Having already reduced production capacity to control inventory build, SunPower is making further manufacturing cost reductions that had not previously been cited within its ‘Manufacturing Step Reduction Program.’ The company said it would stop using its Fab 1 facility in the Philippines and consolidate production at Fab 2 in the Philippines and its newer facility, Fab 3 in Malaysia, operated as a JV with AU Optronics. 

SunPower said that it would transfer some equipment from Fab 1 to Fab 2 to reduce manufacturing constraints during the current quarter. Management noted that the restructuring would reduce nameplate capacity by 125MW, partially offset by yield and productivity improvements planned at its other plants in Malaysia, though exact details were not provided. Fab 3 had 10 lines in production at the end of the third quarter of 2011.

SunPower also said it would be seeking new tenants at Fab 1, potentially including Deca Technologies, which supplies wafer-level chip scale packaging services to the semiconductor industry and is partially owned by the company. Workers affected by the closure would also have the chance to work at Fab 2 as well as possibly transferring to potential tenants at Fab 1.

"Reducing our manufacturing costs and extending our technology advantage with our industry leading Maxeon Gen E cells remains a top priority for the company," said Tom Werner, SunPower president and CEO. "Operationally, our step reduction program is on plan as we now have 2 lines running under our new process and expect to have all 12 lines at our cell fabrication plant 2 (Fab 2) converted by the end of 2012.”

SunPower expects to record pre-tax GAAP charge in relation to the restructuring of between US$51 million and US$69 million, primarily non-cash asset impairment charges of US$40 million to US$54 million, and other cash-based associated costs of US$11 million to US$15 million, for the closure of Fab 1. 

The company reiterated that its manufacturing cost reduction initiatives remain on track, including a manufacturing process cost reduction target of 15% by the end of 2012. 

Management said that it still expects to achieve its cost goal of approximately US$0.86 per watt – on an efficiency adjusted basis – by the end of 2012.

SunPower reported 922MW of solar cell production in 2011, compared to 584MW in 2010, while recognising 766MW in related revenue.