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The solar industry has been under a cloud because of uncertainty of policies and market demand. Many companies in many countries have announced to cut jobs or to close factories, including SunPower, a leading solar company in the U.S., which announced to lay off 25% of its global employees along with the closure its ~700MW nameplate capacity Fab 2 facility in the Philippines.
On December 7, SunPower released its restructuring program and revisions to its guidance for the year 2016. In order to optimize the company’s business structure, maximize its cash flow for the next phase of industry growth, SunPower determined to implement certain initiatives to restructure its businesses.
Production relocates
SunPower will close its Fab 2 IBC solar cell factory in the Philippines, of which the production capacity is approximately 700MW. Simultaneously, SunPower will reduce its global workforce by 25%, or to cut 2,500 jobs globally. The restructuring is expected to incur total charges of US$225 ~ 275 million through the end of 2017, while around 30% of the charges will be in cash.
"We believe these actions, which are fully supported by our board of directors, are important to position the company for sustained profitability through the current industry transition,” commented Tom Werner, CEO of SunPower.
This August, SunPower announced to move its around-1GW-capacity module assembling factory from the Philippines to Mexico as well as to lay off 1,200 employees from its global sites, including 1,000 from the Philippine module factory. In that announcement, SunPower unveiled its new strategy to turn to focus stronger on distributed solar generation systems in the America market, while it would slightly revoke its resource for developing large-scale solar power plants.
The market’s response to SunPower’s new X-Series module products was positive enough to convince the supplier to expand 100MW capacity in 2017. On the other hand, SunPower will deploy its integrated module solution, the Oasis series, to large-scale projects.
“We are committed to our diversified go to market strategy, continuing to invest in our industry leading technology and product solutions, reducing our operational and manufacturing cost structure and continuing to allocate resources to those areas that will improve our global competitive position,” noted Werber. “With solar at grid parity in many markets, we believe the long-term industry opportunity has never been greater."
Guidance for 2016 revised down
On a GAAP basis, SunPower expects to record restructuring charges of at least US$150 million in the fourth quarter of 2016. Consequently, the company has revised down its overall financial guidance for the year 2016.
Revenue of US$1.8 ~2.3 billion on a GAAP basis and US$2.1 ~2.6 billion on a non-GAAP basis, non-GAAP operational expenses of less than US$350 million, capital expenditures of approximatelyUS$100 million, GW deployed in the range of 1.3 ~ 1.6 GW, stated SunPower.
Additionally, the company expects to record GAAP restructuring charges totaling US$75 million to $125 million in fiscal year 2017. The restructuring initiatives, however, are expected to generate positive cash flow from operations through the end of fiscal year 2017 and exit the year with approximately US$300 million in cash.
EnergyTrend’s comment
SunPower is the world’s largest manufacturer of IBC solar cells. It operates Fab 2 in the Philippines, Fab 3 in Malaysia (800MW), and Fab 4 in the Philippines, with a total production capacity of around 1.7GW, before the closure of Fab 2.
SunPower will have at least 700MW of module assembling capacity vacant after the closure of Fab 2, since the company’s 1GW module assembling plant were simply “moved” to Mexico rather than being shut down. This also implies that the vacant module assembling capacity may not be completely used to package IBC modules.
With its position as the world’s leader in IBC manufacturing, SunPower’s production transition represents IBC technology’s retreat from the competitive solar industry – temporary or permanent.
“It is reasonable for SunPower to move its module capacity from the Philippines to Mexico,” explained an analyst at EnergyTrend. “IBC products are more pricy than conventional solar products, so most buyers are from the U.S. and the Europe, some are from Japan. If SunPower is targeting at a more specific and optimized market strategy, it is thinkable why they moved the module assembling plant to Mexico.”
Nonetheless, threats caused by PERC technology explains more to SunPower’s Fab 2 closure.
“PERC modules’ prices have been reduced and their conversion efficiency rates have been increased as more and more Chinese PV makers starts to deploy this technology,” explained the analyst. “Comparing PV modules assembled into the same size respectively with PERC and IBC technology, IBC modules may cost around double to Chinese-maker-made PERC modules, but the power yield may only be 10~20% higher. Consequently, market demand to IBC products would be gradually taken over by PERC products, which have better C/P ratio.”
Such trend emerges not only to IBC technology but also to N-type products. P-type PERC products’ market competiveness has been enhanced due to larger amount of production capacities introduced by Chinese solar makers, and this technology will dominate the mainstream high-efficiency solar market over the next two to three years, at least, noted the analyst.
(Photo credit: SunPower’s blog)