SunPower's deal for SolarWorld's Hillsboro factory already facing pressure from China

SunPower’s deal for SolarWorld’s Hillsboro factory already facing pressure from China

It’s been just two months since SolarWorld agreed to sell its Hillsboro factory to a rival from Silicon Valley, but the solar landscape has already shifted considerably. Solar panel prices are falling again amid dramatic changes this week in the Chinese market. That puts more pressure on […]

SunPower, the California company buying the Hillsboro plant, to make the deal pay.

SunPower chief executive Tom Werner made his first visit to Oregon this week since agreeing to buy the SolarWorld factory in April. He said the plant must upgrade and expand production to stand out.

“We need to accelerate the pace of innovation so we can increase the competitiveness of this facility in a rapidly changing market,” Werner said.

The deal won’t close until midsummer, but once it does Werner said SunPower will move rapidly. He said the company will spend up to $15 million this year installing new equipment, and it plans to start making a higher class of more efficient solar panels in Hillsboro by the end of 2018.

After a series of layoffs and setbacks at SolarWorld’s German parent company, the Hillsboro facility is operating at 50 percent of its capacity. Werner said it needs more from the plant, in terms of volume, efficiency and technology, to compete.

“It’s not going to succeed at 50 percent,” he said. “Even at 100 percent capacity this is a very small factory by world standards.”

SolarWorld’s 480,000-square-foot Hillsboro factory opened in 2008 after the plant’s German parent spent $440 million equipping it – boosted by $100 million in Oregon tax credits and property tax breaks. The facility never thrived, though, undercut by a flood of cheap solar panels from China.

SolarWorld’s German parent company filed for insolvency last year, and SolarWorld laid off 360 Hillsboro employees, roughly half its work force.

In April, SunPower stepped in and paid an undisclosed sum to rescue the Hillsboro factory. SunPower, which makes its own panels in Malaysia and the Philippines, was looking for a way around new tariffs the Trump administration had slapped on imported solar products.

The industry expected those tariffs would trigger a rise in solar panel prices and create an incentive to move product back to the U.S. Last week, though, China ordered its utilities to stop construction of new solar farms and slashed government subsidies to the industry.

That could leave Chinese manufacturers with tremendous oversupply, prompting them to slash their own prices. Falling prices, in turn, could offset the impact of the American tariffs and renew price pressure on domestic manufacturing and on SunPower’s decision to buy the Hillsboro factory.

“I hope they have a future,” said Paula Mints, principal analyst with SPV Market Research. “The competitive stars are not aligning.”

SunPower will ultimately have to spend far more than the $15 million budgeted to make competitive products, Mints said, but that’s an expensive proposition given the industry’s pricing structure.

“The competitive pressures are brutal,” she said.

SunPower is seeking to ease that pressure by seeking a tariff exemption for its products made in the Philippines and Malaysia, outside the subsidized Chinese market the Trump administration is targeting. Werner said the tariffs will cost his company $1.5 million to $2 million a week, money he said could otherwise be spent upgrading capacity in Hillsboro.

But Mints said the Trump administration, focused on reviving America’s foundering coal industry, has no interest in cutting a solar manufacturer a break.

“The odds of getting an exemption are less than zero,” she said.

The situation is fluid, Werner said, and SunPower is weighing tradeoffs around pricing, tariffs and technology as it plans its future in Hillsboro. He said his company has to be prepared to redo its plans every six months.

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