Milpitas, Ca. -- California Governor Arnold Schwarzenegger spent Earth Day in Milpitas, California, celebrating SunPower's new California manufacturing operations in partnership with contract manufacturer Flextronics.  This move looks to generate about 300 new jobs in Silicon Valley.  The event marked the fortieth anniversary of Earth Day and the twenty-fifth anniversary of SunPower's founding.

As usual, Arnold was late -- possibly trying to re-establish his Hollywood ties in preparation for his post-gubernatorial career. 

Anyway, SunPower's announcement is nuanced and revealing.  It's not really a new manufacturing facility, it's simply outsourcing the low-margin part of their solar value-chain to a competent partner: contract manufacturer Flextronics.  It moves SunPower out of the commoditized grunt work of module assembly to focus on their competencies, high-efficiency cell manufacturing and the relatively higher margin work in downstream solar integration.

SunPower already has a contract manufacturing relationship with Jabil, assembling modules in Mexico for the North American market.  SunPower joins BP and Evergreen in an industry shift that moves the module assembly process into the domain of commoditized contract manufacturing.

Attending the event were Tom Werner, SunPower CEO, E.C Sykes, President of Flextronics Industrial, an array of local luminaries, and several hundred enthusiastic Flextronics employees.

Whatever his eventual legacy might be, Arnold has absolutely taken solar, greentech and job creation in California very seriously.  In March, the governor signed SB 71, creating a sales tax exemption for the purchase of greentech manufacturing equipment in California.  Assembly Bill AB 510 was signed in February, which raised the net energy metering requirement from 2.5 percent to 5 percent, and yesterday the governor signed SB 77 to establish the statewide Property Assessed Clean Energy Reserve Program to lower up-front costs for businesses and residences making home energy improvements.

He also made a pitch for AB 32, the California greenhouse gas law, saying that greedy Texas oil companies want to "verschmutzt the world" and are spending millions in California to roll back AB 32.

Tom Werner spoke about bringing manufacturing jobs back to California in SunPower's solar panel manufacturing facility, their first in the U.S.  Establishing a U.S. manufacturing facility is a direct result of SunPower's three-year agreement with the U.S. Department of Energy (DOE) under the Solar Energy Technologies Program.  Under the agreement, which was initiated in 2007, SunPower may receive up to $24 million of federal funding for improvements across the value chain that reduce solar system costs through upgrades in the design and manufacture of integrated solar power systems.

SunPower was number one in California market share in commercial and residential deployments last month, according to Werner.  He said SunPower was investing in California largely due to Schwarzenegger and his staff, adding, "This governor and his staff have absolutely delivered to have a market here and make the market work.  Last month 50 megawatts of residential roofs were installed because of this governor."

In the view of Steve O'Rourke, analyst at Deutsche Bank:

"Shifting lower value-added manufacturing to the U.S. (1) reduces shipping costs, (2) enables better access to the end market, (3) may better address local market needs, and (4) can maintain the company’s overall cost structure optimized (aided by technology and tax incentives). Moving significant manufacturing to the U.S. makes little sense as the cost competitive landscape is brutal, and Asia can offer lower labor costs, potentially lower supply chain costs, and multi-year tax incentives/holidays that cannot be replicated in the U.S. We believe the degree to which a company like SunPower sites manufacturing (and more of the upstream manufacturing value chain) in the U.S. will be proportional to the size and growth of the U.S. market. Now, the U.S. market does not warrant a big commitment."

E.C Sykes, President of Flextronics, spoke about how technology needs a little push to get to the next level and that it was policy pushes from Schwarzenegger that enabled the company's announcement.

"According to the California Public Utilities Commission, more applications were received under the California Solar Initiative (CSI) last month than in any month since the CSI was launched three years ago," Werner added.

Sykes invited the speakers to come back to see the fully operating plant at work in a few quarters.

Arnold said, "We'll be back."