Why First Solar Is Doubling Down On U.S. Manufacturing

by Trefis Team
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First Solar (NASDAQ:FSLR) published its Q1 2018 results on Thursday, beating market expectations on revenues and earnings, driven by solar project sales in markets including India, Japan, and the U.S. First Solar has been seeing strong demand for its Series 6 modules, for which it recently started commercial shipments. The company also continues to witness tailwinds from the imposition of import duties on silicon-based panels and cells, to which its Cd-Te based products are not subject. Year to date, the company booked a total of 3.3 GW of capacity, with its shipment backlog standing at about 10.6 GW (including both systems and third-party module). Considering the strong bookings and demand for the new Series 6 panels, the company announced that it would be building a new module manufacturing facility with 1.2 gigawatts of capacity next to its current manufacturing operations in Ohio. This would help the company increase its planned U.S. Series 6 capacity to 1.8 GW with its total planned Series 6 capacity standing at 6.6 GW.

We have created an interactive dashboard analysis showing our expectations for First Solar over 2018. You can modify the key drivers to arrive at your own forecasts and valuation for the company.

While First Solar has typically done a bulk of its manufacturing in Asia, there appear to be multiple advantages in moving capacity towards the U.S. in the current environment. Firstly, the recent overhaul of the U.S. tax code has boosted the economic rationale for producing in the country. Moreover, labor accounts for a smaller portion of the manufacturing costs of the new Series 6 modules, reducing the effective cost savings of manufacturing in countries such as Malaysia or Vietnam. Additionally, a bulk of First Solar’s demand continues to come from North America, meaning that it could cut logistics costs by producing in the U.S. Close to three-quarters of the company’s potential booking opportunities come from the North American market.

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