Signet Solar won't be building a factory in New Mexico after all.

The company -- which makes amorphous silicon solar panels with equipment from Applied Materials -- has cancelled plans to erect an $840 million factory in the state after failing to get a Department of Energy loan, according to news reports. Jim Wood, vice president of Coast Range Investments, the land developer working with Signet, told the Belen, New Mexico city council that it learned of the withdrawal from Signet officials March 30.

The plant would have employed about 600. The DOE, however, rejected a $220 million loan request in January. Signet has not responded to comments.

It's yet again another bit of bad news for Applied Materials. The semiconductor equipment maker burst into the solar market in 2006 with plans to make equipment for amorphous and crystalline silicon solar manufacturers. Although the crystalline business is growing, Applied's amorphous business has been struggling.

Part of the reason is that the SunFab line, a factory-in-a-box for amorphous silicon, is costly: SunFab costs approximately 30 percent more than competing, standard equipment, according to GTM Research analyst Shyam Mehta. Solar panel prices, meanwhile, have continued to decline. (Tom Friedman forgot to mention high costs in his hotly debated article touting Applied and SunFab last year in the New York Times.)

Signet was one of Applied's first -- and one of its most visible -- SunFab customers. The company, headquartered in the U.S., has a factory in Germany and started shipping panels in 2008. It has been planning to expand production by increasing production in Germany from 20 megawatts to 70 megawatts by the first part of 2011 and by bringing New Mexico on line. Rumors have lingered about the fate of Signet's expansion for weeks. 

A few days ago, another early customer, SunFilm, filed for bankruptcy protection. SunFilm was actually two Applied customers in one: last year, it bought Sontor. Another customer, Masdar PV, has built a factory based around SunFab in Germany but has not moved forward with plans to build factories in the Middle East yet because of the lack of local feed-in policies.

In early March, we reported on rumors and speculation that Applied Materials might look to scale back or even sell its group that makes equipment for amorphous silicon solar panels. Applied declined to comment on the rumors and emphasized that the company will invest more into the amorphous market.

After that, analysts at Goldman Sachs attributed a rise in Applied's stock to news reports that the company might actually scale back on SunFab. Then at the end of March, Applied indicated it would reduce its investments in SunFab. 

Tags: amorphous silicon, applied materials, crystalline silicon, masdar pv, signet solar, sunfilm