The Nearer Shore

Powin Energy founder Joseph Lu came out of retirement for a second time to found QPO Energy, following a surge of interest in bringing manufacturing jobs back to the United States.

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As a young college graduate in his native Taiwan, Joseph Lu says learning how supply chains work was as easy as walking down the street. 

“When I graduated college and finished my military service, our government was really encouraging young people to start their own businesses, so there were a lot of small factories,” Lu tells Oregon Business. “Whole families would operate a factory with three or four machines, doing a very small part of the supply chain. One factory might do the injection, another factory — another family — might do the metal fabrication. If you walk down two or three streets, you can learn all the processes and the whole industry. It’s a great education for kids.” 

Lu, 70, spent a 30-year career managing and overseeing manufacturing operations in Taiwan and China before being coaxed into retirement by his wife and son. In 1989, though, retirement got to be too boring. He left retirement and moved to Oregon to found Powin, a Tualatin-based, high-volume retail manufacturer that designed, built and provided logistics for companies outsourcing manufacturing operations to China and Taiwan. 

Powin went public in 2010 and began to transition into clean-energy storage. The company consolidated its operations into the energy sector, becoming Powin Energy in 2015. Lu says he didn’t get to fully oversee his company’s transition into the energy-storage sector. A heart attack in May of 2017 sent him into retirement again, but once again it didn’t take. As he puts it, federal investment through the Inflation Reduction Act opened up an opportunity to bring a manufacturing operation to the United States, and that was too good to pass up. In 2020 Lu founded QPO Energy, a lithium-battery module manufacturer in Tualatin. 

“I heard about the federal incentive, and I said, ‘I want to make these products in the U.S.’ I already know the energy-storage products. I really know the industry. I really know the vendors. So I decided to come back and be a manufacturer,” Lu says. 

QPO’s temporary headquarters in Sherwood, Ore. Photo by Jason E. Kaplan

Manufacturing in China has boomed over the last 40 years, due in large part to the country’s low cost of labor, lack of regulatory compliance and low taxes, leading some economists to dub China “The World’s Factory.” But supply-chain issues — caused by China’s port shutdowns during the COVID-19 pandemic, as well as the country’s aging population and concerns over potential military conflict with the United States — have made some companies rethink their manufacturing operations and bring a new wave of highly skilled manufacturing jobs to the U.S. 

It’s possible Oregon could see more onshoring efforts, with manufacturers like Lu undertaking projects to return manufacturing to American shores. The bounce could be especially potent in the clean-energy sector, where Oregon provides added incentives and Chinese companies have a decaying monopoly. 

Though it will manufacture battery modules domestically, QPO’s supply chain won’t be 100% American-made at first. The manufacturing of battery cells, which store power, versus battery modules or packs, which hold and dispense the power, requires different processes: Battery cell production is primarily a chemical process, while module production is an industrial, mechanical process that turns the cell into a usable battery module. For now, Lu is buying cells from China. 

QPO’s operation won’t cause any production facilities in China to shut down, either, but Lu is investing $7 million into a production plant to manufacture inverters, which converts direct current power into alternating current power at a higher voltage, in Tualatin.

Lu says finding a domestic partner to supply the cells is high on his company’s list of priorities, in part because of the concerns he and other manufacturers have about China’s future as the center of global manufacturing.

“We felt making products in China was a problem. The costs are getting higher and higher, and there are more and more competitors, and we don’t have enough profit to cover the cost,” Lu says. 

Lu founded QPO out of Quailhurst Vineyard Estate in Sherwood in 2020, setting up a solar-panel field on land at the vineyard — where he also keeps an office — to generate electrical credits for his new company. He refers to the last three years as the company’s incubation period. He’s spent it setting up production schedules, meeting investors, hiring staff and overseeing construction of a 100,000-square-foot manufacturing facility in Tualatin, which he estimates will begin production in 2024. 

Lu has also secured $8 million of equipment from Taiwanese holding company  Yulon Group, which has a 49.5% stake in QPO. Lu also secured a letter of intent from Powin Energy, where he still sits on the board as chairman, to purchase 1.5 gigawatts’ worth of the company’s batteries. 

The company currently has 10 employees and six open positions. But when production starts in 2024, Lu estimates his factory could employ up to 400 people. 

QPO’s first line of battery modules will be for residential use and retail for approximately $10,000. The modules have the capacity to store a home’s generated solar power, act as a generator in case of a power outage and charge during off-peak energy hours in order to dispense power at more expensive times, meaning the modules would pay for themselves in time. The second product line will be battery modules to be placed into Powin Energy utility-scale products. Powin Energy’s 1.5-gigawatt letter of intent would translate into approximately 167,410 of these units. Lu says much of the lithium-ion battery manufacturing in the United States has been for electric vehicles — $73 billion was invested in domestic EV battery manufacturing last year, versus just under $900 million for residential batteries — but there is still opportunity in the residential market. 

“We have a lot of potential customers right now. Everybody’s looking for made-in-the-U.S. products, but we’ll be the only ones!” Lu says, smiling. 

Joseph Lu (left) and chief technolgy officer Virgil Beaston stand behind the battery modules that QPO will manufacture in Tualatin. Photo by Jason E. Kaplan

Virgil Beaston, QPO’s chief technology officer, was first recruited by Lu to join Powin in 2011 when the two met in China. Beaston pitched Lu on investing in his energy-storage company, and Lu countered with a job offer. Beaston left QPO six years ago to pursue his Ph.D. at Binghampton University in New York but dropped out early when Lu made him another offer — this time to be CTO of his new company. He says the opportunity to work with Lu again — and to be be a part of the economy’s transition to clean energy — was too exciting an opportunity to let slip. 

“He’s really good at business. I’m not good at business,” Beaston says. “I’m good at technology, and he’s got a 30-year track record, and the market for residential is coming very quickly. I don’t know what’s going to happen in the next two years, so it’s a chance to take everything we’ve learned and execute much better.”

Beaston says as the economy consumes less and less carbon-based energy sources, the energy grid will need to provide significantly more electricity than it does currently. He says using batteries to store energy during off-peak hours and dispense it during peak hours is a more efficient alternative to making large-scale changes to the energy grid. 

“The biggest need for energy is in cities — high-density areas,” Beaston says. “They’re bringing in electric vehicles and they’re going to start using more and more electricity. I don’t believe there’s any way it will be cost- effective to increase the transmission grid by five, six, seven times. It will never happen. So energy storage is the only way it’s going to be solved. It’s like if you have four lanes going into Portland and it takes you two hours each way to go into the city with traffic. You can make it 15 lanes and solve the problem, but it’s such an overinvestment. Flex times are the better way to solve it. Energy storage avoids all those costs.”

Rosemary Coates is the executive director of the Reshoring Institute, a California-based nonprofit aimed at bringing manufacturing jobs to the U.S. from China. She says more and more companies are looking to reshore manufacturing operations because of fresh concerns over China’s perceived riskiness as a manufacturing hub. Coates spent 25 years as a management consultant working with firms wanting to offshore manufacturing to China, a job that eventually began to weigh on her.

“During the 2012 election, Mitt Romney and Barack Obama were both China-bashing like crazy. It was all about China, and how our economic woes are all related to China and currency manipulation and human- rights violations, and on and on and on. I felt like I couldn’t really say what I did for a living,” says Coates. 

The COVID-19 pandemic was a turning point, she says. 

”There was so much recognition about these long global supply chains, particularly those that went through China. Prior to that, it was all about the economics — all about the dollars and cents and profitability,” Coates says. Now, she says, the conversation is, “How quickly can we get out of China?” 

According to Coates, most estimates say the U.S. is regaining about 200,000 to 300,000 jobs per year in the manufacturing sector — some related to reshoring. The U.S. is also seeing rapid growth in industrial investment, according to the U.S. Census Bureau. In April of 2023, spending on manufacturing construction reached $189 billion annually, triple the average rate of the 2010s.

And Oregon is well poised to benefit from the trend. The state’s manufacturing sector grew 5.75% between January 2021 and May 2023, adding 10,600 jobs according to the Bureau of Labor Statistics. Oregon’s manufacturing growth was nearly triple the national average, led predominantly by jobs in tech and electronics manufacturing

“Oregon is sort of a hidden jewel. It’s a good place for green manufacturing in particular, because there’s a lot of environmental focus,” Coates says. “It’s the Silicon Forest, so there’s already a lot of high tech. It’s an opportunity waiting to happen, so with some further exposure for Oregon, it wouldn’t surprise me to see growth in Oregon as well. But we’re seeing the super cycle is about to happen. It’s happening across the board.” 

A story by freight logistics website FreightCaviar found recent manufacturing growth was heavily driven by battery solar cells and semiconductors manufacturing, buoyed by the Inflation Reduction Act, the CHIPS and Science Act, and pent-up demand created by “decades of underinvestment” in U.S. manufacturing. 

While China is the world’s largest producer of lithium-ion batteries — in part because renewable energy is one of seven categories of business that receive special government attention in the form of generous business loans, tax incentives and cheap, skilled labor to companies looking to manufacture solar panels, batteries, and wind and wave-harnessing technology — the U.S. has the potential to grow the clean-energy storage market internally. 

Transitioning to renewable energy — particularly in the form of lithium-ion batteries — isn’t without its pitfalls, in part because there is little domestic supply of the mineral, partly due to concerns about the environmental effects of lithium mining. The Biden administration has made domestic lithium mining a priority: It loaned Ioneer — a company planning to open a large mining operation in Nevada — $700 million earlier this year. And the Ninth Circuit Court has ruled that a separate planned mining operation on the Nevada-Oregon border can move forward, though tribes and environmental groups have fought the latter. Lu says QPO will be sourcing lithium from China.

Joseph Lu at the location of the new QPO factory in Tualatin. Photo by Jason E. Kaplan

Lu expects the demand created by the federal investment in manufacturing will be enough to carry his business forward. Clean-tech companies in Oregon can also apply for grants via the Governor’s Strategic Reserve Fund, which funds programs and businesses that plan to apply for Inflation Reduction Act funding.

Colin Sears, global trade and business manager at Business Oregon, says there has been a renewed interest in onshoring from companies both domestic and international looking to create supply chains in the U.S. 

“From an inquiry standpoint, we’re seeing more of what I would consider reshoring leads from domestic companies trying to bring back pieces of their manufacturing or supply chain to the U.S., or international companies that want to be here. The clean- tech and semiconductor industries are the two areas where we’re seeing that interest,” Sears says. “Companies are basically building resiliency in their supply chain, so if one foreign country’s border shuts down for a while, your million-dollar machine can’t be finished and shipped to the customer because two $50 parts aren’t there.” 

Lu says the biggest challenge he and many other employers face is the ability to find the right workers. Like the rest of the country, Oregon is experiencing historically low unemployment. A 2023 review by the Washington, D.C.-based Manufacturing Institute found the technical expertise involved in modern manufacturing jobs means the labor shortage is hitting the growing sector particularly hard. The study estimated there would be a projected 2.1 million unfulfilled manufacturing jobs in the U.S. by 2030.

Lu plans to use his connections in Taiwan and China to bring students to Oregon who have studied manufacturing, creating a different kind of chain across the Pacific. While Lu says he intends to hire locally whenever he can, he says he is more likely to find strong technical expertise by recruiting overseas.

“We can hire young people from college, and we can train them to be a very good engineer here, so, I can be a bridge for manufacturing between Taiwan, China and the U.S.,” Lu says. “But I really think making the products in the U.S., that’s the future.”

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