IW 50 -- First Solar Puts Heat on Competitors

IW 50 -- First Solar Puts Heat on Competitors

Manufacturer of thin-film solar modules takes command of solar-panel supply chain.

The renewables industry still lurks in the shadows of big oil and gas companies when it comes to energy production. But thin-film solar-module producer First Solar Inc. is among a handful of alternative-energy manufacturers that have established themselves as major players in the industry.

The company based in Tempe, Ariz., continues to grow in an increasingly competitive industry that is expected to slow as European nations cut government-backed incentive programs. The company's revenue grew to $2.07 billion in 2009, a 66% gain over the previous year. Profit rose 84% during that period to $640 million.

First Solar has expanded in recent years by extending its capabilities to power-plant development. Most recently, the company purchased NextLight Renewable Power LLC, a San Francisco-based developer of utility-scale solar-power projects. The deal completed on July 12 for $297 million is the latest in a string of acquisitions aimed at ramping up growth. The company acquired projects from Edison Mission Group in January and OptiSolar in 2009 and purchased Turner Renewable Energy in 2007. "In recent years what we discovered was limiting our ability to grow was finding viable and sustainable off-takes of our product," says Bruce Sohn, First Solar's president. "There were certain places that were good and strong markets, but if we wanted to grow as rapidly as we thought was appropriate we needed to find larger sources of customer base that could take large volumes of our product."

The expansion efforts come at a critical time for First Solar as Germany, the company's largest market, cuts incentives for renewable-energy usage and pricing pressures increase. The company reported that its second-quarter profit dropped to $159 million, or $1.84 a share, from $180.6 million, or $2.11 a share, during the year-earlier period. The company attributed the declining profits to lower module selling prices and higher operating expenses.

First Solar continues to grow globally, including an expansion at its U.S. manufacturing base in Perrysburg, Ohio. The company added a fourth line in 2009 and has grown its headcount over the past three years from 300 to 1,000.
In addition, First Solar expects Germany's cuts to subsidies (called feed-in tariffs) to slow growth in 2011. But Sohn says he's confident the company's thin-film technology and strong relationship with other European nations, such as Italy, Spain and France, will lead to more opportunities for First Solar. "I think our unique technology has actually redefined the solar industry and established a new trajectory toward low cost and high performance, and that keeps others out there chasing after the ability to get comparable yields and comparable price points," he says.

Thin-film cadmium telluride semiconductor materials convert sunlight to electricity more efficiently than traditional crystalline silicon at about half the cost, though crystalline prices are expected to drop in 2010, according to market research firm iSuppli. The market for thin-film technologies is expected to double by 2013, iSuppli reports. First Solar would not confirm a Reuters report that it is testing the use of a thin-film technology called copper indium gallium diselenide, or CIGS, that would lead to even lower production costs.

"That doesn't mean we don't evaluate and consider other technologies, so in a general sense we are looking for solar technologies that have a particular set of characteristics that will be very important," Sohn says. Even so, says Sohn, currently technologies that would replicate the performance of cadmium telluride "are somewhat elusive."

IndustryWeek selects the IW 50 Best Manufacturing Companies each year based on a formula applied to the IW U.S. 500 list of the largest publicly held manufacturers in the country. To view all IW 50 manufacturers and associated content, visit www.industryweek.com/iw50best-2010.

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