The U.S. International Trade Commission (ITC) launched a full-fledged investigation into a number of Chinese firms accused of benefiting unfairly from government subsidies, which could be a boon for American thin film manufacturer First Solar (NASDAQ:FSLR). First Solar could benefit better module pricing in the U.S. market should tariffs be imposed on Chinese competition. The PV industry has been hit by falling prices and vanishing margins over the past year as manufacturers have been forced to compete on pricing. To date three American solar firms have filed for bankruptcy after being unable to compete with low cost Chinese manufacturers such as Suntech power (NYSE:STP). First Solar, however, enjoys a significant cost advantage because of its thin cell technology that eliminates the use of Polysilicon, the principal raw material used in conventional crystalline cells.
We have a $111 price estimate for First Solar, which is more than double its current market price.
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Price rise seen?
The U.S. has become one of the most important solar markets as lower subsidies in Europe have pushed module manufacturers to penetrate new markets. Falling prices and subsidies from states like California and New Jersey have helped the American market expand rapidly over the last 2 years. The ITC could put in place remedial measures in the form on duties on Chinese imports which would likely increase the price of solar modules in the U.S. First Solar has stayed away from the petition to impose tariffs on Chinese players that was championed by German player SolarWorld and 6 other U.S. solar companies. The petition calls for 100% tariffs on imports from China to counter the subsidies provided by the Chinese government.
Analysts expect module prices to rise by 10% should the tariffs be put in place. This would boost First Solar’s revenues and margins, helping the company become more competitive as well as profitable. Notes: