First Solar's 2024 results show a 27% year-over-year (y-o-y) increase in net sales, reaching $4.2 billion, boosted by higher module volume and $115 million in termination payments. Gross profit margins expanded by 5 percentage points y-o-y to 44.2%, significantly influenced by IRA 45X credits and termination revenues.
The company has initiated production at a new facility in Alabama, enhancing its total nameplate capacity to 21 GW, with a target of reaching 25 GW by 2026. First Solar monetized $857 million worth of 45X tax credits, securing $819 million in cash from Visa. However, manufacturing challenges with certain Series 7 modules are projected to result in potential costs ranging from $56 million to $100 million. Additionally, Series 6 module production in Malaysia and Vietnam is expected to decline by 1 GW in 2025, driven by intense competition and adverse market conditions.
Below are key drivers of First Solar's value that present opportunities for upside or downside to the current Trefis price estimate for First Solar:
First Solar is engaged in the manufacture and sale of solar modules based on Cadmium-telluride (Cd-Te) thin-film semiconductor technology. In addition, the firm also designs, constructs, and sells photovoltaic (PV) solar power systems. The company operates in two main business segments: the components segment and the systems segment. The components segment is responsible for the design, manufacture, and sale of solar modules to solar project developers and system integrators. The systems segment provides PV solar power systems for commercial systems, which includes project development, engineering, procurement and construction (EPC), and operating and maintenance (O&M) services.
The Solar Module division is the primary source of value for the company for the following reasons:
First Solar's systems business is presently largely centered around the U.S. market. However, the company has a lot of opportunities overseas, particularly in markets like Latin America where electricity rates are high and consumption growth is much stronger than in the United States. Other growth markets include the Middle East, India, Asia Pacific, and China. The company has indicated that over half of its new systems booking opportunities (regarding system capacity) come from overseas.
First Solar's panel efficiency gains have been outpacing the broader industry over the past few years. The Cd-Te thin film technology that the company deploys has a higher theoretical upper limit for efficiency compared to silicon-based panels, and we see this as providing a competitive advantage over the long term. Higher efficiency panels help to reduce manufacturing costs, as they require fewer consumables and raw materials to produce each watt of capacity.
The global economic crisis had a profound impact on the solar industry. The rise in energy prices before the economic downturn led many solar manufacturers to increase capacity. This helped certain manufacturers as they benefited from economies of scale which in turn helped reduce prices. However, due to the credit contraction that occurred during the financial crisis, the installation of solar power systems declined significantly. The economic crisis impacted demand for everything ranging from polysilicon to rooftop panels. As a result, many smaller players with weak balance sheets have been struggling which has led to consolidation in the industry.
