First Solar’s Runway to Far East

First Solar Inc. (FSLR) is spreading its wings in the Far East with a billion dollar investment for a thin-film solar panel plant. The company was granted an investment license for the project to be built in Vietnam’s Dong Nam Industrial Zone in Cu Chi District for producing thin film solar modules.

First Solar started work on the first phase of the project in January 2011. The plant is expected to be operational by the middle of 2011. During the first phase, the plant will operate four manufacturing lines capable of producing an annual total capacity of 238 MW. Work on the second phase will start in February 2013 and the whole facility is expected to be set up by 2015.

First Solar estimates the first phase of the Vietnamese facility along with its eight assembly lines in Malaysia, four lines in Germany and two lines in France, to nearly double its production capacity from the current annualized capacity of 1.4 GW to more than 2.7 GW in 2012.

Based in Phoenix, Arizona, First Solar designs, manufactures and sells solar electric power modules using a proprietary thin film semiconductor technology. The company’s solar modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity.

First Solar designs and manufactures solar modules using a proprietary thin-film-semiconductor technology, which allows it to reduce its average solar module manufacturing costs to one of the lowest in the world.

At the end of the first nine months of 2010, First Solar’s average manufacturing cost amounted to $0.77 per watt; this is significantly lower than those of traditional crystalline silicon solar module manufacturers. However, the advantage is dwindling fast with falling polysilicon prices.

First Solar will benefit from the steady recovery in the economy as well as favorable legislations supporting PV installations. The company is focused on capacity build-outs, technological enhancements and cost minimization. The technological superiority that it enjoys over its silicon-based solar peers is quite commendable.

However, its short-term growth may be partially hampered by the volatile euro, apprehension over reduction in German subsidies, falling crystalline silicon prices and the overproduction of modules.

Also competition in the industry is becoming tougher by the day for U.S. solar players such as First Solar, which has a huge German exposure in their top line compared to Suntech Power Holdings Company Ltd. (STP), SunPower Corporation (SPWRA) and ReneSola Ltd. (SOL) whose markets are more diversified.

We currently have a market ‘Neutral’ recommendation on the Zacks #3 Rank (Hold) First Solar stock.

FIRST SOLAR INC (FSLR): Free Stock Analysis Report

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