Suntech Power Holdings Co, the world's largest solar panel maker by capacity, said it will reduce production and cut operational costs to weather the downturn in the photovoltaic sector, a move analysts said Tuesday was caused by both external and internal pressures.

"The sector is witnessing a rough period with shrinking demand and low product prices. And anti-dumping duties imposed by the US and a probe by the EU piled up further pressure, forcing us to cut our solar cell production," Suntech spokesman Zhang Jianmin told the Global Times Tuesday.

The company will reduce its annual solar cell output by 25 percent and operation costs by 20 percent this year. These changes will involve some 1,500 employees who can opt between being shifted to other plants and getting severance compensation, Zhang said.

Suntech, based in Wuxi, East China's Jiangsu Province, was once a star performer in China and also the first Chinese solar panel maker to list overseas in 2005, but it plunged into a downward spiral recently.

Behind the plunge, there are both external and internal factors, analysts said.

"This is an adjustment period for the global solar sector which is suffering from massive oversupply," an expert surnamed Wang with the China Photovoltaic Industry Alliance told the Global Times Tuesday.

"Suntech expanded too quickly, leading to today's problems," said Han Xiaoping, chief information officer at Chinese energy portal china5e.com.

Suntech was founded in 2001 with an annual output of 10,000 kilowatts in 2002 but the figure hit 1.8 million kilowatts by the end of 2010.

It also misjudged on the prices of some raw materials, Wang said. Suntech signed a 10-year contract with US-based MEMC in 2006, saying it would buy silicon wafer at a unit price of $40 from the US supplier. At that time, the market price for silicon wafer was some $80 per unit, according to a Monday report by Beijing-based Energy Review magazine.

However, silicon wafer prices plunged to some $2.4 a piece  in 2009, but Suntech still had to buy the materials at the contract prices. In 2011, Suntech broke the contract with MEMC at a payment of $212 million. The move also put further pressure on its capital, Wang said.

With the total assets of $4.38 billion, Suntech had a debt of $3.58 billion by the end of first quarter of 2012, according to its first half year financial report.

Some analysts foresee a possible bankruptcy of the company as early as the end of this year while others believe Suntech still has the chance to get support from the Wuxi local government given the importance of the enterprise locally.

"Cutting output and costs may not help the company stay afloat as the entire industry is suffering from a supply glut," Han said. "With Suntech cutting down on supply, its competitors may take the opportunity to boost supply and seize market share."