Germany's SolarWorld Bucks Trend on Asian Manufacturing

German solar manufacturer SolarWorld AG (SWV.DE), which was one of the first profitable solar companies in the world, is bucking the trend of moving operations to Asia because of low cost manufacturing (low wages).

Instead, the company has decided to locate manufacturing plants in countries that have the highest quality, environmental and social standards.

SolarWorld sees it as an important way to differentiate from its many competitors. They made the announcement after selling its shares in a joint venture production site in South Korea. 

"A solar power system is an investment for generations. We guarantee 25 years of reliable output. But the life of our solar systems is far longer. That cannot be guaranteed if you rely on a low-cost location,” says SolarWorld Chairman and CEO Frank Asbeck.

In addition, SolarWorld says labor accounts for only 10% of the company’s costs, and is therefore not a crucial factor. The company says it is finding continual cost reductions through highly automated manufacturing and optimum logistics.

As production costs decrease, shipping costs are accounting for a larger percentage of overall costs. As a result, manufacturing in growing markets, like the US, makes sense.

"Thanks to the logistics advantages of our on-the-spot production and our already established distribution networks we expect to be able to more than triple our sales [in the US]", Asbeck says.

SolarWorld says its US sales by June this year already match what they sold in all of 2010.

They also expect European markets to grow because of supportive legislation in Germany and other European countries. Germany has already scrapped cuts to its groundbreaking feed-in law since making the decision to eliminate nuclear from its energy mix.

SolarWorld is expanding production in Germany and the US, where it has manufacturing facilities in California and Oregon. By the end of the year, the company’s combined module production in the two countries is expected to exceed 1 gigawatt (GW). 

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