Major Closures for First Solar, Sunpower

Major Closures for First Solar, Sunpower


First Solar closing a German plant and idling 4 production lines in Malyasia. SunPower also shutting down part of its overseas operations.
New Hampshire, USA -- Two American solar heavyweights built on overseas manufacturing are scaling back operations in an effort to keep up with a shifting landscape.
On Monday, San Jose, Calif.-based SunPower announced it was closing a 125-MW capacity manufacturing facility in the Philippines and pushing some of those operations to its 575-MW Fab 2 facility also in the Philippines. The company’s 600-MW plant in Malaysia remains its biggest operation.

Then on Tuesday, Arizona-based First Solar announced an even more drastic move to cut operating expenses. The world’s biggest thin-film manufacturer will close its facility in Germany and idle four of its 24 lines at its mammoth facility in Malaysia. The company will cut 2,000 jobs, or 30 percent of its workforce. The cuts and shutdowns are expected to reduce costs by $30 to 60 million this year and between $100 and 120 million annually after that.

First Solar said that through the layoffs, the company’s average manufacturing cost is expected to improve to $0.70-$0.72 per watt in 2012, below prior expectations of $0.74 per watt. In 2013 the company estimates average module manufacturing costs will range from $0.60 to $0.64 per watt.

“These restructuring actions are difficult to make and take, given all the important stakeholders involved" said Mark Widmar, First Solar's CFO, in a conference call. "The solar market has changed and so must we,” he continued.

Widmar explained that the restructuring actions are to "align our business to a demand profile that is highly reliable and predictable, which largely is our captive pipeline.” He indicated that the market for First Solar in Europe is largely drying up. The German factory that the company is closing had primarily supplied modules to third-parties, he said. “Clearly, you should take away from the European reductions that we’re doing from an op-ex [operating expense] standpoint, largely is all third-party module business. We’re not doing much of any systems business in Europe.”

Rumors that First Solar was looking for a buyer were shot down immediately. “I would not say that these actions are at all any indication of window dressing to position the company for sale. It is not that at all. It is integrated into a long-range plan that we feel highly confident in,” said Widmar.

First Solar continues to eye new markets in unsubsidized emerging regions of the world. “Over the next couple of years, we also intend to make progress in sustainable markets,” he said. More details will be announced during the company’s first quarter earnings call, which is scheduled for early May.

The moves by SunPower and First Solar, two of the world's biggest solar manufacturers, underscore the shift already underway in the solar industry and across much of the clean energy industries. Shifting policy, overcapacity and falling pricing coming from China continue to threaten future operations for many international players. In the past month alone, Q-Cells and Solar Trust of America have filed for bankruptcy. Also this week, reports indicated that Danish wind energy pioneer Vestas may become the target of a possible takeover from Chinese competitors.

According to Sam Wilkinson, a senior analyst at IMS Research, the moves point to the mounting pressure to reduce costs, even for a company like First Solar, long billed as a cost leader. First Solar's move also has much to do with changing policy and the overall difficulty stemming from the European market.