Market Trends

Solar Giant Longi Green Energy Slashes Workforce Amid Industry Challenges

In a significant development shaking up the solar sector, China's Longi Green Energy Technology Co., recognized as the most prominent solar manufacturer globally, has initiated a substantial reduction of its workforce amidst trying to cut costs in the face of overwhelming overcapacity and aggressive competition within the industry. Insiders privy to the company's strategy have disclosed that Longi aims to cut up to 30% of its employees, a figure that eagerly reached roughly 80,000 at its zenith the previous year.

This drastic decision is indicative of a hastened rate of layoffs, a process initiated by Longi last November. During that period, the company began dismissing thousands of individuals, predominantly composed of management trainees and factory staff. This was a response to the relentless expansion that has characterized the global solar industry for years. There remains uncertainty regarding the exact number of employees laid off before this latest resolution.

With no immediate official statement from Longi regarding the staff cuts, the situation appears precarious for the workforce at the Xi'an-based company. However, Longi is not in isolation in facing these adversities, as China's solar production sector, which occupies a dominant position in global manufacturing, has been wading through similar distress marked by employee layoffs and suspended investments in the recent past.

Solar manufacturers have found themselves in a bind, compelled to sell at or sometimes even below their production costs, following a plunge in solar panel prices to unprecedented lows last year. The consequence has been a scenario where a sector critical to the global energy shift is grappling with excessive capacity, industry consolidation, and the looming threat of bankruptcies.

The climate of cutthroat competition has also led numerous companies that manufacture wafers, which are an integral component in solar panels, to scale back production. Facing this adversity, Longi, a major player in wafer production, was necessitated to significantly decrease prices last year.

In the wake of seeking ways to reduce overheads, Longi employees have witnessed prior cost-cutting attempts fail to hit the mark. Measures such as the abolishment of complimentary afternoon tea, contracted budgets dedicated to business travel, and mandates to print in monochrome barring supervisor approval were put into effect. Additionally, cuts back on perks such as free coffee in their Shanghai office were reported by employees.

Growing angst among the Longi workforce concerning job security became evident when the company decided to remove an internal feature that allowed employees to view the total staff count late last year.

The solar industry within China has faced not only operational and financial challenges but also international trade pressures. For instance, some Chinese manufacturers have experienced blockages when exporting to the United States due to allegations of forced labor practices in China’s Xinjiang region - accusations which the Beijing administration has steadfastly repudiated.

In a particularly relevant case for Longi, their joint venture in Ohio, USA, which was established in partnership with a local entity, has encountered significant opposition amid the escalating political hostilities between Beijing and Washington.

As far as financial results are concerned, Longi's net income suffered a staggering 44% decline down to 2.52 billion yuan (about $350 million) in the third quarter of 2023. Li Zhenguo, the company's President, openly acknowledged last October that the firm had erred by not being sufficiently competitive in pricing against its counterparts, resulting in a likely shortfall for its annual shipment target. The repercussions have been felt in the company's stock value, which has plummeted roughly 70% from its peak in 2021.

Despite the gloomy scenario, there's cause for optimism with regards to the solar sector's resilience. Historically, the industry has ridden through cycles of rapid growth followed by contractions, often influenced by government subsidies. Yet, with the cost of solar panels becoming increasingly economical, demand has surged with new installations jumping 72% to a record high last year, as per BloombergNEF data.

The hiring trajectory at Longi had expanded dramatically, from a modest 4,068 employees when it went public on the Shanghai Stock Exchange in 2012, to reporting 60,601 employees at the close of 2022. Hiring persisted into 2023, even amidst the emerging industry challenges.

However, the tide has turned, and these hiring activities are now being systematically rolled back. According to some sources, recently departed Longi employees were often terminated directly or resigned upon being moved to disparate roles they were unable to fill. Meanwhile, production facilities reliant on older technologies have borne the brunt of the job cuts more than other segments of the company.

Looking into the future, it is predicted that the Chinese solar industry may witness a turnaround by the end of the year. Profit margins are expected to climb by 2025, precipitated by a quicker pace of industry consolidation and a more synchronized supply and demand balance, according to analysis from Bloomberg Intelligence.

In light of these developments, Longi's standing in the market positions it favorably to navigate through the impending turbulence. With significant market leadership and roughly $7.4 billion in cash and equivalents as of the end of 2022 – a liquidity reserve that surpasses most of its rivals, as per company reports and Bloomberg Intelligence comparisons – Longi appears well-equipped to sustain its course through the industry's stormy weather.

Notwithstanding the recent impediments, the solar industry's prospects continue to garner attention. With increasing global investment and interest in solar power, the industry's evolution remains a focal point for those tracking the dynamics of energy transition. Despite the setbacks, the pursuit for renewable energy sources continues, and solar power remains a critical component of the global strategy to achieve a more sustainable energy landscape.

It is important to note that the information in this article regarding Longi Green Energy Technology Co.'s workforce reduction was obtained through Bloomberg's coverage, which included valuable contributions from journalists Dan Murtaugh and Alfred Cang. Their report carries important insights into the challenges faced by the solar manufacturing giant and, in a broader context, reflects the tribulations of the solar industry at large.

For extensive coverage and to delve deeper into the details of the developments surrounding Longi Green Energy Technology Co. and the solar industry, visit the Bloomberg website.

Conclusion

To conclude, the recent news about Longi Green Energy Technology Co.'s workforce reduction is more than a mere corporate restructuring. It is a reflection of the greater challenges that the solar industry must contend with, from overcapacity to international political pressures. As companies like Longi navigate through these choppy waters, their strategies and adaptability will be crucial in determining not only their own futures but also the direction of the global shift towards renewable energy.

In summary, Longi's decision to slash its workforce, the pressures from competition and overcapacity, and the global demand for cleaner energy sources create a complex backdrop. While job losses and financial stresses paint a dire present, the unwavering progression towards a greener future suggests a brighter horizon. The resilience and innovation within the solar industry may yet herald a new era for sustainable energy, one that remains a cornerstone of our collective environmental aspirations.