First Solar’s New CEO Details Plan to Challenge Chinese Rivals

(Bloomberg) -- First Solar Inc. may reopen a factory to speed up delivery of photovoltaic panels that could be a disruptive weapon against Chinese competition, the company’s new chief executive officer said in his first media interview. 

Mark Widmar, who took over in July after five years as chief financial officer, said he’s focused on squeezing costs out of the manufacturing process instead of expanding factories. That’s a contrast with rivals led by JinkoSolar Holding Co. and Trina Solar Ltd., which are driving an 18 percent increase in global solar production this year.

Widmar is preparing to introduce the next generation Series 5 and Series 6 panels, which he says will deliver more power at a lower cost than the competition. That will help the biggest U.S. panel producer weather a global plunge in prices that may accelerate as more capacity comes online. One of First Solar’s mothballed factories, in Vietnam and Germany, may be reopened to bring the new products to market as early as 2018.

“If we’re able to leverage one of those locations, then that accelerates that timeline,” Widmar said at an interview Wednesday at the Solar Power International conference in Las Vegas. “This is a truly disruptive product.”

First Solar’s New CEO Details Plan to Challenge Chinese Rivals

Panel prices have sunk 24 percent this year to an average of 42 cents a watt. That’s approaching the 40-cent level that analysts have estimated as First Solar’s current manufacturing cost. Improvements in efficiency, as well as new, larger panels, may push costs to as low as 25 cents in the next three years, according to Ben Kallo, an analyst at Robert W. Baird & Co. Trina, the Chinese manufacturer with the most shipments last year, reported a cost of 45 cents a watt in the second quarter.

First Solar’s costs are “low enough to be competitive with anything, as long as people act rationally,” said Kallo, who counts the company as his top solar pick. “They’ve got the best balance sheet in the industry, so they can get by even if some producers sell below their cash costs.”

Concentrating on efficiency is necessary in part because First Solar faces lower demand for the large-scale utility projects in the U.S. that have traditionally underpinned its sales.

“It feels like a repeat of the past and that the industry hasn’t learned from its mistakes,” Widmar said. “Being capacity constrained is actually a good place for us. We’re going to be a 3-gigawatt production company for some time, capture the highest value, and then move quickly as we can to pull forward series 6.”

The company is moving to transition to the new products as quickly as it can.

“We’re trying to pull it forward as much as possible,” he said. “We’ll probably see a little more production in 2017 than we initially expected. A significant portion of the first half will be series 4, but we’ll ramp up quickly by the end of the year.”

Cost Advantage

Until then, First Solar will maintain its advantage over the polysilicon panels that dominate the industry, with better performance in high temperature and high humidity markets like the U.S. Southeast and India, said Jeffrey Osborne, an analyst at Cowen & Co. The newest modules will help First Solar gain traction beyond that.

“The plan is to push as fast as possible on Series 6, which should have a cost below what the Chinese can do,” Osborn said.