Good day, and welcome to the Daqo New Energy third quarter 2026 results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. 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, IR Director. Please go ahead.
Hello, everyone. I'm 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 third quarter of 2026, which can be found on our website at www.dqsolar.com. Today, attending the conference call, we have our Deputy CEO, Ms. Anita Zhu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Xiang Xu, is on a business trip now, so Ms. Anita Zhu will deliver our management remarks on behalf of Mr. Xiang Xu. Today's call will begin with an update from Ms. Zhu on market conditions and company operations, 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 would like 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, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statements. 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 offer these translations into U.S. dollars solely for the convenience of the audience. Now I will turn the call to our Deputy CEO, Ms. Anita Zhu. Ms. Zhu, please go ahead.
Thank you. Hello, everyone. This is Anita, and I will now deliver our management remarks on behalf of our CEO, Mr. Xu. Supported by continued anti-involution policies, including price enforcement, the polysilicon sector bottomed out and rebounded in Q3, with polysilicon prices gradually recovering towards cost levels. However, downstream players continued to hold polysilicon inventories and largely limited their purchases to immediate operational needs, keeping overall sector trading volumes low. Against this backdrop, we delivered a substantial increase in Q3 shipment volumes, driving strong sequential revenue growth and narrowing losses. Our financial position remains sound, with a robust balance sheet and zero debt throughout the period.
As of September 30th, 2026, we held cash equivalents, and restricted cash of $546.5 million, short-term investments of $267.3 million, bank notes receivable of $161.5 million, held-to-maturity investment of $51.6 million, and a fixed-term bank deposit balance of $1 billion. Together, these readily convertible assets total $2.06 billion, up to $1.92 billion at the end of Q2, providing a strong financial foundation and strategic flexibility to navigate the current market environment. Operationally, our nameplate capacity utilization rate was approximately 70% during the period. Total production volume at our two polysilicon facilities was 53,469 metric tons, exceeding our guidance range of 50,000 metric tons - 55,000 metric tons. Sales volume rose sharply from 15,190 metric tons in Q2 to 46,910 metric tons in Q3, following our shift in June from a wait-and-see stance to a more market-oriented sales and pricing strategy.
We believe this increase also reflects greater customer confidence in our product quality and continued preference for our products. Our average selling price increased by 2% sequentially to $4.12 per kilogram, although the increase lagged the broader market recovery because Q3 shipments fulfilled orders signed before late July. On the cost side, average total production cost and average cash cost fell by 9.7% and 7.4% sequentially, respectively, reaching new record lows of $5.37 per kilogram and $4.23 per kilogram, respectively, reflecting our continued improvements in manufacturing efficiency and cost control. In light of the current market dynamics, we expect total polysilicon production volume in Q4 of 2026 to be approximately 35,000 metric tons- 45,000 metric tons. For the full year of 2026, we expect production volume to be in the range of 175,000 metric tons - 185,000 metric tons.
Anti-involution efforts across the solar PV sector continued during Q3. The State Administration for Market Regulation released price compliance guidance targeting the solar PV sector on July 31st. This followed August by industry initiative against below-cost sales that we co-signed. Against this backdrop, polysilicon manufacturers halted below cost sales, and N-type polysilicon prices rebounded from a trough of CNY 30.5 -CNY 33 per kilogram in Q2 to approximately CNY 40 -CNY 43 per kilogram by the end of Q3. On September 3rd, the National Development and Reform Commission and the SAMR jointly issued the Notice on Matters Concerning Cost Accounting for Low-Price Disorderly Competition in Key Industrial Products, establishing a firmer regulatory basis for polysilicon pricing. Despite these policy tailwinds, elevated industry inventories and weak near-term demand continued to make the operating environment challenging.
In response, we are taking a disciplined approach and evaluating and reducing our near-term utilization rate to better align our production with market demand and support the orderly de-stocking of polysilicon inventories. This approach is consistent with our commitment to the long-term healthy development of the solar industry. We are also diversifying beyond our core polysilicon business to reduce our exposure to solar PV cyclicality by targeting the fast-growing AIDC power infrastructure market. On June 3rd, 2026, we announced the investment agreement to establish a manufacturing base for the R&D, manufacturing, and sale of next-generation energy solutions and related equipment for AIDC, including energy storage systems, solid-state transformers, and solid-state circuit breakers. These technologies support the AIDC industry transition to a high-voltage direct current architecture, such as 800 voltage DC standard advanced by NVIDIA and other leading AI infrastructure providers.
The platform is anchored by Daqo Group, an affiliated entity under common beneficial ownership with Daqo New Energy Corp., which brings over 40 years of power equipment manufacturing expertise, established technology, experienced talent, and deep customer relationships to help accelerate our entry into the segment. We view AIDC power infrastructure as a structural growth opportunity that complements our core business and has the potential to broaden our earning base. Drawing on our track record of navigating multiple polysilicon cycles, we intend to pursue this expansion in a disciplined manner while preserving our balance sheet strength. Despite the challenging market environment, the solar PV industry retains compelling long-term growth prospects. Growing vulnerabilities in global energy markets have heightened concerns about national energy security, underscoring the important role that solar PV and other renewable energy sources can play.
As one of the world's lowest cost producers of high-quality N-type polysilicon, supported by a robust balance sheet and zero debt, we remain optimistic about the sector and are well-positioned to capitalize on the anticipated broader market recovery and long-term growth opportunities. We will continue to sharpen our competitive edge by advancing high-efficiency N-type technology and using digital transformation and AI adoption to optimize costs. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in that transition. Now I will turn the call to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead.
Thank you, Anita, and hello, everyone. This is Ming Yang, CFO of Daqo New Energy. We appreciate you joining our earnings conference call today. I will now go over the company's third quarter 2026 financial performance. Revenues were $194.2 million compared to $62.7 million in the second quarter of 2026 and to $44.6 million in the third quarter of 2025. The sequential increase was primarily driven by higher sales volume as the company resumed normal sales activities in June following its adoption of a more market-oriented sales and pricing strategy. Gross loss was $60.6 million, compared to a gross loss of $83.7 million in the second quarter of 2026, net gross profit of $9.7 million in the third quarter of 2025. Gross margin was -31% compared to -132% in the second quarter of 2026 and a + 4% in the third quarter of 2025.
The sequential improvement in gross margin reflected higher selling prices, lower production costs, and lower inventory impairment provisions. Inventory impairment provisions totaled $30.9 million in the third quarter of 2026, down from $55.7 million in the second quarter of 2026. Selling, general, and administrative expenses were $16.3 million, compared to $15.8 million in the second quarter of 2026 and $32 million in the third quarter of 2025. The sequential increase was primarily attributable to higher sales volume. The year-over-year decrease was primarily because the company recognized $18.6 million in non-cash share-based compensation related to the share incentive plan in the third quarter of 2025, while it did not have the same item in the same period of 2026. R&D expenses were $2.7 million, compared to $1.6 million in the second quarter of 2026 and $0.6 million in the third quarter of 2025.
The increase in R&D expenses was primarily due to R&D of next-generation energy solutions for AIDC. R&D expenses can vary from period to period and reflect R&D activities that take place during the quarter. As a result of the foregoing, loss from operations was $78.6 million, compared to $98.1 million in the second quarter of 2026 and $20.3 million in the third quarter of 2025. Operating margin was - 40.5%, compared to - 156% in the second quarter of 2026 and - 8% in the third quarter of 2025. As a result of the foregoing, net loss attributable to Daqo New Energy Corp. shareholders was $52.9 million, compared to $81.2 million in the second quarter of 2026 and $14.9 million in the third quarter of 2025.
Loss per basic ADS was $0.78, compared to $1.20 in the second quarter of 2026 and $0.22 in the third quarter of 2025. Adjusted net loss attributable to Daqo New Energy shareholders, excluding non-cash share-based compensation cost, was $52.9 million, compared to adjusted net loss of $81.2 million in the second quarter of 2026 and adjusted net profit of $3.7 million in the third quarter of 2025. Adjusted loss per basic ADS was $0.78, compared to adjusted loss per basic ADS of $1.20 in the second quarter of 2026 and adjusted earnings per basic ADS of $0.05 in the third quarter of 2025. EBITDA was - $9.2 million, compared to - $29 million in the second quarter of 2026 and $45.8 million in the third quarter of 2025.
EBITDA margin was - 0.7%, compared to - 46.8% in the second quarter of 2026 and 18.7% in the third quarter of 2025. Now on the company's financial condition. As of September 30th, 2026, the company had $546.5 million in cash and cash equivalents, compared to $555 million as of June 30th, 2026. Short-term investments were $267 million, compared to $250 million as of June 30th, 2026. Note receivable balance representing bank notes maturing within six months were $161.5 million, compared to $71.7 million as of June 30th, 2026. Held-to-maturity investments were $51.6 million, compared to $51 million as of June 30th, 2026. Fixed term deposits due within one year was $965 million, compared to $928.9 million as of June 30th, 2026. Now on the company's cash flows.
For the nine months ended September 30th, 2026, net cash used in operating activities was $215 million, compared to $50 million in the same period of 2025. For the nine months ended September 30th, 2026, net cash used in investing activity was $235 million, compared to $449 million in the same period of 2025. Net cash used in investing activities in 2026 was primarily attributable to the purchase of short-term investments, fixed term assets, fixed deposits, net of redemption as of both purchase of PP&E. Purchase of property, plant and equipment and land use rights totaled $93.5 million for the first nine months of the year. For the nine months ended September 30th, 2026, net cash used in financing activities was $7.8 million, compared to $32,000 in the same period of 2025.
The net cash used in financing activities in 2026 was primarily related to $7.8 million share repurchases made by the company's subsidiary, Xinjiang Daqo, from its minority shareholders on the A-share. That concludes our prepared remarks. We will now take questions from the audience. Operator, please begin.
Thank you. We will now begin the question- and- answer session. To ask a question, you may press star then one on your touch- tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Alan Hon with JP Morgan. Please go ahead.
Thank you, management, for taking my questions. My first question is related to our sales strategy during the third quarter. Because we have read that the spot price has increased since August, and during the first two quarters, we have been not willing to sell at a very low cost to reserve cashes and hoping the market to recover. But majority of our sale is transacted at lower than the average spot price in fourth quarter. You did explain a little bit on a bout securing some sales probably in July timeframe, signing contracts. Just want to get a little bit more clarity on how should we look out for the fourth quarter sales ASP. Is it going to be closer to the current spot market prices, or is it still going through some of the contracts signed in July, which is transacted at $4 per kilogram?
Thank you, Alan, for your question. I think before we shed some light on our sales strategy and the ASPs going forward into the fourth quarter, I would like to give a little bit more background on the recent development of the anti-involution. Because recently, there have been conversations happening on a more frequent basis, and we see a strengthened tone on the pricing law, which players are not allowed to sell below cost. And this previously was really under the debate of whether that means cash cost, production cost, or full cost, and we think that's leaning more towards the full cost level. And to give a reference for us, our Q3, the all-in cost, including depreciation and the VAT, is around CNY 43 per kilogram. I would say that would serve as a benchmark for our strategy.
However, that being recognized, because recently the industry level inventory is really accumulating to a relatively high level to around 700,000 metric tons overall, with half at the manufacturers of the polysilicon level and half at the wafer downstream customer level. I would say we recognize the market dynamics, and the goal is to really have our sales at the benchmark level. But I think that's going to undergo a more gradual process, like how in Q2 we have ramped up to above 30, 31, and then now to around 35 average.
Got it. In that sense, I think this is probably a situation across the industry, which would also mean, overall, the industry is still trying to figure out how to fully follow the guideline, I would imagine.
Yes, because the conversations are still ongoing, so it is not sure from our perspective on the exact level of enforcement. What we can say from our company's perspective is that we 100% engage and promote the healthy and sustainable long-term development of the industry, which you can see from our overall sales volume in the first two quarters as we took a wait-and-see stance for clearer signal from the regulators and from the policy perspective, and were reluctant to be the first ones to sell at below-cost prices. So we are still actively participating in these anti-involution initiatives. But given the industry dynamics, we also have to assess our own strategies in this situation.
Got it. I guess my second question would be, how do we think about our strategy in ramping up or increasing the production in third quarter maybe? Because it sounds like the situation is not very clear, and maybe maintaining a lower production volume would be a safer bet. I just want to get your thoughts on why we are increasing the production in first quarter.
Okay. I think the actual production for the fourth quarter is actually fairly fluid. So there is two approach that we are taking. I think if you look at what we have done is, right now we are producing, say, roughly 15,000 metric ton per month. But the current manufacturing, I would say the process and the actual production, for example, I think in terms of quality and cost, is actually fairly optimal. I think you can see in the third quarter, we actually achieved fairly significant cost reduction while quality improved. So to the extent that we can maintain the current stable process, we would like to do that. But we also recognize that there is this industry initiative or proposal of reducing the entire industry's utilization further to maybe, say, 35% or so across the industry.
We are also observing and looking at how our industry peers is working on that. So to the extent that if the industry peers can come to the actual action of jointly reducing utilization, certainly we would welcome that, and we would follow as well. So I think that is why we have a fairly wide range with regard to our Q4 production level.
Got it. My last question would be about the policy outlook. I understand we are now in a potential turning point where regulation intervention is happening, but it is taking time to sort out among players. I would like to hear your thoughts on when you think we will get to a point where industry at large will be selling at the designated level, like the all-in cost level?
I think that will be a more gradual process because as Ming just mentioned, the players recently have proposed lowering the industry level overall rate to around 35% to balance the overall supply and demand for the year ahead. That is based on our estimated demand outlook for next year, and including the high level of inventory of around 700,000 metric tons currently. We think maintaining at this rate will allow prices to return to a reasonable level. Of course, I think it would be under the process of first recovering to above cash cost, then to production cost, and finally to full cost. We do think that is going to take at least a couple months going forward. That also depends on the timing of when the regulation really evolves and rolls out.
Got it. Okay. Thank you very much for sharing with us the current industry backdrop and your strategy. With that, I will pass on to the next person.
Thank you.
Great. Thank you, Alan.
The next question comes from Phil Shen with ROTH Capital Partners. Please go ahead.
Hey, guys. Thanks for taking my questions. First one, Anita, you talked about you're unsure about what the enforcement levels are of the anti-involution policies. I was wondering if you could talk through what we could expect to see as it relates to enforcement. Could the government become more aggressive, and is that a key catalyst to support pricing? If they do pursue enforcement, what could they actually do that could be meaningful in impact? Thanks.
Thank you, Phil. I think based on our engagement with our peer players and with CPIA and from attending these meetings, we do sense a firmer tone in combating the vicious competition in the industry. I think that's via two fronts that we see. First is the energy consumption, which would phase out the outdated capacity starting from next year. That's a quite clear point. The other one is the pricing laws that we just mentioned. I think that's still under debate because every company has their own strategies, and they have their own production, sales, and inventory levels. That's still under the debate. We do think that we'll see something coming very soon on that front.
Anita, I'd like to explore that a little bit more. Everybody has different levels of where they want to produce and sell and all these things, but ultimately there's got to be some punitive actions that change behavior. What do you think those actions could be?
I think the most straightforward punitive action upfront would be via fines for the companies that do not abide by these principles and guidelines. For instance, selling at below the cost level. Then they need to have punitive action so that would serve as a red flag and signal for other companies to follow. In terms of the energy consumption, I think it will be easier to measure from that front because you can clearly see how much energy they use when producing polysilicon. I think the utmost extreme case will be when they just cut off the power for these facilities.
Got it. Okay. Thank you very much. Moving on to pricing, you gave some color for Q4 pricing. Could you talk about how you expect pricing to trend in 2027? I know a lot of it might depend on some of these enforcement actions and so forth. But it'd be helpful to have some kind of baseline for 2027 pricing. Thanks.
I think in the coming quarters, the goal was to really excel above the all-in cost. Like I mentioned, for us, the benchmark will be based on Q3 all-in cost that will be at least CNY 43 per kilogram. Based on the execution and how strong the policies roll out, we might expect prices to ramp up, suppose that the supply and demand rebalancing happens faster, and we see stricter policies coming out to recover to, let's say, CNY 45-CNY 50 per kilogram range.
Okay, great. That's helpful. Last one for me on your AI data center activities and investments. You're diversifying, you're spending more money in R&D. Can you talk to us how much in 2027, how much money could you invest in these sectors, storage, SST, solid-state circuit breakers? When could we see revenues? Could we see any revenues in 2027, or is this really 2028 or beyond? Which one would be first of these three end markets or products that you're developing? Thanks.
Yeah. In terms of the AIDCs, we're quite pleased with the progress right now. Construction is already underway, and we've actually broken ground, and the pile foundation work has already kicked off. We expect construction to be completed in the first half of next year. We expect to begin generating sales next year. By the end of next year, we expect project to be at operating cash flow positive, and that's primarily driven and thanks to our accumulated experiences and client relationships with our affiliated company, the Daqo Group, which has over 40 years of experience with electrical equipment. We will see the fastest growth in AIDC-related. The more plug-and-play modular solutions for the AIDCs, we will see revenue and orders in that front first.
Okay. There's a lot you said there. You could see revenue in 2027. What are you selling in 2027? Are you selling storage, or are you selling solid-state transformers? How much money are you planning to invest to bring that capacity online? What exactly are you - sorry if I missed this, but what's the nameplates of whatever capacity you're building? Thanks.
Yeah. For next year, we would have orders in the AIDC-related, the electrical equipment. What we're selling is actually the integrated solutions for the AIDCs, which include the transformers, the busbar, the bus ducts, and the switchgear, and the bus ducts, and that's what we see growing fastest next year. The overall CapEx we expect next year will be CNY 1 billion. That's a rough estimate at this point.
Okay, got it. So CNY 1 billion, and then what kind of revenue could we see in 2027? At what margin? Thanks.
I think gross margin will be around 15%-20%, and the net profit margin will be high single digits.
Okay. Thank you. Look forward to learning more about this business, and I will pass it on.
Great. Thank you, Phil.
The next question comes from Alan Lau with Jefferies. Please go ahead.
Thanks. Anita and Ming. So would like to follow up on the enforcement question, because I recall back in July, there was a meeting between SAMR and the industry players. Back then, I think the message was enforcement this time will be in place, given that there was two years already. So wonder, because if you look at the ASP of most players or the market prices, yes, there's a lot of inventory in the industry, but what's stopping the authority from enforcing or is it back to more market-driven after a couple of meetings?
I think when we sat down to discuss in more depth, the thing that somewhat delayed the process was that once we, let's say, set an overall production volume and sales volume for the industry, that could cause potential monopoly in the industry, and that would not lead to a long-term healthy development of the polysilicon as well as the entire value chain. I think that was the primary concern. So we had to reconsider how to best set the guidelines for the companies and for the players in the industry.
Understood. How do you see the growth rate of demand next year globally or in China?
I think overall in China, the demand compared to this year would be relatively flat or even, I would say, a YoY decrease. A small amount of YoY decrease overall. But globally, overall, maybe around a high single digit growth across the globe.
I see.
Previously, we have installed a significant amount of solar PV, because previously we have installed a lot of the solar PV. I think in the next year or so, it will be somewhat slower in terms of the pace.
Understood. This year, I think demand declined quite meaningfully year-over-year last year. I think in terms of numbers, is it in the mid or high 100-ish gigawatt, and next year maybe you see another 10% decline year-over-year in China?
Yeah, I think next year will still be around the high 100 GW- 200 GW.
I see. So next year on this basis, probably slight decline, while overseas market-
Yeah. Slight decline.
A bit of slight growth, so net pretty flattish.
Yes, that is correct.
I see. I wonder if you see any signs of exit from the market, because one of the leading company in the industry are buying out another one. I wonder if you see any of other similar voluntary acquisition or exit from the market, et cetera.
I think this will be more market-oriented because starting from January 1st of next year, first of all, the outdated capacity, which have a higher energy consumption level, would gradually phase out of the market. From a more fair perspective, I would say the players currently have a comfortable stage with their current nameplate capacity. Based on what we are discussing right now, I think all the players will have to lower their utilization rate to balance out the demand. I would say if a player is to acquire another company, if the valuation is at a reasonably low level, that would be an option. If that poses a different strategy for the company, say, overseas expansion or so, I guess that would also be a consideration when we think about potential acquisitions.
By overseas expansion, what do you mean? Polysilicon overseas expansion? Because first of all, the U.S. market seems to be quite restrictive on Chinese players' products. Secondly, seems Chinese government is also imposing some restrictions on export of equipment as well.
Yeah. I'm primarily talking about players that might have completed a certification or a traceability requirement. Because some players might have applied for a specific traceability standard to have their products abroad. And that's what I'm talking about in terms of potential overseas expansion, not specifically setting a factory overseas, like in the U.S. or so.
Understood. So last question is about, given that the company is still holding on significant amount of cash and stock price is obviously a bit depressed, at least. So when the company would think it's appropriate to enhance the shareholders' return?
First of all, we recognize the current state, and we strongly believe that returning value to our shareholders remains a priority for our management team and our board. At the current share price, we are significantly undervalued relative to our balance sheet and also our long-term earnings power. A share repurchase is definitely something that we are actually considering. But deciding to launch a program, we want to have a more clear view of how the anti-involution policy is rolled out and enforced, and also how our peers will respond to the current situation. And we think that these factors all directly affect the industry pricing and our cash generation ability. And that means, to us, that really means the right size and form of any potential capital return. So we totally understand that an investor would like us to act now, given our strong cash position.
But I think waiting a short period of policy clarity would allow us to size any return correctly and choose the most effective form, either in the form of a share repurchase or via a dividend. So this is really a question of timing for our management team. So we are definitely keeping a close eye on the dynamics, and we'll discuss the options with the board again in the next coming month and even in Q4 again. So we'll communicate the decision to launch, and once we have that decision finalized, we'll communicate promptly with our shareholders.
I see. Thanks. Thanks, Anita. We will pass off. Thank you.
Thank you.
Thank you, Alan.
The next question comes from Air Ma with Citibank. Please go ahead.
Thank you for taking my question. My first question is about the sales volume. What is the expected sales volume in the first quarter, and also the volume outlook for 2027?
I think our sales volume in Q4 would be relatively similar to or close to our production levels. We will strengthen our efforts and our sales. Obviously, our top priority is really to reduce our inventory.
Okay. Is there any outlook for 2027?
In terms of sales?
Yes.
I think the goal for us is to maintain our market share. That will be around 15% of the market for 2027.
Okay. Thank you, Anita. My second question is about the production cost. We have seen that the cash production costs have been declining quarter- by- quarter. Can we also expect a similar trend in the fourth quarter and also in next year? If yes, what will be the percentage scale?
Okay. Hello, Air. Thank you for your question. We did see fairly significant cost reduction across our facilities in Q3, and this is primarily via a reduction in energy usage, particularly related to electricity, as well as silicon powder, and also in steam, and via a technical upgrade. Also benefiting from some benefits from silicon and silicon metal of price decline. I would say, based on current trend, we would expect Q4 costs to be similar to Q3 costs based on the most recent data we have. Then we would expect 2027 to be also similar to Q3 cost, maybe with a slight reduction.
Thank you, Ming. My last question is about the inventory provision. I saw that the inventory provision in third quarter is slightly less compared to the second quarter. I would ask if at the current price, will there still be inventory provision in the fourth quarter, or what is the condition to make the provision?
Okay. I would say if the market remains at the current ASP, we would expect Q4 inventory provision to be less than Q3.
So it means that the market price should be higher than CNY 43, which is your all-in cost, then there will no longer be any inventory provision. Is that correct?
Or let's say we would expect Q4 ASP to be higher than Q3. We would expect, I would say, some reduction in inventory provision from that perspective.
Okay. That's all my questions. Thank you.
Great. Thank you.
The next question comes from Gordon Johnson with GLJ Research. Please go ahead.
Hey, guys. Thanks for taking the question.
Hello, Gordon.
Hey, how is it going? You have built roughly 70,000 metric tons of inventory this year. With Q4 production guided to 35,000 metric tons-45,000 metric tons, what sales volume do you expect in Q4, and how much of the $140 million in customer advances will be delivered against this quarter? I have a follow-up. Thanks.
Currently, we expect Q4 shipment to be higher than the Q4 production, so with a reduction in inventory as a result. I would say, because we receive payment before we deliver products. Certainly, I think, for example, the $140 million is all contracted for and is expected to be delivered in Q4, while we would continue to receive additional orders as well.
Very helpful. Now that you are free cash flow positive this quarter, congrats on that, by the way, what are the priorities for the $2.06 billion? How much will you commit to the AIDC platform with Daqo Group? How is that related party deal being reviewed and priced? How much cash sits at the Daqo parent level versus Xinjiang Daqo? Thanks for the questions again.
I would say for AIDC, our committed CapEx currently is around $20 million or so in that range, and primarily is to build up the facility and related manufacturing and equipment for the AIDC business. Certainly on the parent level, right now we have over $300 million. This is offshore. On the domestic entity, Xinjiang Daqo, there is roughly CNY 10 billion of cash balance there.
Thanks again.
Great. Thank you.
This concludes our question- and- answer session. I would like to turn the conference back over for any closing remarks.
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.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.