduct transactions below cost, it is also against the law. It is irrational. I think this situation will gradually improve. I personally think it will improve. But now there have been transactions.
Since last time until about mid-July, there have been almost no transactions. Now there are fewer transactions. I think this situation may improve. What is the basis for this? Everyone has to trust us. In simple terms, everyone has to trust our commitment, right? We all have a commitment here. We need to comply with industry regulations and implement some measures in line with the internal points of the country. I think this progress may become faster.
Ming Yang, CFO, Daqo New Energy: Okay, let me translate for Mr. Xu. Okay. I think he’s seeing in the market that there is some transactions happening at roughly RMB 40,000 per ton or about RMB 40 per kilogram, although there’s a very low volume of transactions right now. Even though the overall demand is relatively weak, there are some wafer producers in the industry that have a very low to no inventory where they are procuring to production. And so right now, we are seeing some transactions, although not very high. What we’re seeing is some manufacturers are testing the market. Although the full cost model would stipulate around RMB 50 per kilogram, some producers are right now testing the market and selling at approximately RMB 40 per kilogram right now. And so it’s been about 2 weeks since the announcement of the manufacturers and the guidance from the government.
We do think that going forward, we are likely to see more and more transactions happen at this new price range.
Alan Lau, Analyst, Jefferies: Understood. Strictly based on the production cost, probably polysilicon price would be higher than that. Given that in this round of the anti-involution initiative, there is not an acquisition plan afterwards. If prices goes up to CNY 40 or maybe CNY 45 or CNY 50 per kilogram, what do you think would happen? Because effectively this will reach to the cost level of more players. Who would be able to sell their products? What do you think the end game of this round of initiative? If there are some capacities will be shut down because of the higher energy consumption requirement or how do you see this?
Ming Yang, CFO, Daqo New Energy: Let me translate for Mr. Xu first. Just a minute. Let me translate for Mr. Xu. He thinks that the recent energy quota policy from the government, where there is different energy usage requirements for the industry, he thinks this will lead to a forced exit of a significant amount of capacity that have a significant or higher energy usage. We are likely to see that happen pretty soon. Also the industry self-discipline, there is a commitment from the various manufacturers that there should be a voluntary reduction of capacity or production.
Also there is a commitment that manufacturers should not be selling at below production cost. We think that both of these are likely to happen starting the second half of this year. There is also the issue that not that many producers actually have the capability to produce, especially now that the industry is running at a fairly low utilization level. A lot of manufacturers have let go significant number of people. There is actually a lack of employees and also lack of training and time. A lot of capacity that have been shut down is unlikely to restart going forward. Even now, we think that, for example, the effective capacity within the industry, even though close to 3 million tons have been built, the effective capacity is already less than 2 million tons right now, and likely to go lower as well.
Alan Lau, Analyst, Jefferies: Thank you. My last question is about AIDC initiative as a second growth driver of the company. I wonder if there is all the backlog or progress to share on this new business? Thank you.
Ming Yang, CFO, Daqo New Energy: Let me translate. Okay, hold on.
Xiang Xu, Chairman and CEO, Daqo New Energy: 关于这个AIDC的事情，其实是大全的第二赛道。因为我们综合考虑，光伏的赛金规目前的现状，要有一个大的增长其实有很大的难度，因为大家都很清楚市场的需求，还有光伏发电的规律都是可以预见的，国内还有这么多企业分这块。所以大全作为电子产业的这个行业的，应该讲在中国的这个市场上，我们有很高的地位，就高低压成套开关。而且经过今年AI的发展之后，我们知道了，我们对市场的了解，因为我们做电子设备，应该讲开关、变压器，以市场来讲，我们是一种供应器。所以我们经过市场的调研之后，我们觉得我们应该更做AI有关、AIDC相关的一些我们最熟悉的行业，来增加我们第二个增长曲线。这基于我们的专业、我们的人才优势、我们的研发优势。非常厉害，上次在这个月，上个月季度的时候，我们公布了我们的做法，我们的决定之后，我们也有和投资者来参加投资人的一个会议。因为投资情况，也没有投资人的时候，所以正好今天也是一个机会来跟各位投资者解释一下关于大全的AIDC方面的一些产业的这些事情。因为我们是做这个产品，大全基于这个方面电力行业的这个基因，所以我们对AI在电力需求的市场是比较了解的。所以我觉得AIDC这个行业，我们来讲，做电子设备，包括它里面的电力厂，包括它里面的IT厂，包括发电厂，我们都非常熟悉。这是我们在AIDC一个现成的产品，同时来说，甚至大家都很清楚。我们的AIDC上我们的SSC、SSCB、互感器、隔离变压器，现在来说都是全球应该讲是一个未来的一个方向。虽然明年AIDC没有太多的市场，我们用达的这个方案，用达的这个800V DC的方案，和现在中国阿里云的大码的方案，对电力的需求是很大，而且大家对他们的认识也是非常明确。所以我们想在这个方面，我们应该利用我们现在大全能源，在这个Energy这里面资金的优势。我们现在有资金的优势，加上这个应该讲是一个巨大的一个增长的风口，我们来投入这个行业的市场，市场的投入，市场的研发制造，这是我们优势的体现。AIDC行业我们就非常熟悉。现在我们在做的就是，我们有一个自己的一个研发的队伍，我们现在在上海成立研发的队伍，所以我想在2026年、2027年，我们应该有销售。因为大家这个行业有很多的客户资源，有应该讲有一流的我们研发团队，我们也想做到世界上一流的研发工程师加入我们的团队。在AIDC电力这个系统，电力这方面，SSC这方面，能够作为行业的领先者，甚至全球的领先者，这是我们的优势。而且我们现在也有现金流，我们有自己的现金流，我们可以大胆地去投入，那里是手指头，这里投入。应该讲，我们建成一个一流的工厂，一个一流的人才的队伍，和一流的制造设备。这尽管讲能体现我们的销售，体现我们的收入，能为我们这个公司创造利润。在这里强调一点，就是我们这个行业非常熟悉。
Ming Yang, CFO, Daqo New Energy: Let me translate for Mr. Xu. We do see that the AIDC related power infrastructure and equipment market is actually a very viable sector where it is going to be a significant growth driver for the company, and it is the second sector that the company is entering into. I think most investors are probably aware that we do think that the growth for the polysilicon market going forward is likely to be relatively low in terms of volume demand as well as for solar. The company is actively looking for other areas of growth. Because Daqo Group has more than 40 years of experience in the power equipment sector, and being one of the leading manufacturer and supplier of high and low voltage power equipment such as transformer and circuit breakers.
Daqo Group is seeing a very strong demand, especially in AI data center related power equipment demand. We do think this is a very significant and real opportunity for the company. Daqo Group brings many years of experience and advantage in manufacturing, in R&D, in technology capability. In terms of products as well, with the growing AI power demand, and especially for the next generation power infrastructure for IDC, where led by NVIDIA, there is this future development of a new next generation of equipment under the 800V DC infrastructure. We are targeting initially in the solid-state transformer and solid-state circuit breaker market. The industry is starting in 2027, next year, and then we expect to see very significant growth from 2028 to 2030 with power demand from these new AI data centers based on a new 800V DC technology.
With Daqo Group, it brings significant experience and advantage, at the same time matching with Daqo New Energy’s strong balance sheet and capital position, to capture this growth driver. Now we have built an R&D team in Shanghai, and we expect to have an initial product ready by year-end. Then with prototypes and then by achieving sales starting in 2027, and then capturing the growth opportunity 2028 to 2030, and our goal to become an industry leader within this IDC power equipment sector by being a tier 1, both in terms of product and the team. That is our current end goal right now.
Alan Lau, Analyst, Jefferies: Yeah. Thanks a lot for management. Good explanation. I will pass on. Thank you.
Ming Yang, CFO, Daqo New Energy: Great. Thank you, Alan.
Conference Operator: Our next question comes from Mengwen Wang with Goldman Sachs. Please go ahead.
Mengwen Wang, Analyst, Goldman Sachs: Sure. Thanks management for taking that question. I have two questions. One is related to the poly business and another to the AIDC business. First, in terms of the poly business, I think you just mentioned currently the industry upstream and downstream players is kind of wait and see, and given the downstream inventory is at a relatively higher level. I am not sure what is the outcome do you expect for after the wait and see period? Particularly, we had this kind of self-display in first half, like we uphold our pricing and then we record a lower shipment. I am wondering, do you have any shipment guidance then towards the end of the year? What is our priority going forward? Will we uphold the pricing to the higher level, like CNY 50,000 per ton? Or, we are kind of want to reach the balance between price or shipments.
Want to hear more about the poly business operations strategy. Thank you.
Ming Yang, CFO, Daqo New Energy: Okay. Thank you, Mengwen. Let me translate your question for Mr. Xu, and then he will respond. Just a minute.
Xiang Xu, Chairman and CEO, Daqo New Energy: 我认为我的观念是下半年对我们来讲，发货应该讲我们产品质量比较好，发货不是问题，主要还是价格的问题。价格的问题当中是什么？就是说今年上半年我们发货的比较少，按照我们这个行业制定，大秦的产能应该是能发货，应该超过15%到17%这个范围之间，超过这个范围是合理。所以在这个前提下，我们还会进一步地按照我们上面的想法，合理的价位我们去发货。但是今年因为全行业已经亏损了不是一年了，所以很多企业很难支撑得下去。未来的话，我认为一定有一些成本高的企业、现金流不好的企业会被淘汰。第二，能耗高，能耗指标不达标的，他会被政府强制淘汰。这个对我们是一个利好的事情。所以我觉得大秦能源有足够的现金，有这样的良好的财务状况和良好的质量标准，还有我们下游客户的评价好的优势，我觉得下一步我们想在应该讲白热化的大环境之下，我们想能够把我们的库存降到最低。从未来来说，今年我还不敢明确地讲，我认为明年的形势会更好。因为今年大家现在也看下来，价格一直在提升，当然不一定是我们的问题，包括我们的硅片，不仅是硅料的问题，包括我们的硅片现在价格也在涨。因为现在的价格都是基于现金成本价，这完全不合理。也不是说在这种倾销的情况下，我认为也是有原因的。所以我想这个应该会有点，也必须有点这种情况。
Ming Yang, CFO, Daqo New Energy: Let me translate for Mr. Xie. In the second half, what we believe is that because Daqo New Energy, we have a superior quality of product in the market. Selling and shipping our product is really not an issue. I think the question is really price. In the first half, because we adhere to self-discipline, we did not sell as much products as our normal market share. Because our competitors were engaged in low-cost sales practices. But if we look at our market share in the past, we believe that we can achieve approximately 15% market share within the industry, and we continue to expect that going forward. Our target is to sell at an appropriate price or a reasonable price, be fully compliant with the government guidance and the price law.
What we expect is that, say, in the next 6-18 months, we are likely to see a forced exit or a market-based exit of manufacturers with high production costs or manufacturers with poor cash positions or poor cash flow. Companies with not a good balance sheet are likely to continue to struggle going forward. While Daqo New Energy with our cash position and our strong balance sheet, also our high product quality and low cost, we expect that we are likely to do better and to do well in the market. Especially in 2027, where we expect to see a much improved and better market environment. Then we expect to continue to lower our inventory going forward to relatively low inventory levels. That is our target.
Mengwen Wang, Analyst, Goldman Sachs: Okay, thank you. Can I conclude that we will hold up the price in your turn, and we will wait the rest of the marginal players to exit, and then at that time, we will see fast inventory depletion and the recovery of the shipment is likely to occur in the next 6 to 18 months?
Ming Yang, CFO, Daqo New Energy: I think in terms of pricing, we cannot sell below cost. We’re going to adhere to that. At the same time, we’ll look for opportunities to sell at a reasonable price. Then wait for the market to have additional capacity exits. Yes.
Xiang Xu, Chairman and CEO, Daqo New Energy: 我再讲一个事情。
Mengwen Wang, Analyst, Goldman Sachs: Okay, that’s super clear. My second question about AIDC, I think we have put out announcements like we have CNY 6 billion total investment, CNY 2 billion in the first phase. You just mentioned we will have sales volume reported in next year. Just wondering, can you share a bit more about the plan for the AIDC business, specifically like our CapEx timeline and the source of capital for this CNY 6 billion or CNY 2 billion investments? What’s our expected payback duration for the first phase of the production phase? What’s the normalized profitability from this business do we expect we’ll achieve? Also for other operating metrics, will we have more other sources allocated for this new business development or we can use some of the synergies from our Daqo Group, the aligned company?
So, a lot of details about can you share a bit more regarding to these metrics. Thank you so much.
Ming Yang, CFO, Daqo New Energy: Okay. Let me translate your question first quickly. Okay, hold on. Let me translate for Mr. Shi. I think first of all, let me just clarify on the investments involved. Even though the total project anticipated investment is RMB 6 billion, we are only committing the first phase right now, which is about RMB 2 billion, which will cover all of solid-state transformer, solid-state circuit breaker, and also our E-House total solution for AI power infrastructure and also some related to energy storage. The remaining RMB 4 billion is not committed as of today, and will be planned sometime in the future. Then in terms of our strategy, we are focusing on AIDC-related power infrastructure or equipment. Then we expect to have three primary products.
One is a total solution or a package solution which is going to be a plug-and-play kind of solution for AI power infrastructure, which has all the related power equipment. Then also our solid-state transformers and solid-state circuit breakers, and so it includes the related software and control. There is very significant synergy with Daqo Group because of Daqo Group’s experience and know-how and also their position within the market, we think that actually we can receive significant orders from customers. We are now in the phase of doing R&D and also the building of related manufacturing facilities. The R&D team is now in place, and we continue to expect to have our prototype ready by year-end and getting these products. In terms of 2026 and 2027 is really a preparation period and introduction of the products into the market.
We think that the market will see a high growth phase from 2028 to 2030, and where we do expect a significant ramp-up of revenue during this period for these related products and business. Okay. Thank you, Mengwen.
Mengwen Wang, Analyst, Goldman Sachs: Hi, Ming. Just one last very small question. For the RMB 2 billion committed investment, we will extend in 2026, right?
Ming Yang, CFO, Daqo New Energy: Over the next two years. This year is only about, I think, it is only maybe $30 million-$40 million this year. The remaining will be over the next two years, actually. Yeah.
Mengwen Wang, Analyst, Goldman Sachs: Okay. Thank you so much.
Ming Yang, CFO, Daqo New Energy: Sure.
Mengwen Wang, Analyst, Goldman Sachs: That is all from me. Thank you.
Ming Yang, CFO, Daqo New Energy: Thank you. Our CEO will make additional comment. Mr. Xu will provide an update on our semiconductor polysilicon business, where the company has spent a total investment, including land and related equipment facility of about 1.2 billion RMB into the business. We have been doing product trial production and also in terms of qualification with our customers. The qualification cycle has been much longer than we anticipated, but we are continuing to do this. He is very optimistic that he is looking at very significant market demand, where the expected demand for semiconductor poly is roughly 75,000 tons per year, while right now the current industry production for semiconductor poly is only about 57,000 tons per year. He is expecting a very significant growth for this product, this market sector. We are going to wrap up and reinvigorate our activities for this. Okay.
Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Jessie Zhao for any closing remarks.
Jessie Zhao, Investor Relations Director, Daqo New Energy: Thank you everyone again for participating in today’s conference call. Should you have any further questions, please don’t hesitate to contact us. Thank you and have an awesome day. Goodbye.
Conference Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.