Plunging panel prices force Celestica from market

Canadian manufacturing conglomerate Celestica's attempts to become a solar panel company only lasted four years before the economic reality of plunging panel prices forced them to pull the plug.

In less time than it takes for a U.S. president to serve out his term, Canadian manufacturing conglomerate Celestica has decided the solar-manufacturing business isn’t for them.

During its earnings call to discuss its fourth-quarter results, Celestica explained its decision.

“Previously disclosed market instability and global oversupply of solar panels continued to negatively impact our solar panel manufacturing business, including the pricing and demand for solar panels in the fourth quarter of 2016,” company officials said.

“Since these negative factors are expected to be prolonged, and we no longer expect to generate reasonable returns, we made a decision in the quarter to exit the manufacturing of such panels,” they continued.

The company started producing white-list solar panels in its Toronto headquarters, after losing its biggest client in it core business of printed circuit boards in 2013. The decision to enter the solar panel market was met with great fanfare in the Canadian business press and was hailed as another bold move in the company’s risk-loving history – although even some observers wondered about the move at the time.

The solar panels represent part of Celestica’s push into green energy. That might seem an odd choice, given the havoc wrought of late by a glut of cheap Chinese solar panels,” wrote Matthew McClearn for the magazine Canadian Business. “But [Mike Andrade, executive vice-president of the company’s diversified markets [segment] believes his competitors look at their products from the wrong perspective.”

“Developers are the primary buyer of solar panels, he says, and they look at it much as they would a fixed income instrument. ‘They couldn’t care if it was squirrels in cages that generated the steady flow of energy that they had a contract for,” he says. “They just wanted a reliable flow of money from it.’”

For all of Andrade’s colorful language, however, Celestica couldn’t get a reliable flow of money from its solar panel business. Like some of its other attempts to diversify its product offerings, the move to make solar panels became a right-decision, wrong-time story.

As Celestica, whose biggest white-list client appears to have been Canadian Solar subsidiary Recurrent Energy, entered the market, panel prices plummeted, the result of overproduction in China.