What rabbit will First Solar pull out of the hat?


Update (2): First Solar is holding a conference call tomorrow (Wednesday, December 14, 8:00am EST) to provide financial guidance for 2012. As we noted recently, the CdTe thin-film leader is set to be the first of any major PV manufacturer to give guidance for next year, after what can only be described as a ‘challenging’ year for the whole industry.

With module prices set to continue to decline, though not at the same rate next year, the industry faces a multitude of issues so the call tomorrow could set the scene for much of the industry.

Moreover, there is a good chance First Solar could regain the industry’s number one spot again, having already guided 2011 revenue to be in the range of US$3.0 billion to US$3.3 billion.

The 2010 leader and nearest rival in the revenue stakes, Suntech has already guided 2011 revenue of between US$3.0-US$3.1 billion, adding to the interest in First Solar’s guidance call.

However, First Solar is facing a tough time competing with falling c-Si module prices and the collapse of polysilicon prices that have yet to fully permeate through to product production costs and therefore lower product prices.

Though having been cushioned by its massive multi-gigawatt project pipeline, financing problems have emerged once again, especially in Europe. FiT changes have also shifted markets in Europe towards rooftop and that hasn’t been one of First Solar’s strengths having lower module efficiency levels than either CIGS thin film technologies and conventional crystalline silicon offerings.

Though much of the current utility-scale business in US focused and First Solar leads the pack in that respect, China is ramping-up ground-mounted projects and that is a market the company wants to be a major player in but has yet to secure a foothold.

With 2012 industry dynamics difficult to gauge, other than perhaps it could be worse than this year has proved to be; one financial analyst believes First Solar will have to pull a rabbit out of its hat if the financial markets are going to react positively to guidance.

According to Jesse Pichel at Jeffries, First Solar may need two rabbits!

The financial analyst thinks that if First Solar announces the introduction of a high-efficiency CIGS thin-film module it would signify the company could better compete in the rooftop market going forward.

Though it’s the worst kept secret that First Solar has been developing CIGS technology the company has yet to make any public statement on the subject.

Should a CIGS module roadmap not be on the agenda tomorrow, Pichel is looking for an announcement about adding crystalline modules to its product portfolio, again to address the rooftop market.

Such is the concern for another challenging year, no rabbit from the hat and First Solar stock price will remain as depressed as the market.

We have less than 24 hours to find out. 

In perhaps what could be a rather ironic development, The Wall Street Journal broke news that Markus Beck, a senior member of First Solar’s R&D team and well known for his CIGS cell technology work in the earlier days of Solyndra has left the company. 
According to the WSJ report, other members of his team in the CIGS development centre in Santa Clara have also left the company. WSJ cited a ‘person familiar with the situation,’ as no official statement had been announced. 
The report suggests that First Solar was narrowing-down its R&D focus in the tough financial conditions. 
This development could mean that its CIGS development efforts are over and that the company could be shifting work to pilot line, though the suggestion in the WSJ report that CIGS R&D was being scaled down or closed completely is also a valid assumption. 
Update 2. 
During the 2012 guidance call, First Solar management were asked in the Q&A session with financial analysts about the validity of the WSJ story. Management noted in response that its R&D spending forecast would be reduced and that it would have been substantially higher otherwise. 
Management noted that if they hadn’t made changes to R&D efforts, then costs would have risen significantly. 
The impression given was that its CIGS development efforts to date did not give management confidence that it could compete effectively with other CIGS manufacturers such as Solar Frontier in Japan, which had higher module efficiencies and manufacturing scale to offer strong competition in the future when First Solar would be vulnerable to pricing pressure on ramping and improving yields and efficiencies. 
Overall, the conference call produced no rabbits from the hat. 


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