A few years ago, the size of a solar manufacturer’s module capacity was enough to command investor attention. Today, that metric alone tells only half the story.
The questions investors are asking have become far more nuanced. How much of the manufacturing value chain does a company control? Can it produce its own solar cells? Does it have plans to manufacture wafers? How insulated is it from global supply chain disruptions? Most importantly, can it remain competitive as module manufacturing becomes increasingly commoditised?
These questions reflect a larger transformation underway in India’s solar manufacturing landscape. While module assembly has helped the country build significant domestic capacity over the last five years, the next phase of industrial growth will be defined by backward integration. The attention of long-term investors is steadily shifting towards solar cells and wafers, not simply because they are upstream products, but because they represent the real engines of value creation in photovoltaic manufacturing.
India has already demonstrated that it can scale module manufacturing at an unprecedented pace. Installed module manufacturing capacity has expanded from less than 15 GW in 2020 to well over 140 GW by mid-2026. Domestic solar cell manufacturing has also crossed the 25 GW mark, driven by the Production Linked Incentive (PLI) Scheme, increased private investment and policy interventions such as the Approved List of Models and Manufacturers (ALMM).
This rapid expansion has undoubtedly strengthened India’s position as a global solar manufacturing destination. However, it has also exposed an important reality that is module manufacturing, by itself, offers limited long-term differentiation.
Globally, module prices have witnessed a sharp correction over the past two years, largely due to oversupply. Margins have compressed, competition has intensified and manufacturers dependent solely on assembling imported components have found it increasingly difficult to protect profitability. As manufacturing capacity grows, modules are becoming less of a technology play and more of a scale-driven business.
This is precisely why investors are now looking further upstream.
Solar cells account for a substantial share of the value addition within a photovoltaic module. Unlike module assembly, cell manufacturing involves highly sophisticated processes, including diffusion, passivation, metallisation and precision quality control. It demands higher capital investment, stronger process engineering capabilities and continuous technological upgrades.
Manufacturers with domestic cell production are better positioned to manage costs, improve product consistency and reduce dependence on imported intermediate products. Equally important, they are able to adapt more quickly to evolving technologies such as TOPCon, Heterojunction (HJT) and, eventually, tandem solar cells.
Recent policy developments have further reinforced the strategic importance of cell manufacturing. With the implementation of ALMM List-II for solar cells from June 2026, government-supported solar projects are now required to source domestically manufactured ALMM-listed cells. This policy shift is expected to accelerate investments in domestic cell production while encouraging greater integration across the manufacturing value chain.
Yet, if cells represent today’s competitive advantage, wafers are likely to define tomorrow’s.
Despite impressive progress in modules and cells, wafer manufacturing remains India’s most significant supply chain gap. A majority of wafers used by domestic manufacturers continue to be imported, making the industry vulnerable to global price fluctuations, logistics disruptions and geopolitical uncertainties.
This dependence is more significant than it appears.
Every imported wafer carries embedded risks that extend beyond procurement costs. Manufacturers remain exposed to foreign exchange volatility, shipping delays, international trade restrictions and concentrated supplier markets. As recent global events have demonstrated, disruptions at one stage of the supply chain can quickly affect manufacturing schedules across multiple countries.
For investors evaluating long-term manufacturing businesses, reducing these vulnerabilities has become an important indicator of resilience.
However, wafer manufacturing is fundamentally different from module assembly.
It requires considerably higher capital expenditure, advanced crystal growth technologies, precision wafer slicing equipment and uninterrupted access to affordable electricity. Energy costs alone account for a significant proportion of wafer production economics, making infrastructure and power availability decisive competitive factors.
This explains why China spent more than a decade building an integrated ecosystem spanning polysilicon, ingots, wafers, cells and modules before emerging as the world’s dominant solar manufacturing hub.
India is now attempting to build similar capabilities, albeit in a far shorter time frame.
Encouragingly, policy is beginning to move in the same direction. Earlier this year, the Ministry of New and Renewable Energy extended the ALMM framework to include solar ingots and wafers through the introduction of ALMM List-III, with implementation planned from June 2028, subject to sufficient domestic manufacturing capacity. The move signals a clear policy intent that is to encourage investment further upstream and reduce dependence on imported raw materials over the long term.
The significance of this policy goes beyond import substitution. It reflects an understanding that industrial competitiveness cannot be achieved through module assembly alone. Sustainable manufacturing ecosystems are built by controlling critical technologies across multiple stages of production.
This is also influencing investment decisions.
Increasingly, capital is flowing towards companies pursuing vertically integrated manufacturing strategies rather than standalone module assembly operations. Integrated manufacturers are able to capture greater value addition, reduce procurement risks, improve production flexibility and maintain stronger operating margins during periods of market volatility.
Perhaps more importantly, vertical integration provides greater control over technology transitions. As the global industry moves beyond PERC towards TOPCon, HJT and next-generation tandem architectures, manufacturers that own upstream production capabilities will be better positioned to commercialise emerging technologies without relying entirely on external suppliers.
For India, this transition carries implications that extend well beyond the solar sector.
Building domestic capabilities in wafers and cells supports employment generation in advanced manufacturing, strengthens industrial supply chains, attracts long-term capital and enhances energy security. It also aligns closely with India’s broader ambition of becoming a global manufacturing hub under the ‘Make in India’ initiative.
The solar industry has entered a phase where manufacturing scale alone is no longer sufficient. Investors are increasingly looking for technological depth, supply chain resilience and long-term competitiveness. These attributes are unlikely to be determined by module assembly capacity alone.
Instead, they will depend on how successfully manufacturers move upstream.
India’s first chapter in solar manufacturing was about creating module capacity.
Its next chapter will be written by those willing to invest in cells, wafers and the technologies that underpin them.
The companies that recognise this shift today will not only strengthen their own competitiveness but also help shape the future of India’s clean energy manufacturing ecosystem
