FSLR Plans to Launch a Super Large And Cheap Solar Panel

Western solar manufacturers face an existential crisis almost every few years, as the Chiense solar industry ramps up capacity at an exponential phase leading to an unexpectedly massive decrease in solar panel costs. The last downturn in 2012 had weeded out most of the western solar manufacturers and even some of the larger Chinese ones. The recent downturn where solar panel prices have fallen by almost 25% in the last couple of months, has forced the western solar company executives to revamp their entire strategy on how to survive.

Also read Large Chinese Solar Manufacturers Make High Margins And Revenues Even As The Other Companies Faces Existential Crisis

The current solar downturn is not expected to end before 2017 and some companies are already facing losses. Sunpower (NASDAQ:SPWR) has already decided to close a number of manufacturing lines and its stock price has plummeted. First Solar (NASDAQ:FSLR) which is the most valued solar company in the world with a very differentiated technology, is also facing the pressure from lower prices. Despite lowering costs and improving technology rapidly, the company is finding it hard to maintain decent margins at the currently low prices of 40 cents/watt.

The management has completely revamped its strategy for technology improvement and has decided to make a radical overhaul. The company’s next planned product Series 5 is getting mothballed now. The company will jump over to the Series 6 solar panel from its current Series 4 product.  This will cause some short term pain as the company will not produce solar panels in the expected quantity, resulting in lower production and sales in 2017.

The company is also shutting down some manufacturing lines in USA, as it does not think that it can retrofit the factories to use Series 6 equipment. On the positive side, the company is confident that it will come out with a 425 watt solar panel at 40% lower costs by 2017 end, after accelerating its roadmp. This will make the company again competitive, if not cheaper than the lowest Chinese solar panel costs. While First Solar end electricity prices are already competitive in the USA, by 2018-2019, First Solar will have a huge market at these prices even if it does lose out to the Chinese manufacturing juggernaut.

First Solar has been the one company that has managed to maintain high profitability and margins both in up and down cycles. Though the company’s plans have been upended numerous times by the Chinese manufacturers, it has come out stronger every time. Its panel efficiency improvements in the last couple of years has improved at 250% the standard industry improvement rates.