Will Sunpower survive?

Sunpower used to be a world leader in the production of solar panels despite using a non-standard technology on n-type monocrystalline which is more expensive to manufacture but gives the highest efficiency amongst silicon made solar panels. However, the company was not able to keep up with the drastic cost reductions being made by Chinese solar companies. Its sales to Total in the last downturn made it possible for the company to survive and it thrived during the upturn between 2014 and 2015 with the company showing strong growth and decent margins. Its EPC and development arm also helped the company grow its revenues strongly. However, the sharp crash in solar panel prices has once again brought the company’s survival in doubt. With the Chinese companies being backed by their government, Sunpower does not have that luxury. Even its oil and gas giant parent Total is also not very happy in supporting the company which has been bleeding.

Sunpower has announced a major restructuring in which it fired hundreds of workers and shuttered its older solar cell lines. The company also faces a technology risk as the p-type mono technology using PERC has become the main monocrystalline technology upstaging its n-type monocrystalline technology whose costs still remain much higher.

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While the company always used Chinese partners for making its panels, it is now extending the partnership further to make cells as well. The company wants to expand its p-type technology solar panels and cells in association with Chinese companies Dongfang and Zhonghuan Semiconductor. These are very large Chinese companies and Zhonghuan is the second largest producer of monotype ingots and wafers in the world with very large expansion plans in 2017 and 2018.

Sunpower is basically fighting against its back to the wall and knows that it cannot fight the Chinese anymore who anyway dominate with almost 75% of the global manufacturing capacity and 45% of the world’s demand. It would be better to use its technology advantage till it can and build some value around it. Its n-type monocrystalline technology might become totally obsolete or a niche technology at best, given the massive investments being made by Chinese companies in other silicon technologies.