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Business

Solar Firms Scale Back

Manufacturing: First Solar, SunPower cut production

by Melody M. Bomgardner
April 23, 2012 | A version of this story appeared in Volume 90, Issue 17

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Credit: First Solar
First Solar will idle four production lines in Malaysia.
Solar manufacturing in Malaysia. First Solar.
Credit: First Solar
First Solar will idle four production lines in Malaysia.

First Solar, an Arizona-based thin-film photovoltaics firm, said last week that it will restructure its operations to reduce capacity and shift production to more efficient facilities. The announcement came one day after a similar statement from SunPower, a maker of crystalline silicon solar cells with headquarters in San Jose, Calif.

First Solar will close a plant in Frankfurt in the fourth quarter. It will also idle four production lines in Kulim, Malaysia, on May 1. The shutdowns, along with additional personnel reductions in Europe and the U.S., will reduce the company’s workforce by 2,000 positions, or about 30%.

The company blamed subsidy reductions in Europe for the changes. Interim CEO Michael J. Ahearn said First Solar is scaled to operate at higher volumes than the market currently demands. “The solar market has fundamentally changed, and we are quickly adapting our market approach and operations to maintain and build upon our competitive advantage,” he explained in a press release.

Meanwhile, SunPower executives told investors that the firm is accelerating its shift to production lines that produce photovoltaics at lower costs, including the consolidation of two facilities in the Philippines into one. Last November, the company said it planned to cut costs by 10% in the next year to deal with sinking prices and demand.

The average selling price of crystalline silicon photo­voltaic modules fell from $1.80 per watt to 90 cents in 2011, according to GTM Research, a market analysis firm. First Solar’s cadmium telluride thin-film modules enjoy a price advantage over traditional modules, but cheap supplies of polysilicon and competition from Chinese solar-cell makers have narrowed the difference. The company plans to shrink manufacturing costs to 70 cents per watt by the end of the year. SunPower expects to reduce its cost to 86 cents per watt by then.

First Solar may be able to weather the pricing storm thanks to revenues from utility-scale solar projects it is developing, pointed out Jonathan Dorsheimer, an analyst at investment bank Canaccord Genuity, in a note to investors. But for all producers, reducing costs is a must, he wrote. “While difficult, right-sizing the business and attempting to lower the cost structure is clearly the right thing to do: This market has been ruthless to higher cost suppliers—see the bankruptcies of Evergreen Solar, Q-cells, Solon, etc.”

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