(Bloomberg) -- The world’s largest solar manufacturer slashed prices for a key component as growing capacity in the sector intensifies cost competition.

Chinese company Longi Green Energy Technology Co. cut wafer prices by as much as 31% on Monday. Wafers are silicon squares that are wired up and pieced together to form solar panels. 

The reduction comes after solar silicon prices have plunged by almost half since early February. A slew of new factories have ramped up production, ending a shortage of the material that disrupted the industry’s supply chain last year. 

Longi President Li Zhenguo warned last week that aggressive expansion in the solar supply chain could lead to excess capacity that forces more than half the companies in the industry out of business in the next few years. 

Longi shares fell as much as 2% in Shanghai on Tuesday. Shares of TCL Zhonghuan Renewable Energy Technology Co., its top competitor in the wafer space, were little changed in Shenzhen. 

©2023 Bloomberg L.P.