General Electric Capitulation is a bad portend for First Solar

My last article on GE-FSLR collaboration raised many readers’ doubts about why I think this agreement will not be very fruitful. Hence here goes another article to further emphasize on my stance.

Cadmium Tellerium technology which has been made popular by First Solar (FSLR) is in imminent danger of being made
obsolete by the huge cost and technology leaps being made by the mainstream solar crystalline silicon technology. First Solar used to have a huge cost advantage over c-Si technology which allowed its solar panel segment to make gross margins of over 50% in 2008 even when its panel prices were substantially lower than c-Si panel prices. However, the massive expansion of silicon solar panel capacity has led to a sharp reduction in c-Si panel prices such that they have become cheaper than Cd-Te panel prices.

Read more about Thin film technology here.

Why did Silicon panel costs fall so much

The main reason has been the crash in polysilicon prices from $400/kg in 2008 to about $20/kg now. Processing costs of silicon to end panels has also reduced drastically. Though FSLR has also reduced costs of its Cd-Te panels, they have not been able to match the breathtaking cuts in silicon panel costs. Now a silicon panel can be made 10-15% cheaper than a FSLR panel. This places FSLR at a big disadvantage as panel efficiencies of thin film panels are at least 20-30% lower than silicon panel. Lower efficiency increase the overall solar system costs as it requires more BOS components

Thin Film Companies have been shutting down rapidly

Major thin film companies such as Miasole, Nanosolar, Solyndra have either shut down or sold for dirt cheap prices. Leading Cd-Te technology companies such as Abound Solar have also been forced to close bowing to market compulsions. Abound Solar was well funded through a massive DOE grant but could not survive. Now General Electric (GE) has also thrown down its arms. GE had boasted of building America’s biggest solar panel factory using technology acquired from a Cd-Te startup Prime Solar. The company had said its efficiency would be higher than FSLR and its costs would be lower.

GE had earlier announced that it was going slow in its expansion plans and now the company has given up by selling its technology to its arch rival FSLR and firing 50 workers. Again to any solar industry watcher, this was inevitable. I don’t foresee more than 5 thin film solar companies surviving this downturn and am not sure that First Solar will be able to keep up its thin film technology.

Read about thin film bankruptcies:

First Wave

Second Wave

Where does that leave First Solar

My bearish thesis on First Solar (FSLR) rests on the fact that the company will have to take massive write-downs as its Cd-Te factories are no longer competitive with silicon solar panels. The company has been able to survive because of generous DOE subsidies for its large solar panel farms. I don’t think that FSLR can sell a standalone solar panel outside its system business. Even after buying GE’s Cd-Te technology, First Solar has a tough road in keeping Cd-Te technology alive. At the end of the day, First Solar is one company while hundreds of silicon panel companies and their suppliers spend huge amounts on improving the silicon panel technology. Perhaps FSLR realizes this and has made a small investment into silicon solar panel technology.

I remain bearish on First Solar stock given the technology headwinds it faces with its thin film technology.