TOKYO -- Japanese solar panel makers are slashing domestic production, looking to reduce costs and rethink sales strategies in the face of shrinking demand and price competition from foreign rivals.
Kyocera halted production at a solar panel assembly plant in Mie Prefecture, south of Nagoya, as of the end of March. The Kyoto-based company, Japan's second-biggest panel maker, will keep producing photovoltaic cells at two plants in neighboring Shiga Prefecture. But it is has decided to outsource panel assembly to group plants in China or outside manufacturers to trim costs. Employees at the Mie plant will be relocated.
Solar Frontier, a unit of oil distributor Showa Shell Sekiyu, slashed panel output roughly 30% in January at several domestic plants including a main one in the southwestern prefecture of Miyazaki after producing at full capacity through last year. The company has suspended shipments bound overseas, where price competition is even stiffer.
Panasonic has had panel production on hold since February 2016 at a mainstay Osaka area plant, bringing its combined domestic and overseas capacity utilization for panels to 50-60%. While throttling back output at home, the company plans to use Malaysia as an export base in a bid to boost U.S. panel sales with partner Tesla.
Demand for solar panels in Japan has faded as feed-in tariff rates for solar power have roughly halved since their introduction in fiscal 2012. Utilities now pay 21 yen (19 cents) per kilowatt-hour for output from industrial solar power installations, down from the initial 40 yen, taking some of the shine off solar as an investment. Domestic panel shipments are forecast to remain in decline at least until fiscal 2020, according to Tokyo market research firm Fuji Keizai.
Panel producers in China and the Americas, meanwhile, are investing in new capacity, with their sights set on the growing global market. Canadian Solar, the world's third-ranking producer, boosted capacity close to 30% in 2016.
Having raised their cost competitiveness through economies of scale, these players are also going after what demand remains in the Japanese market. Foreign-made panels accounted for 66% of domestic shipments in the October-December quarter, twice as much as four years earlier, according to the Japan Photovoltaic Energy Association industry group.
These factors have contributed to a 24% drop in the average price of industrial-use solar power systems over the last four years. Panel prices are seen as making up about half the cost of such systems.
But Japanese solar companies still hold an important strength: sales networks and brand recognition for home solar panels. With the government promoting the concept of self-sufficient "zero energy houses," domestic suppliers intend to channel more energy into residential sales.