INTERVIEW - Maxeon Solar bets on premium status against Chinese rivals

Singapore-based solar cell and panel maker Maxeon Solar Technologies Ltd (NASDAQ:MAXN) sees the premium status of its products as the key to fighting the heavy competition coming from Chinese manufacturers.

We recently spoke with Maxeon's chief revenue officer (CRO) Mark Babcock about the company's offerings and its prospects, how attractive the US market is for solar manufacturers, and how Europe is currently flooded with panels.

"We have a differentiated product. We have a differentiated channel. We have some very strong environmental, social and governance (ESG) credentials and I think that those are all important to a set of customers. I think that we've got an important place in the market. It's a premium product,” he stated.

Babcock is an American executive with more than 15 years of experience in the solar power industry. He entered the sector in 2007 joining SunPower, which he left in 2012, and then moved to SunEdison in 2013 until the company went bankrupt in 2016. Later, he also took a senior position at the distributed generation solar business of Flex. Babcock has been serving as Maxeon’s CRO since December 2020, joining it a few months after the company was spun off from SunPower. He also had a short spell as Maxeon’s interim CEO until Bill Mulligan formally assumed that position in January 2023.

QUALITY AND LONGEVITY

Continuing on the topic of Chinese competition, he said that installers working with the company for a long time recognise that its product offers a much better quality than panels imported from China.

"Some of our installers claim that Maxeon panels are producing more now than they produced 10 or 15 years ago when they were installed. That may be weather-adjusted, but certainly, we're seeing very low levels of degradation. We've got good hotspot performance and other things that matter over the long term. But it requires a different type of sale. It requires a sale that's really focused on long-term value and not just upfront cost,” Babcock stated.

MANUFACTURING FOOTPRINT

Presently, Maxeon has four manufacturing facilities in operation – one in the Philippines, one in Malaysia and two in Mexico. This past August, the company also announced plans to build a solar cell and panel factory in Albuquerque, New Mexico. Babcock said that this new facility will have the capacity to produce 3.5 GW of cells and modules with its shingled Topcon technology for the US utility-scale market. The total cost of the project is estimated at over USD 1 billion.

In Europe, the company currently maintains sales and service activities only. Babcock commented that there are no plans to establish a manufacturing footprint on the continent as the opportunities in the US are better than they are in Europe. He said that it would be too costly for the company to manufacture in Europe and that that is why Maxeon is paying more attention to the US market where its locally-made offerings would be more valuable because of the direct subsidies under the Inflation Reduction Act (IRA) as well as the Investment Tax Credit (ITC).

THE US MARKET ADVANTAGE

“The US is doing a combination of reducing costs and increasing price, such that it's making the product that's produced there more valuable. At the same time, they've got some aggressive actions to keep the lowest cost products that are not traceable from an ESG, forced labour perspective to keep those out of the US market. So, the combination of those two things basically makes manufacturing viable in the US and quite attractive, whereas that combination does not yet exist in Europe. Europe has very few restrictions on importation, which is why you see the mass of inventory that's currently built up. And the incentives for manufacturing are relatively limited at this point,” Babcock explained.

As a result, the US has become the company’s intermediate focus for growth. Babcock believes that severing ties with SunPower, and in doing so eliminating “the middleman”, will result in a better price for both the company and its installer partners and ultimately in a more attractive value proposition for the end customer.

EUROPE OVERPRODUCTION ISSUE

The executive further commented on the overproduction issue, saying that there's clearly a glut of products in the market, making Europe a tough place to be selling PV modules right now.

“Prices have dropped very, very quickly. We are still bullish in the long term on the European market overall and specifically in the distributed generation (DG) market. We feel like the combination of consumer-side policies on energy production and the fundamental rise in electricity rates will make Europe a long-term good market. It will take some time to stabilise.”

DIFFICULT SALE IN EASTERN EUROPE

According to the executive, Maxeon is strongest in Italy, France, Belgium and the Netherlands when it comes to European markets. On the other hand, it finds it more difficult to do business in Eastern Europe because this requires teaming up with wholesalers.

“Our value doesn't come from upfront cost. Our value comes from long-term cost of ownership, reliability, you know, not just the upfront efficiency that we've been known for a long time. We find that in general, the wholesalers have a harder time explaining that value to installers and then consequently installers to end customers. It's really much more effective for us in the markets where we can have direct installer contact [...]. So, for us to be present in a market in any significant form means that we need to have a sales force on the ground. It can't be as simple as ship a container into a wholesaler. And so that limits our ability to really be effective in very small, up-and-coming markets like those in Eastern Europe,” Babcock explained.

FUTURE IN EUROPE

“I don't see us manufacturing in Europe in the short term, but we are a member of the European Solar Manufacturers Alliance. We are staying very close to the policy developments and as Europe comes up with some new plans to make manufacturing attractive the way the US has done, we are certainly willing to evaluate that in the future,” he concluded.

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