Advanced Energy Industries Inc. (AE) is closing down its solar inverter business, which is operated under AE Solar Energy Inc., AEI Power GmbH and their subsidiaries.
The company says it will now focus exclusively on its Precision Power business. The Coloradoan reports that the decision will result in layoffs from AE's Fort Collins, Colo.-based U.S. operations.
AE says it expects to record a pre-tax charge of approximately $260 million to $290 million related to the elimination of the solar inverter business operations, the majority of which will be recorded in the second quarter. Of this write-down, approximately $150 million relates to the impairment of goodwill and intangibles; $45 million to $75 million to the write-down of inventory, fixed and other assets; $15 million for employee termination cost; $10 million for tax valuation allowances; and the remaining $40 million for other costs to exit the business, the company says.
Cash costs for severance and other expenses related to this decision are expected to range from $30 million to $45 million, of which AE expects $20 million to $30 million to be paid out this year.
U.K.-based market analysis firm IHS says falling prices and difficulties in finding new markets have caused AE to retreat from the solar business. The company was unsuccessful in finding a buyer. According to IHS, AE ranked as the the third largest supplier globally in 2013 with a 4% market share. However in 2014, it dropped outside of the top 10 rankings following substantial market share loss in three-phase high-power inverters in the U.S. market. It also faced rapid price reductions in the U.S. market compared to the rest of the world.
Cormac Gilligan, senior solar supply chain analyst at IHS Technology, says one of AE's key strengths in the past has been to use the profit generated from its other businesses, such as semiconductor equipment, to acquire competitors. However, following the acquisition of RefuSol in 2013, demand for inverters transitioned quickly from Europe to Asia, and in addition, inverter prices decreased rapidly, which heavily impacted AE's revenues.
Although AE tried to expand its presence in other high-growth markets, such as the U.K., India and Japan, and promote its string inverter technology via the RefuSol acquisition, most of these markets were extremely competitive. As a result, Gilligan says, AE has been unable to compensate for its lost market share in the U.S. with growth in new international markets.
Gilligan points out that AE's exit from the solar inverter market will leave a large void in the commercial- and utility-scale segments in the U.S., representing a significant opportunity for a range of suppliers, such as ABB, Schneider Electric, TMEIC or Power Electronics, to grow their presence. Also, Chinese inverter suppliers, such as Sungrow, TBEA and Huawei, may recognize this as their opportunity to build their presence in the market.