MEMC Electronic Materials is hurting. The silicon wafer and solar project developer is undergoing some big restructuring that includes laying off 20 percent of its workforce and idling – or possibly closing – a polysilicon factory, the company said Thursday.

The extent of the restructuring, to take place during the fourth quarter of this year and the first quarter of 2012, presents one more piece of evidence that the solar manufacturing sector is suffering painful blows from falling prices and lackluster demand that has resulted in part from a pile up of inventories.

Missouri-based MEMC said the shakeup affects all of its business units and should enable the company to cut operating costs by more than 15 percent. The company sells silicon wafers and, though its SunEdison subsidiary, installs photovoltaic projects in North America, Europe and Asia. It also sells silicon wafers to the chip industry.

“Changed market conditions require that we improve productivity across all segments and in solar move to a more balanced manufacturing model aligned with our downstream business,” said Ahmad Chatila, MEMC’s CEO, in a statement.

The restructuring plan aims to cut costs and improve the efficiency of its factories, and it includes the following:

  • Lay off 1,300 workers worldwide, or 20 percent of the MEMC workforce, including 250 positions in the United States.
  • Suspend manufacturing of its polysilicon factory in Merano, Italy. The company might close the factory, which has an annual production capacity of 6,000 tons, unless it’s able to reduce manufacturing costs quickly “in the near term.”
  • Cut production at its Portland, Ore., factory, which makes silicon crystal. MEMC also will slow the expansion of its silicon wafer factory in Kuching, Malaysia. The wafer factory, which began production in the first quarter of this year, will hit an annual production capacity of 300 megawatts.
  • Consolidate its solar materials business with SunEdison staring on Jan. 1. MEMC produces its own silicon and turns that into wafers, and it sells solar panels bearing its brand that are made by Flextronics.

As a result of declining sales and restructuring, the company expects to take a cash and non-cash charge totaling $700 million.

Its fourth-quarter sales should fall between $523 million and $585 million, said MEMC, which expects to record losses of $5.20-$6.38 per share. The company noted that the numbers could fall further because Europe’s financial market crisis could affect pricing and sales by SunEdison.

MEMC is not alone in laying off workers and reducing or even suspending production. Energy Conversion Devices, which makes amorphous-silicon thin films, suspended manufacturing and planned to lay off 500 workers by the end of this year. Companies such as Renewable Energy Corp., SolarWorld, Solon and Q-Cells have cut back production or shuttered factories. Suntech Power and First Solar, the two largest solar panel makers in the world, don’t plan to expand their manufacturing fleet in 2012. Suntech and JA Solar recently said they would idle some of their production equipment given the poor demand and inventory buildup, which analysts say is in gigawatts.

Despite the number of manufacturers who are reducing production and factory expansion plans, a few seem to think this is a good time to expand. Hemlock Semiconductor, for one, is moving ahead with a $1.2 billion project to build a new polysilicon plant in Tennessee. It expects the plant to start production in late 2012.

Last month, Panasonic announced it will spend 45 billion yen to build a solar factory in Malaysia that will start production in December 2012. The factory, which will make silicon wafers, cells and panels, will start with an annual production capacity of 300 megawatts.