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REC Silicon announced cuts to 40 percent of its workforce this week, blaming trade disputes with China for the strain on its business.
It’s a consequence that U.S. polysilicon manufacturers have warned about for years, since trade restrictions shut them out of their top market in China in 2014. About 95 percent of REC’s revenues come from sales outside the U.S.
“I’ve been telling the government for a long time. We’re kind of on the edge, and this is the start of it really,” said Francine Sullivan, vice president of business development at REC. “We meant it when we said it’s urgent, that we need something done.”
The U.S. polysilicon industry has tried to influence trade negotiations, including the latest round pertaining to the Section 201 case, in order to resolve polysilicon tariffs. But the escalating exchanges between the Trump administration and authorities in China have not helped.
Since Greentech Media last reported on the industry’s struggles, Sullivan said they’ve seen “no action” in negotiations.
“They’re busy threatening one another with tariffs,” she said of the two governments.
In 2010, Norway-based REC completed construction on a $1.7 billion production facility in Washington state. That facility will now run at just 25 percent of its annual 20,000-metric-ton capacity. That will help the company stay afloat while it waits for the Chinese market to reopen.
The company also has a facility in Butte, Montana that produces products that are unaffected by solar trade policies.
The 100 or so jobs lost this week are just the latest in several rounds of cuts for REC. The company has lost 500 jobs since 2011. Many of the latest layoffs encompass skilled labor employees, including nearly the entirety of the company’s research and development team.
According to Sullivan, if the political landscape doesn’t change, more cuts could come before the end of the year.
Sullivan said the president’s aggressive negotiating tactics may offer an advantage, but she is worried about timing.
“I’m hopeful they’re going in with a strong hand, but when?” said Sullivan. “Because we’re wheeling people out the door now.”
Though a 70 percent drop in revenue since 2011 is squeezing the company, REC is looking for other options to build its business.
The company has already entered into a joint venture in China with Shaanxi Non-Ferrous Tian Hong New Energy in which it is the minority shareholder. That polysilicon fabrication facility will produce 8,000 metric tons of granular polysilicon in 2018, according to GTM Research Senior Solar Analyst Jade Jones, and will eventually produce 20,000 metric tons.
Though China now accounts for about 89 percent of wafer capacity, Sullivan said REC is keeping its eye on other markets that are developing their solar supply chain more fully than the U.S. is in order to avoid dependence on China. She cited India, Saudi Arabia and Egypt as markets to watch.
But Jones noted that it’s just simply getting harder for manufacturers to compete.
“In addition to shipment barriers, all polysilicon producers are facing pressure to reduce prices as the PV industry enters into a supply glut,” said Jones. “It’s going to be a lot harder for U.S. polysilicon suppliers to stay price-competitive in the market we are entering.”
Neither of the other two U.S. polysilicon manufacturers, Wacker Chemie AG and Hemlock Semiconductor, responded to requests for comment on the layoffs or the state of the industry.
Several cell and module manufacturers have announced U.S. facilities in the wake of the Section 201 tariffs — LG, most recently — but Sullivan said those investments are not enough to outweigh the potential loss of an $8 billion global industry that the U.S. once dominated.
While certain advanced energy technologies use polysilicon in REC's product, such as some batteries, Sullivan said demand from nascent products isn’t enough to buoy the industry yet. Currently, there is no wafer production in the U.S.
She added that lopsided manufacturing puts the U.S. at a disadvantage, making the supply chain for solar and other products vulnerable to external forces.
“The U.S. is not serious about protecting solar as an energy source,” she said.
Instead, Sullivan said China may soon “own all the new industries,” including batteries, solar and electric vehicles. The U.S. will be left with oil and gas.