Solar maker Q-Cells lays off 500, moves to restructure

Germany-based Q-Cells, the second largest maker of solar cells in the world, announced today that it is cutting its staff by a fifth — trimming 500 jobs from its 2,600 workforce. The company has been very frank about reducing costs in order to remain competitive in an increasingly heated market.

Prices for solar cells have dropped off in the last several months due to oversupply, causing companies like Q-Cells and its Chinese competitor JA Solar Holdings to fall short of their earnings expectations. Q-Cells reported a loss of $87.58 million for the second quarter, and of $994.8 million for the first six months of the year, forcing it to pull back higher sales forecasts it had made for the 2009 fiscal year. The layoffs and reorganization announced today are predicted to slash production costs by 25 percent.

Analysts say the staff cuts are yet another sign that the solar cell giant is on shaky ground. Q-Cells is feeling pressure not only from Asian rivals that continue to churn out cheaper and cheaper cells, but also from Arizona-based First Solar, currently the world’s largest producer. Despite plummeting prices, First Solar managed to post $180.6 million in net income for the second quarter, up from $164.6 million in the first quarter and $69.7 million last year. Not that the company is immune — it plans to offer rebates to German customers to maintain a competitive edge in the country. It just happens to be seeing profits as many of its competitors record losses.

In an attempt to turn its luck around — and in tandem with the layoffs — Q-Cells plans to close its production lines at its facility in Thalheim. Scaling down manufacturing is one of the company’s only available tactics, as it is as yet unable to make the same number of cells less expensively. These measures were foreshadowed by a preliminary announcement in April that the company would be cutting its employees’ hours.

The oversupply in the solar market can be attributed primarily to the drop in silicon prices. This has set off a chain reaction, plunging solar cell prices 20 percent between the first and second quarter this year and finally lowering prices for solar panels (with thousands sitting on the market). At the start of this week, research firm iSuppli issued a report predicting that the solar equipment glut is so extreme that it will probably linger until 2012.

The Asian companies, while remaining tough competitors, report mostly miserable results for the second quarter. China-based JA Solar announced a quarterly loss of $28.5 million, about even with its first-quarter loss. ReneSola, also headquartered in China, said it lost $3.6 million in the second quarter and missed its income target by $8 million.