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Suntech to Close Arizona Facility

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Suntech Power Holdings Company Ltd. (STP) announced it will stop production at its Goodyear, Arizona, solar panel manufacturing facility on Apr 3, 2013, with forty-three employees affected. Suntech said its decision is in line with the company's global restructuring efforts to rationalize production capacity and reduce operating expenses by 20% in 2013.

The need comes in the light of global oversupply and higher production costs related to the import tariffs imposed by the U.S. government. Earlier, in Nov 2012, the company halted two of the three production shifts at its Arizona, facility.

Wuxi, China-based Suntech is a leading solar energy company. The company designs, develops, manufactures and markets photovoltaic (:PV) cells and modules.

Suntech Power’s predominantly China-focused manufacturing base gives it a distinct cost advantage compared to its U.S. and European peers. Also, its Pluto technology-enabled multi-crystalline silicon modules can achieve higher conversion efficiency. The increase in conversion efficiency helps the company to capture market share from the crowded PV market.

Suntech expects to release its 2012 fourth quarterly numbers on Apr 1, 2013. The company expects shipments of PV products in the fourth quarter of 2012 to decline in a low single-digit percentage rate compared to the third quarter of 2012. The gross margin in the fourth quarter of 2012 is expected to be slightly negative. Suntech also expects 2012 annual PV shipments in the range of 1.7GW to 1.8GW.

Suntech Power is one of the largest producers of PV solar modules under its proprietary Pluto technology with a geographically diversified customer base. Other positive factors for Suntech include ongoing expansion programs, higher conversion efficiency through its Pluto technology-enabled modules, subsidy program in China, and improving operating efficiencies. However, the positives are overshadowed by fears of tepid module demand in Europe, rising competition, the volatile Euro and the financial stability of its customers. Suntech Power currently has a Zacks Rank #3 (Hold).

Also, the current macro scenario does not bode well for the solar industry, which thrives mainly on subsidies and grants. As a result, major solar operators like Canadian Solar Inc. (CSIQ), First Solar Inc. (FSLR), and Solar Power, Inc. (SOPW), all hold a Zacks Rank #3 (Hold).

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