Longi layoffs speed shift in solar production away from China

LAYOFFS at Longi Green Energy Technology, the world’s biggest solar manufacturer, will likely accelerate a global rebalancing of production capacity away from China.

Longi, which employed as many as 80,000 people at one point last year, said on Monday (Mar 18) that it would trim about 5 per cent of its workforce. That followed a Bloomberg story in which several sources familiar with the matter said that as many as 30 per cent of staff at the Chinese solar giant could lose their jobs.

The cuts mark a reversal after years of rapid expansion by Longi and other Chinese firms that made the country the centre of global solar manufacturing. Their success has aided efforts to slow global warming, making solar the fastest-growing source of energy on Earth. But it is also resulted in two negative consequences for Chinese manufacturers.

The first is that solar became the focal point of global trade frictions, as countries including the US became uncomfortable relying on China for equipment that is vital to the energy transition. The second is that factory expansion outpaced demand, leading to a collapse in prices that is pinched profit margins for the manufacturers.

Chinese firms have responded in recent months by seeking to rein in domestic expansion, while at the same time investing in more manufacturing abroad. One Chinese solar executive said in December that the industry was shifting from a model of “make in China and service the world” to one of increased near-shoring or friend-shoring to cater to global markets.

Xi’an-based Longi is part of that evolution. It has already started production with local partner Invenergy at a facility in Pataskala, Ohio, that will eventually produce more than 1,000 solar panels an hour. Longi will probably keep its US expansion on track, while most of the job cuts will be in China, said Dennis Ip, an analyst at Daiwa Capital Markets.

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The company’s shares dropped as much as 1.3 per cent in Shanghai on Tuesday. They have now fallen 70 per cent from a record high in late 2021, when the market capitalisation was as much as US$85 billion.

China will likely remain the centre of the solar industry for the foreseeable future, in part because its domestic market is by far the world’s largest. Cheap Chinese modules will probably still be a source of frustration for other nations’ efforts to build domestic supply chains, perhaps leading to additional trade barriers in the future, said Youru Tan, a solar analyst at BloombergNEF.

However, “overseas production plans by leading manufacturers likely will be continued as even more challenges are expected in China markets”, he said.

After years of consolidation within China, the solar industry is clearly looking to shift some capacity elsewhere. The layoffs this year look set to accelerate that rebalancing. BLOOMBERG