SUNPOWER PHILIPPINES MANUFACTURING LIMITED

100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

“Engineering Economics Study of Replacement Analysis on Replacing Solar Cell Laser

Cutting Machine for SunPower Philippines Manufacturing Limited.”

A Technical Report Presented to Engr. Donnalyn C. Cabaces-Faculty Member

College of Engineering, Architecture and Fine Arts

Batangas State University Pablo Borbon Main II Alangilan, Batangas City

As a Requirement for the Course ENGG 404 – Engineering Economics

By:

Alcantara, Lloyd M. -19-00437

Alido, Kevin F. - 18-59884

Almirol, Kathleen Joy F. - 19-08483

July 2021
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

I. Introduction (The Problem and Its Background)

A. Name of Company and Its History

It takes a lot of courage to change the way our world is powered. SunPower's
goal is to achieve this. The objective is to transform people's perceptions of energy and to
commit to unleashing the sun's immense energy so that we may all benefit from the freedom
it gives. Since the 1970s, SunPower has been creating ground-breaking solar technologies.
Over the years, they have been known for inventiveness, craftsmanship, and confidence.
Dr. Richard Swanson, one of the co-founders, was considering methods to cope with the
oil problem over four decades ago, when he was pondering ways to deal with the oil crisis.
Solar cells were being utilized on spacecraft at the time, which he found fascinating. His
engineering task was to work out how to reduce the cost of the cells. As a result, he
embarked on a journey that has enabled SunPower establish itself as a leader in residential,
commercial, and utility-scale solar power production over 40 years later.
SunPower Philippines Manufacturing Limited activities include solar cell and
module production. SunPower is a global leader in creating the most efficient solar
modules for homes, businesses, commercial buildings, and power plants.
Solar Cell Manufacturing (Fab1) and Module Manufacturing (SPMM) in
Binan, Laguna, and Solar Cell Manufacturing (Fab2) in Sto. Tomas, Batangas, are the
organization's three manufacturing locations in the Philippines. Solar cells are
manufactured by Fab1 and Fab2 and sent to ModCo, which assembles solar panels.
SunPower Philippines began operations in March 2004 with a capacity of
25MW/year and has since expanded from one manufacturing line to twenty lines with a
total capacity of 600MW/year. The total land area for Solar Cells & Module Manufacturing
is around 20 hectares. Solar Cell Manufacturing employs cutting-edge technology and
includes 21 key process stages, whereas Module Manufacturing has only five.
The company can create solar panels with a 20 percent efficiency, making it a
world leader. SunPower's constant technological aggression allows them to provide 72-cell
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

modules, 96-cell modules, and the largest 128-cell modules to the market, all with an
aesthetically attractive appearance. "MORE WATTS, LOOKS GREAT!" is their motto.
Solar energy is the most plentiful on the planet. At any given moment, around
173,000 terawatts of solar energy impact the Earth, which is more than 10,000 times the
world's entire energy demands. Solar energy is a method for fighting the present climate
problem and reducing our reliance on fossil fuels by catching the sun's energy and
converting it into power for your house or company. Solar power is more practical,
dependable, and cost-effective than it has ever been. SunPower may help households and
businesses generate their own power and save money.

Mission Statement

SunPower aims to change how our world is powered by offering the most efficient
solar technology you can buy for your home or business.

Vision Statement

At SunPower®, our vision is to change the way our world is powered. With
residential and commercial solar power systems installed across six continents, we are
accomplishing that goal. We also believe that real and sustainable change starts locally –
in our communities and with our children – which is why we are investing in education.
SunPower curricular programs, internships and partnerships help prepare students for a
brighter future.

B. Type of Company

SunPower Philippines Manufacturing Limited is an American company

specializing in solar power generation and energy storage. This company is a public type
of company.

C. Form of Ownership

SunPower is in form of Corporation. A corporation (also known as a regular or

C-corporation) varies from a sole proprietorship and a partnership in that it is a separate
legal entity from the individuals who own it. It can form legally binding contracts, acquire,
and sell property, sue, and be sued, be held liable for its conduct, and pay taxes. When a
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

company grows to a certain size, it is a good idea to form a corporation so that the owners'
responsibility is limited.

D. Organizational Chart

Peter Faricy
Chief Executive Officer
(CEO)

Douglas J. Richards
Manavendra Sial Norm Taffe Eric Potts Executive Vice President,
Executive Vice President Executive Vice President, Executive Vice President, Chief People Officer
and Chief Financial Channels Commercial Americas
Officer

Vichheka Heang Regan MacPherson

Tom Werner
Corporate Controller and Chief Legal Officer
Chairman of the Board
Principal Accounting Officer
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

A chief executive officer (CEO) is the company's highest-ranking executive,

with primary responsibilities including making major corporate decisions, managing the

company's overall operations and resources, serving as the primary point of communication

between the board of directors (the board) and corporate operations, and serving as the

company's public face.

The executive vice president and chief financial officer task’s is to oversee all
financial affairs with a depth and scope relevant with the company's size. Create financial
strategies in accordance with the board of directors' guidelines. Budget management,
analysis, forecasting, and direct funding techniques. Oversee all accounting activities,
including receivables, payables, payroll, and financial reporting.

The Vice President of Channel Sales will oversee a team that is responsible for
all elements of the business relationship with each partner, including recruitment,
qualifying, onboarding, training, pipeline reporting, and win/loss reporting.

Executive Vice President, Commercial America will oversee designing,

supervising, and implementing America’s channel strategy, as well as contributing
substantially to the global plan. They will oversee creating and implementing the Americas'
entire channel and partner strategy, which will leverage considerable growth by utilizing
numerous indirect routes to market.

Executive Vice Presidents, Chief People Officers serve as counselors and

consultants, but they must also be capable of implementing solutions. Their role is to
guarantee that people-centered operations including hiring, training, professional
development, and performance management support the company's growth and bottom line
by optimizing them.

Corporate Controller and Principal Accounting Officer are personally

accountable to Parliament for the economic, efficient, and effective use of resources, and
are responsible for managing one or more budget grants or charged expenditures, as well
as the preparation of receipts and expenditures budgets, revenue collection, budget
utilization, and departmental account maintenance in the prescribed manner.
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

A chief legal officer (CLO) is frequently the most influential legal executive of
a publicly listed firm. The chief legal officer (CLO) is a specialist and leader who advises
the business's other executives and board members on any important legal and regulatory
challenges the company has, such as lawsuit threats.

A chair of the board (COB) is the most powerful and influential member of the
board of directors, and he or she leads the company's officers and executives. By serving
as a connection between the board and higher management, the chair of the board ensures
that the firm's obligations to shareholders are fulfilled.

There are other people behind the success of the company excluding those
positions mentioned above. Managerial business roles including marketing manager,
product manager, project manager, finance manager and human resources manager.
Operational roles including marketing specialist, business analyst, human resource
personnel, accountant, sales representative, customer service representative, administrative
assistant. And lastly, the employees assigned in the production. Those are the contributors
that makes a company successful.

E. Products/Services Offered by SunPower

Commercial solar and storage solutions from SunPower deliver more value and
reliable long-term savings—a foundation upon which you can stake your energy future.
Offering a range of panel, installation type, and financing options to meet the unique needs
of your organization. Designing-out system failures and power shortages for industry-
leading reliability with dependable results.
• Solar Panels.
• Complete Systems.
• Solar Cells.
• OneRoof.
• Solar Battery Storage.
• Carport Installation
• Rooftop Installation
• Ground Installation
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

F. Statement of the Problem

SunPower Philippines Manufacturing Limited is currently facing a problem in

the production of solar panels. The main cause of this problem is the solar laser cutting
machine that the company uses in the past years. The machine that the company are using
is currently having a malfunction and the production of the solar panels are affected. Since
the solar cell laser cutting machine is one of the most important equipment in the
production, the company wants to resolve this problem as soon as possible. The company
considers two options in resolving this problem. One of the options is to retain the old
machine and just repair it so that the machine will operate again properly. On the other
hand, the second option is to purchase a new solar cell cutting machine which has a higher
specification and can increase the production of solar panels.

The first cost of the old machine is P560,648 and to repair it, the reconditioning
cost of it will be P 75,000 and the useful life of it will be extended for 5 years. The old
machine has no estimated salvage value. Annual maintenance cost of this machine is 10%
of its first cost while the annual electrical bills will cost P 50,000.
The new model costs P 662,584 with an estimated useful life of 10 years. It has
an estimated salvage value of P 203,872 and its annual maintenance cost is 7% of the
purchasing price. Its annual electrical bill is expected to be P 65,000. If the interest rate is
15%, what would be the best recommendation for this situation?
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

Old Machine (Zenith Solar-SFS-X20)

Parameters OLD MACHINE

First Cost ₱560,648.00
Electrical Bills/Year ₱50,000.00
Reconditioning Cost ₱75,000.00
Maintenance
10%
Cost/Year
Interest on Capital
15%
(15%)
Useful Life 5

New Machine (Argus SFS20)

NEW
Parameters
MACHINE

First Cost ₱662,584.00

Salvage Value ₱203,872.00

Electrical Bills/Year ₱65,000.00

Maintenance Cost/Year 7%

Interest on Capital
15%
(15%)

Useful Life 10

II. Methods of Evaluation

For years or decades, replacement analysis is critical to the economic success
of any company. Companies must make various replacement decisions, such when
replacing capital equipment as it wears out or becomes outdated, purchasing capital
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

equipment for expansion, and replacing old technology with new technology. There are
four major reasons for replacement including physical impairment, inadequacy,
obsolescence and rental or lease possibilities.
1. Physical Impairment
Without substantial repairs, the present asset is totally or partially
worn down and will no longer perform satisfactorily.
2. Inadequacy
The capacity of the existing asset is insufficient to satisfy the
current demands placed on it.
3. Obsolescence
This might be due to a decrease in demand for the asset's service or
the availability of more efficient assets with reduced out-of-pocket costs.
4. Rental or Lease Possibilities
It is possible to rent an asset or property that is same or equivalent,
freeing up capital for more profitable uses.

III. Analysis and Result

*Note: These attached screenshots are from the Excel file which shows the computation
of chosen method for the problem stated on this study.
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

Since the Rate of Return on Additional Investment is 25.71% which is greater than the
interest rate of 15% then, it is more economical to purchase the new solar cell laser cutting
machine.

IV. Conclusion and Recommendation

Equipment and machineries are included to those necessary things that runs a
business. Especially in companies which focus on production, machineries process or produces
a product intended for eventual sale. But when days and years passed by, those machineries
and equipment may not operate well especially when those things reach their useful lives.

Recently, the company encountered a problem specifically on a solar cell laser

cutting machine that are used in the solar panel production. The head of the company decided
that the problem must be solved immediately so that the production will not be interrupted. It
came to a decision wherein a study will be conducted using replacement analysis method. The
company is deciding whether the old machine they are currently using will be repaired and
recondition or purchasing a new solar cell laser cutting machine.

It was shown in the computation and analysis that retaining the old machine
(Zenith Solar-SFS-X20) will result to a greater total annual cost (P 825,803.26) compared to
the total annual cost when the company decided to purchase the new solar cell laser cutting
machine (Argus SFS20) which is (P 669,460.18). This study shows that the rate of return on
additional investment is greater than the interest rate which is stated in the problem
(27.51%>15%). In conclusion, the company should purchase the new solar cell cutting
machine- Argus SFS20.

For recommendation, future researchers may try other methods of evaluation

when dealing in this kind of situation. There are other methods of evaluation including
evaluation of single project, comparing alternatives, cost-benefit analysis, break-even
analysis, and present economy study that can be use and may also help in choosing the best
options/alternatives. Also, when choosing the options especially the products itself, keep in
mind that the quality of the product should be good enough and can perform/operate its own
function so that the investment will be worth it.
 SUNPOWER PHILIPPINES MANUFACTURING LIMITED
100, East Avenue, Laguna Technopark, Santa Rosa, Biñan, Laguna, 4204

V. Appendices
• https://us.sunpower.com/home-solar
• https://pqa.dti.gov.ph/awardees.php?year=2010
• https://investors.sunpower.com/corporate-governance/committee-composition
• https://theorg.com/org/sunpower/org-chart
• https://investors.sunpower.com/corporate-governance/committee-composition
• https://whsunic.en.made-in-china.com/product/VBHmdfGEaoRq/China-20W-Small-
Laser-Cutting-Machine-Scriber-Tool-Solar-Cells-Laser-Cutting-Machine-for-Wafer-
Slicing.html
• https://perfectlaserco.en.made-in-china.com/product/jKEmxsZPXbWA/China-20W-
30W-50W-100W-Solar-Cell-Laser-Cutting-Machine-for-Silicon-Wafer-Polysilicon.html
• https://zenithsolar.en.made-in-china.com/product/uXexDYqlOkUE/China-Zst-Best-
Price-Chinese-Solar-Cell-Cutting-Machine-Fiber-Laser-Cutter.html