The JV manufactures solar cells at an 800MW fabrication plant in Melaka, Malaysia.
SunPower will make the purchase over the next four years under a stock buying deal. The company has also signed an agreement to deliver 100MW of its E-series solar panels to AUO.
SunPower president and CEO Tom Werner said: "The solar industry expects continued growth for the foreseeable future, as solar power becomes increasingly cost effective in many countries.
"Acquiring AUO's stake in the Malaysian joint venture gives us sole control over our highest performing solar cell fab and will allow for technology upgrades and further expansion of our high efficiency solar cell technology as market conditions warrant."
Subject to several conditions, the transaction is expected to be completed by the end of this month.
SunPower is planning to upgrade the Melaka facility, which features infrastructure to support future capacity growth.
As part of its plans, SunPower is seeking to increase its future manufacturing capacity for its products and reduce costs.
Werner said: "We will thoughtfully manage capacity during the current industry volatility, but we are committed to being a leading upstream industry participant over the long term, leveraging our unique, high value solar panel technologies.
“Purchasing AUO's portion of the Melaka joint venture is an opportunity for us to enable technology upgrades, cost reductions and future expansion consistent with this strategy."
Image: SunPower will pay $170m to AUO over the next four years as part of the stake acquisition. Photo: Courtesy of Naypong/FreeDigitalPhotos.net.
