In its quarterly earnings call on Tuesday, Trina warned that the current “imbalance” in the global market for PV modules “will deepen” in the months ahead if the company’s peers do not take a “rational” approach to their factory expansions.

Trina acknowledged that the average selling price of modules in the global market is declining faster than Trina’s own manufacturing costs, squeezing its margins. 

Despite reporting significant top-line growth in the second quarter – with shipments up 17% year on year – Trina’s quarterly net income fell modestly to $40.3m, down from $40.9m in the year-ago period. 

The company’s gross margin fell to 18.3%, from 20% last year.

And the squeeze may just be getting started.

After years of steady growth in the global solar market, fueled in large part by China, Trina expects the global solar market to be “flattish” in 2017, says interim chief financial officer Merry Xu, who joined the company several months ago.

Trina expects the world to add 67-72GW of new solar capacity in 2016, and perhaps only 70GW in 2017, Xu says.

The Chinese market, in particular, is slowing considerably, due to a range of factors that includes changes to the country’s incentive policies, delays in connecting big projects, and a high curtailment rate among projects in western China.

China will likely add only one-third as much capacity in the back-half of 2016 as it did in the first six months of the year, predicts Yvonne Young, Trina’s director of investor relations.

The slowdown in China has led to “very aggressive pricing” from panel suppliers concerned about their bulging inventories, Young says.

How soon the module market regains a healthy balance will depend largely on Trina’s peers, Xu says.

“Trina will take a prudent and very cautious approach," she says. But "if [our competitors] keep up their capacity expansions and capex [spending], the imbalance will deepen”.

Asked whether Chinese officials might seek to use a new industry downturn to further consolidate the country’s bloated solar manufacturing sector, Xu said Trina hasn’t yet "noticed any policy from the government requiring or pushing for such consolidation”.

Chief executive Jifan Gao, however, immediately stepped in and said the government “will certainly encourage industry consolidation” around manufacturers with a “technology advantage”.

“Let’s say the stronger ones will become stronger,” Gao said, speaking through a translator. “This will continue to be the trend; we expect to see industry consolidation continue.”

Trina shipped 1.66GW of modules in the second quarter, including 39.3MW to its own downstream projects. That compares to the 1.42GW it shipped in the first quarter, and the 1.23GW it shipped in the second quarter of 2015.

New York-listed Trina is subject to a go-private bid, which is expected to close in early 2017.