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CdTe and crystalline manufacturer and project developer First Solar
announced positive results for Q1 as well as a switch in strategy
emphasis from deployment to module sales.
Honestly, revenues, positive net income and other financial metrics
matter less in this case than the company’s strategy switch to
module sales. Downward price pressure and margin compression along
with continued aggressive pricing from China makes this move
confusing. Cost leadership is mutable in the PV industry and it is
difficult to imagine that First Solar will have an advantage in this
regard for long.
First Solar has a history of abrupt strategy changes, typically with
successful results. In the mid to late 2000s, when demand in Europe
was at its peak, the company shut down module sales to the US and
other countries and focused on sales into Europe. As demand in
Europe slowed First Solar switched its strategy to projects, selling
almost all of its module product to its systems division. Now, with
continued margin compression, aggressive pricing and a seemingly
stable utility scale market in the US the company switches back to a
focus on module sales.
Lesson: Companies in all industries make decisions that lead
to head scratching moments for observers. When a company with a
strong and leading project business makes a dramatic strategic
switch observers should ask themselves what the company sees
happening to its project pipeline. Another equally important
question is what is happening to the company’s project margins.
Given traditional low bidding on PPAs and tenders, the answer may
be: Get out while you can.
Paula Mints is founder of SPV Market Research, a
classic solar market research practice focused on gathering data
through primary research and providing analyses of the global
solar industry. You can find her on Twitter @PaulaMints1
and read her blog here.
This article was originally published in the April 30 issue
a bimonthly executive report on the solar industry, and is
republished with permission.
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