Intelligent Energy

SunPower's plan for survival

SunPower's plan for survival

Posting in Energy

Solar cell and panel maker SunPower has the tech and backing of oil giant Total. But in this market, that's not enough. Now it's taking drastic cost-cutting measures to survive.

SunPower will stop producing solar cells at one of its factories in a continued effort to cut costs and ultimately survive the tough market conditions that have already claimed other manufacturers in the industry.

SunPower calls this a consolidation of its operations. And while technically true, it doesn't quite express what it means or the severity of the measure. The San Jose, Calif.-based company announced Monday it will shutdown operations at its 125-megawatt capacity factory in the Philippines. SunPower plans to lease out the factory to tenants.

Employees working at the 215,000-square-foot factory known as Fab 1, will be transferred to its Fab 2 factory, which is about double the size and located some 20 miles away. Fab 1 employees also could end up working for the tenant. SunPower didn't officially name the new tenant. However, the company did say it was is working with chip packaging startup Deca Technologies, which it holds a minority interest in, on the use of the factory.

The closure will obviously reduce capacity. However, improvements in yield and equipment efficient at its No. 2 and No. 3 cell fabrication plants will offset some of that reduced capacity, SunPower President and CEO Tom Werner said in a statement. Those plants are now running under a new process that reduces the number of steps to make solar panel, which should, in turn cut operating expenses and hopefully boost productivity.

SunPower has already gone through a round of cost cutting. Last November, the company said it would restructure in the fourth quarter and shuffle around executives in a move aimed to reduce expenses by 10 percent in 2012. This latest cost-cutting measure will reduce expenses 15 percent by the end of the year, SunPower said.

The end-goal is a solar cell that can be made cheaply enough to be competitive in a market where prices have fallen by half. SunPower says the factory closure combined with improvements in yield and equipment at its other two plants will allow it to to achieve a cost goal of $0.86 per watt exiting 2012.

Despite SunPower's struggles, the company has fared better than other solar cell and panel manufacturers. Numerous companies have been forced to close factories, layoff workers and even file for bankruptcy. SunPower has the backing of oil giant Total, which holds a 60 percent-stake in the company. And SunPower continues to improve its technology to boost the efficiency of its solar cells. SunPower's solar panels already have a better sunlight-to-electricity conversion rate than others on the market.  And its third-generation solar cell, which is now in production at its Fab 3 plant, has a sunlight-to-electricity conversion efficiency of up to 24 percent.

Photo: SunPower

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Kirsten Korosec

Contributing Editor

Kirsten Korosec has written for Technology Review, Marketing News, The Hill, BNET and Bloomberg News. She holds a degree from Northwestern University's Medill School of Journalism. She is based in Tucson, Arizona. Follow her on Twitter. Disclosure