The global solar industry is entering a phase of consolidation after years of rapid expansion, and one of its most critical components is feeling the impact. According to Wood Mackenzie’s latest market outlook for 2025, the global solar inverter market is set to decline for two years, contracting by 2 per cent to 577 gigawatts AC (GWac) in 2025 and by a further 9 per cent to 523 GWac in 2026. Following record-breaking inverter sales in 2024, there has been a decline, indicative of growing concern in major solar markets, including China, Europe, and the US. Analysts stress that the decline is cyclical rather than structural, driven by policy changes, inventory adjustments, and evolving grid and technology requirements, even though the near-term picture remains complex.

Why is the Solar Inverter Market Declining After Years of Growth?

The slump follows a protracted boom period during which inverter exports grew rapidly, enabling widespread solar installations. The global solar inverter market is set to decline for two years, which is a sign of market maturity rather than collapse, as Wood Mackenzie points out, since even the biggest producers in the sector can no longer sustain continuous expansion.

Among the leading causes of the contraction are:

• Post-2024 correction: Record shipments in 2024 led to inventory build-ups and oversupply in several areas.
• Policy uncertainty: Project choices are being delayed by changing regulatory frameworks in the US, Europe, and China.
• Pricing pressure: Margins are being squeezed by fierce competition, especially from Chinese manufacturers.
• Demand realignment: Hybrid systems, retrofits, and repowering initiatives are replacing pure capacity expansions in growth.

Every solar system requires solar inverters that convert DC electricity from solar panels into grid-compatible AC power. Demand growth, however, becomes less linear and more responsive to economic and policy signals as markets mature.

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How are Regional Markets Responding Differently to the Downturn?

Regional dynamics paint a mixed picture, even as the global solar inverter market is set to decline for two years globally. The largest inverter market in the world, China, is expected to shrink by 5% to 304 GWac in 2025, the first decrease since 2019. Uncertainty during the changeover between China’s 14th and 15th five-year plans is associated with this reduction. China is expected to maintain its lead, with cumulative inverter demand surpassing 2.9 terawatts AC (TWac) by 2034.

Except for China, the picture is better elsewhere in the Asia-Pacific. By 2025, inverter demand is expected to reach 89 GWac due to:

• Growing markets for rooftop solar in Southeast Asia and India
• Increased investments in domestic manufacturing
• Policies that promote clean energy in developing nations

On the other hand, Europe continues to deteriorate. By 2025, shipments are predicted to reduce from 88 GWac to 83 GWac, and by 2032, they will be below 75 GWac annually. Demand is being impacted by ongoing inventory issues and decreasing capture costs for utility-scale projects, particularly in Spain.

Inverter shipments in the US are expected to reach 47 GWac in 2025 before plummeting by 22% in 2026, mainly due to the Inflation Reduction Act‘s slow phase-out of tax subsidies.

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What is Driving Inverter Price Declines Across Technologies?

Falling prices are a defining feature of the current market environment and another reason the global solar inverter market is set to decline for two years in value terms, even where volumes remain relatively strong. All inverter categories are seeing price reductions due to competition from Chinese suppliers and quick technology advancements.

Essential developments in pricing include:

• Module-level power electronics (MLPE): Due to Enphase and SolarEdge‘s market positioning, costs in the US are more than 50% higher than global norms.
• Hybrid inverters: As battery-ready, DC-coupled systems became mainstream offers from companies like Huawei, SolarEdge, and Tesla, prices dropped by 13% in 2024.
• Utility-scale inverters: The sharpest declines are being seen in utility-scale inverters, with domestic three-phase string inverter prices in China predicted to go below $0.02 per watt AC.

Larger unit capacities (350–400 kW AC), falling silicon carbide semiconductor costs, and fierce competition among providers like Huawei and Sungrow might cause central standalone inverters to approach $0.01 per watt AC by 2034.

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Could Cybersecurity Concerns Reshape the Inverter Market?

As the global solar inverter market is set to decline for two years, cybersecurity is becoming a crucial risk element, adding yet another level of uncertainty. Inverter remote-access features, which are essential for monitoring and grid services but pose questions about data security and grid resilience, are being examined more closely by governments in the US and Europe.

Anticipated developments include:

• Europe: The Cyber Resilience Act will be expanded to include more stringent standards for software, reporting, and remote access.
• United States: Lawmakers have called for restrictions on the import of Chinese inverters, which might change the nature of supplier competition.
• Manufacturers: Investing more in local data hosting, encrypted communications, and secure firmware.

While some overseas suppliers may face obstacles due to these efforts, businesses that can meet stricter compliance requirements may be encouraged to innovate and stand out from the competition.

Despite the slump, Wood Mackenzie anticipates a recovery in the early 2030s, bolstered by electrification, AI-driven electricity consumption, and a burgeoning repowering market. This suggests that businesses that invested during the current slowdown may come out stronger.

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Frequently Asked Questions (FAQs)

Q1. Why is the market for solar inverters currently contracting globally?

Inventory adjustments following record 2024 shipments, policy uncertainty in key markets, and declining prices brought on by fierce competition are the primary causes of the downturn.

Q2. Despite the recession, which areas are still experiencing growth?

Rooftop solar expansion and local manufacturing investments are likely to fuel growth in Asia-Pacific economies outside of China, especially in Southeast Asia and India.

Q3. When can we anticipate a market recovery?

According to Wood Mackenzie, electrification, AI-related demand, and cyclical repowering will drive the market’s recovery and surpass 2024 levels by the early 2030s.

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