SolarWorld, the company that started the solar trade war that has escalated in 2018, is now being acquired by SunPower Corporation (SPWR -5.10%), a crazy turn of events in the solar industry. It was SolarWorld that filed a trade complaint that led to anti-subsidy and anti-dumping tariffs on Chinese and Taiwanese solar imports in 2014, and last year, it joined Suniva's Section 201 trade case that led to a 30% tariff on most solar imports earlier this year. But SolarWorld was never able to make it on its own and began shopping for bidders for its operations in 2017. 

SunPower will step in to buy SolarWorld Americas, whose main asset is a manufacturing facility in Hillsboro, Oregon. Now, one of the companies hit hardest by tariffs (SunPower) will become the biggest U.S. solar manufacturer -- ahead of First Solar (FSLR -1.12%) -- potentially turning tariffs into an asset. 

Solar array with trees in the background.

Image source: SunPower.

What SunPower is buying

SolarWorld's Oregon facility has 430 megawatts (MW) of solar cell capacity and 550 MW of solar module capacity, which SunPower will restart as it builds out its own technology in the plant. SunPower produced 1,172 MW of solar panels in 2017, so this is a big capacity expansion in the U.S. 

Long-term, the plan will be to bring in P-Series manufacturing, a proprietary panel design that involves stacking solar cells like shingles when assembling a solar panel. For now, SolarWorld's existing products will go back into production, with SunPower saying, "The company will invest in factory improvements and increased working capital, while retrofitting a portion of the facility to produce P-Series solar panels, in addition to continuing to produce and ship SolarWorld Americas' legacy products."

CEO Tom Werner told me the plan is to turn 25% to 50% of the panel assembly space into P-Series manufacturing and keep the rest as is. He also said that SunPower's manufacturing expertise combined with the price premium from solar tariffs should make the plant profitable as quickly as this year. 

Why SunPower is making this move now

It's not terribly surprising that SunPower is acquiring solar manufacturing capacity in the U.S. right now. It was the most impacted by solar tariffs and is looking for ways to lower costs for solar panels and build P-Series panels stateside. 

The company's high-efficiency X-Series panel has been impacted more than competitors' panels because it carries a price premium of 50% to 100%, or $0.20 to $0.40 per watt, over commodity solar panels even without tariffs. Since tariffs are calculated based on the value of what's coming into the country, the absolute tariff paid by SunPower is higher than that of competitors, compounding its price premium. SolarWorld's manufacturing will give the company inroads in the U.S. market with a product that's nearly as efficient as X-Series while being lower-cost. 

For P-Series, the product serves the ground utility solar market, which SunPower is effectively shut off from with tariffs in place. But adding P-Series capacity will allow SunPower to use some of the 2,500 MW of solar cells the Trump administration has exempted from solar import tariffs as supply and make a cost-competitive product in the U.S. If P-Series supply is added quickly, it could top First Solar's 600 MW of solar capacity in Ohio, taking market share from the thin-film solar giant. 

A bold move back to the U.S. 

Most of SunPower's manufacturing is located in Asia, but SunPower's roots reach back to California three decades ago. Now the company will be a major U.S. solar producer again -- and if management's predictions are correct, it could take the top spot from First Solar in supplying solar panels to the U.S. market. 

It will be a few quarters to see what the impact of SolarWorld's manufacturing facility is on SunPower's financials, but I anticipate that it could give the company a more cost-effective path to market in residential solar and could open up a huge opportunity for P-Series and utility-scale solar as well. Maybe tariffs won't be the downfall of SunPower after all.