SunPower Could Get Some U.S. Duties On Chinese Imports

The solar industry witnessed another major event with the U.S. Commerce Department deciding to impose tariffs exceeding 30% on major Chinese panel manufacturers. ^[1] The tariffs could help SunPower Corp. (NASDAQ:SPWR) improve its pricing in the American market, which is becoming an important driver for global panel demand. SunPower is focused on manufacturing high-end panels that are sold at a premium to products made by Chinese panel manufacturers like Suntech Power (NYSE:STP). While the response from Chinese manufacturers is still uncertain, and some could work around the tariffs by shifting manufacturing to locations outside China, module prices in the U.S. could see a rise, helping SunPower improve its margins.

We have a $7.45 price estimate for SunPower, which is at a 35% premium over its current market price.

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Module prices could rise

The 31.22% tariff on solar modules from China could have a major effect on the solar industry in the U.S. and help players like SunPower fend off low cost Chinese competition. The U.S. has become one of the most dominant markets for solar PV after European countries have pulled back on subsidies for green energy. Some industry voices predict that the tariffs could push up the cost of solar energy in the country, while others are still unsure about how the decision impacts the overall industry. ^[2]

Chinese panel manufacturers are already taking steps to shift the manufacturing of modules for the U.S. market to facilities outside the country. Suntech already has a manufacturing facility in Arizona. However, the tariff will not just apply to solar modules but also to individual Chinese solar cells that are used to make the modules, which could complicate efforts to work around the duties.

Around 20% of the panels manufactured by Chinese players are sold in the U.S. market. ^[1] While the tariff could push up module prices at least in the short term on products manufactured in China, the long-term global impact is uncertain. If Chinese players react by starting new manufacturing facilities, its impact could worsen the industry oversupply situation. ^[2] Chinese manufacturers could also bid more aggressively in European and emerging markets as demand from the U.S. customers drops. However, most players are likely to subcontract to Taiwanese cell and module manufacturers to avoid the tariffs. ^[3]

SunPower, which is taking steps to cut manufacturing costs, could increase its module pricing in the U.S. market as well as boost sales volumes as it becomes more competitive with Chinese products. According to estimates, the new tariff could increase the price of Chinese modules to about $1.11 /watt, which is 17% above non-Chinese products. ^[2] The duties could help SunPower improve its margins as well, which have suffered because of the inflow of cheap products from players like Suntech.

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1. China cries foul after U.S. sets tariffs on solar imports, Reuters [↩] [↩]
2. Suntech, First Solar weigh in on tariff ruling, Phoenix Business Blog [↩] [↩] [↩]
3. U.S. Solar Tariffs on Chinese Cells May Boost Prices, Bloomberg [↩]