SunPower pulls back on cell and panel production

The world simply has too many solar panels and not enough buyers. This imbalance already has forced many manufacturers out of business and some to make a huge cut in production. That’s what SunPower(s SPWR) said on Tuesday it will do at its solar cell and panel factories Philippines.

The San Jose company says it will suspend production at six of the 12 production lines at Fab 2 for solar cells and 20 percent of the solar panel production in the southeast Asian country. SunPower also will cut about 900 employees, most of them located in the Philippines.

SunPower’s CEO, Tom Werner, issued this statement:

“Industry conditions continue to be challenging and while it is never an easy decision to reduce positions, we must make prudent decisions to effectively compete in an industry with significant overcapacity. Additionally, we’ll further our efforts to reduce costs and improve operational efficiencies.”

In April this year, SunPower announced it would shut down another solar cell factory, called Fab 1, in the Philippines. The goal was the same: to reduce costs so that it could sell its solar panels at more competitive prices. SunPower makes the most efficient silicon solar panels on the market, but its special technology also is more expensive. Its strategy has been to charge higher prices for the more efficient solar panels. But this strategy doesn’t work so well when there is a big oversupply problem.

Its main rivals, many of them in China, have been selling their less efficient solar panels at far lower prices. The pricing battle partly contributed to a trade complaint against Chinese solar cell makers, and the U.S. Department of Commerce decided last week to impose tariffs on imported silicon solar cells from China.

The tariffs aren’t likely to stop solar panel prices from falling, however. Chinese companies can skirt the penalties by buying solar cells from countries such as Taiwan and assembling them into panels in China. This approach will still increase their production costs, but not nearly at the levels of the tariffs.

SunPower sold a majority stake to French oil giant Total last year in order to gain financial help. SunPower said its 2012 sales forecast remains unchanged, and it will provide more details about its cost-reduction plans when it discusses its third-quarter earnings on Nov. 1.

SunPower isn’t alone in idling production lines and laying off a huge number of employees. First Solar (s FSLR) has been doing that. Some veterans in the industry, such as Q-Cells in Germany, went bankrupt or have been sold. Many startups that tried to scale up production in the past two years failed because they couldn’t reduce their manufacturing costs fast enough. Solyndra and Abound Solar are two examples. Others, such as MiaSole, got scooped up on the cheap by conglomerates looking to add a diverse set of solar technologies and services in their portfolios.