"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".
"Additionally, as a result of our continued cost reduction progress at our Fab 2 and Fab 3 manufacturing facilities, we have made the strategic decision to consolidate our Philippine manufacturing operations into Fab 2 and begin repurposing Fab 1 this quarter. This decision will enable us to rationalize our operating expenses, improve supply chain efficiency and lower our manufacturing cost per watt through scale advantages. The reduction of approximately 125 megawatts of nameplate capacity at Fab 1 will be partially offset by further improvement in yields and equipment efficiency in Fab 2 and Fab 3," concluded Werner.
The company's manufacturing cost reduction initiatives remain on track, including its step reduction program which will reduce the number of steps in the manufacturing process by 15 percent by the end of 2012. Combined with additional yield and equipment efficiency improvements, the company expects to achieve its cost goal of approximately $0.86 per Watt, on an efficiency adjusted basis, exiting 2012.
As a component of repurposing, SunPower is working with Deca Technologies and others on the use of the Fab 1 facility. SunPower is a minority shareholder in Deca Technologies, an electronic interconnect solutions provider that initially offers wafer level chip scale packaging services to the semiconductor industry.
Employees at Fab 1 will be transferred to Fab 2 or have the opportunity to work for potential Fab 1 tenants. SunPower will transfer some equipment from Fab 1 to Fab 2 to reduce manufacturing constraints.
SunPower expects to record pre-tax GAAP charges in restructuring totaling $51 million to $69 million, primarily non-cash asset impairment charges of $40 million to $54 million, and other cash-based associated costs of $11 million to $15 million, for the closure of Fab 1. Of the pre-tax GAAP charges totaling $51 million to $69 million, $47 million to $63 million will likely be recorded in the second quarter of fiscal 2012 and the remainder in ensuing quarters.
"We expect to reduce both our cost per watt peak of panels and our capital expenditures as a result of this change," Werner said.