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Analysis - Japanese maker to build turbines in US

US: Leading Japanese wind turbine manufacturer Mitsubishi Heavy Industries (MHI) is proposing to build a turbine factory in the US state of Arkansas next year.

The facility under consideration would make turbines with a combined generation capacity of around 600MW per year, equivalent to about 50% of the company's current manufacturing capacity in Japan. Turbine blades are likely to be supplied by the company's factory in Mexico.

While senior management has yet to approve the plans, an MHI spokesman cites rising demand in the US, exchange rates and lower costs as arguments in favour. While US manufacturing capabilities have been considered for some time, the company may be spurred on by yen strength and the possibility that local investment and job creation may help protect the business from trade politics.

MHI does not deny that deliberations have been influenced by the fact that wind farm projects in receipt of government stimulus funds are under pressure to "Buy American" or that the legal GE battle could result in a ban on importing MHI wind turbines into the US.

The Japanese yen recently strengthened to about 89 yen to the dollar, 5% higher than its average 2009 level. Local manufacture would help MHI cut foreign-exchange risk and transportation costs. About 80-90% of MHI's wind turbine production, which is worth about $1 billion annually, is sold to the US market. MHI plans to continue with wind turbine manufacture in Japan, with a view to growing its sales into high-growth markets in Asia.

GE filed a patent infringement complaint against MHI in a district court in Texas in February despite a ruling from the US International Trade Commission the previous month that MHI's turbine design does not infringe GE's patents. But GE has said it has grounds on which to appeal the commission's decision, signalling that MHI's troubles with GE are far from over.

For more see 'Clash of the titans reshapes sector'

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