World's leading solar manufacturer Longi to trim workforce by 30%
Longi, the global leader in solar manufacturing based in China, is poised to eliminate roughly a third of its workforce, as part of an aggressive cost-cutting plan. The exact number of job losses remains uncertain due to a malfunctioning internal feature, that previously allowed employees to view the total staff count. This drastic step follows a series of smaller cost-saving initiatives, that included limiting color printing and discontinuing complimentary afternoon tea and coffee in offices.
Renewable sector faces challenges amid geopolitical tensions and inflation
The renewable energy sector, which includes solar manufacturers like Longi, is wrestling with obstacles due to geopolitical tensions arising from Russia's invasion of Ukraine in 2022. This event led to decreased gas supplies into Europe, prompting governments to hasten their shift toward renewables. However, the resulting spike in energy bills has escalated inflation rates and added costs to already strained supply chains due to rising demand. Hence, many renewables companies are halting projects and trimming jobs to recalibrate their portfolios.
Financial woes amid intense competition
Longi's financial health has suffered amid these industry challenges, with its net income plummeting by 44% to CNY 2.52 billion (around $350 million) in the third quarter of 2023. The company's shares have also experienced a significant drop, falling around 70% from their peak in 2021.
Previous cost-cutting measures and future prospects
Prior to resorting to job cuts, Longi implemented several cost-saving measures such as discontinuing free afternoon tea, reducing business trip budgets, and instructing staff to print only in black and white. Despite these hurdles, Bloomberg Intelligence analysis suggests that China's solar industry could begin to recover by the end of the year. With an anticipated equilibrium between supply and demand expected in 2025, Longi may be well-equipped to navigate the turbulence given its market leadership position and substantial cash reserves.
Workforce reduction amid industry overproduction
Longi initiated workforce reduction in November, primarily impacting management trainees and factory workers. The process resulted in employees either being directly dismissed or resigning after being reassigned to positions they were unable to accept. This comes as the global solar industry wrestles with an overproduction issue, with manufacturers compelled to sell at or near production costs due to plummeting solar panel prices. Despite this, new installations skyrocketed 72% last year, driven by affordable solar panels, setting a new record.
Expansion and hurdles
The solar industry, including firms like Longi, has a history of boom-and-bust cycles typically influenced by government policies. Despite recent challenges, Longi had experienced significant expansion since its public listing in 2012 on a major stock exchange. The company reported a workforce of over 60,000 at 2022-end and continued hiring well into 2023. However, this trend is now reversing.
