(Bloomberg) -- Layoffs at Longi Green Energy Technology Co., the world’s biggest solar manufacturer, will likely accelerate a global rebalancing of production capacity away from China.

Longi, which employed as many as 80,000 people at one point last year, said on Monday that it would trim about 5% of its workforce. That followed a Bloomberg story in which several people familiar with the matter said that as many as 30% of staff at the Chinese solar giant could lose their jobs.

The cuts mark a reversal after years of rapid expansion by Longi and other Chinese firms that made the country the center of global solar manufacturing. Their success has aided efforts to slow global warming, making solar the fastest growing source of energy on Earth. But it’s also resulted in two negative consequences for Chinese manufacturers.

The first is that solar became the focal point of global trade frictions, as countries including the US became uncomfortable relying on China for equipment that’s vital to the energy transition. The second is that factory expansion outpaced demand, leading to a collapse in prices that’s pinched profit margins for the manufacturers. 

Chinese firms have responded in recent months by seeking to rein in domestic expansion, while at the same time investing in more manufacturing abroad. One Chinese solar executive said in December that the industry was shifting from a model of “make in China and service the world” to one of increased near-shoring or friend-shoring to cater to global markets. 

Xi’an-based Longi is part of that evolution. It’s already started production with local partner Invenergy LLC at a facility in Pataskala, Ohio, that will eventually produce more than 1,000 solar panels an hour. Longi will probably keep its US expansion on track, while most of the job cuts will be in China, said Dennis Ip, an analyst at Daiwa Capital Markets. 

Read More: Top Solar Firm Longi Plans Thousands of Job Cuts on Glut

The company’s shares closed down 2.4% in Shanghai on Tuesday. They’ve now fallen more than 70% from a record high in late 2021, when the market capitalization was as much as $85 billion. 

China will likely remain the center of the solar industry for the foreseeable future, in part because its domestic market is by far the world’s largest. Cheap Chinese modules will probably still be a source of frustration for other nations’ efforts to build domestic supply chains, perhaps leading to additional trade barriers in the future, said Youru Tan, a solar analyst at BloombergNEF.

However, “overseas production plans by leading manufacturers likely will be continued as even more challenges are expected in China markets,” he said.

After years of consolidation within China, the solar industry is clearly looking to shift some capacity elsewhere. The layoffs this year look set to accelerate that rebalancing.

On the Wire

  • China Evergrande Group, the defaulted developer at the heart of China’s real estate crisis, falsely inflated revenue by more than $78 billion in the two years leading up to its failure, according to the nation’s top securities regulator.
  • Two global funds long cautious about Chinese equities have turned bullish, the latest indication of recovering investor confidence in the world’s second-largest stock market.
  • Iron ore edged lower after a volatile start to the week as traders took stock of the outlook for demand in China.

The Week’s Diary

(All times Beijing unless noted.)

Tuesday, March 19:

  • CRU International Steelmaking Raw Materials Conference in Shanghai, day 1
  • EARNINGS: Huaneng Power, Towngas, Anhui Conch

Wednesday, March 20:

  • China sets monthly loan prime rates, 09:15
  • China Jan.-Feb. output data for base metals and oil products
  • China’s 3rd batch of Jan.-Feb. trade data, including country breakdowns for energy and commodities
  • CCTD’s weekly online briefing on Chinese coal, 15:00
  • CRU International Steelmaking Raw Materials Conference in Shanghai, day 2
  • EARNINGS: China Coal, HK & China Gas, China Resources Power

Thursday, March 21:

  • EARNINGS: Cnooc (briefing in HK at 17:00)

Friday, March 22:

  • China weekly iron ore port stockpiles
  • Shanghai exchange weekly commodities inventory, ~15:30
  • EARNINGS: CMOC, Zijin Mining, Hongqiao, Shenhua, ENN Energy

(Updates with Longi’s closing share price in 7th paragraph.)

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