First Solar No Longer First in PV Module Sales

March 2nd, 2011 by Trefis Team
-16.74%
Downside
195
Market
162
Trefis
FSLR: First Solar logo
FSLR
First Solar

First Solar (NASDAQ:FSLR) is engaged in the manufacturing and sale of solar modules with an advanced thin film semiconductor technology. The firm also designs, constructs and sells photovoltaic (PV) solar power systems to customers around the world. First Solar competes with other solar industry players like SunPower (NASDAQ:SPWRA), Suntech Power (NYSE:STP) and Yingli Green Energy Holding Com (NYSE:YGE).

We have a price estimate of $155, which is around 6% ahead of the price estimate.

2010 Results at a Glance

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The company recently announced Q4 results and the consolidated figures for the entire year. Its revenues increased from $2 billion in 2009 to $2.56 billion in 2010, an increase of almost 25%. [1] In spite of this significant improvement in the company’s net sales, net income only increased from around 4% from $640 million in 2009 to $664 million in 2010. This is due to a reduction in the average selling price of PV modules and an increase in expenses.

However, a significant achievement for First Solar in the year was that it reduced its per watt manufacturing cost to 75¢ making it the first company in the solar industry to reduce manufacturing cost per watt below $1. First Solar enjoys a significant competitive edge in the industry from its focus on reducing manufacturing costs. Looking ahead steps like setting up its solar module manufacturing plants in low cost locations like Vietnam [2] are likely to bring down its manufacturing cost per watt to almost 60¢ by 2014.

But First Solar is No Longer the Largest PV Modules Manufacturer

First Solar has been the biggest producer of PV modules in the past with annual sales of about 1.1 gigawatt (GW) in 2008 and 2009. [3] Although this figure increased by almost 30% to reach 1.4 GW in 2010, China-based solar industry giant Suntech Power has knocked First Solar from the first position. While Suntech Power has yet to announce its exact sales numbers for 2010, it likely shipped around 1.5 GW of PV modules in 2010. [4]

The increasing focus by countries on renewable sources of power in the last few years has made the solar industry highly competitive with companies differentiating themselves largely on module manufacturing costs and module efficiency. Companies like Suntech Power which focus on lower costs with better module efficiency are a definite threat to First Solar and can significantly reduce First Solar’s sales in the near future.

As you can see by dragging the trend-line in the graph above, if the sales for First Solar to customers outside the U.S. and Germany reduces from the estimated 5 GW in 2017 to 4.5 GW, it potentially loses 10% of its value.

It looks like First Solar really needs to gear up and meet its competition head-on before it gets too late.

See our full estimates for First Solar.

Notes:
  1. Fourth Quarter and Year-end 2010 Financial Results, First Solar Investor News, Feb 24 2011 [↩]
  2. Sun to shine on First Solar’s green plant, Vietnam Business News, Feb 22 2011 [↩]
  3. Top 10: Ten Largest Solar PV Companies, RenewableEnergyWorld.com, June 29 2010 [↩]
  4. Suntech Announces Full Year 2010 Outlook, Suntech Investor News, Dec 6 2010 [↩]