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Strategies & Market Trends : Greater China Stocks
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From: Julius Wong11/3/2011 10:05:09 PM
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China Solar Boom Erodes Technology Edge Backed by U.S. Loans
By Christopher Martin and Ehren Goossens - Nov 3, 2011

China’s success in wresting control of the solar industry is erasing an advantage for U.S. suppliers led by First Solar Inc. (FSLR), which use a rival technology supported with $5.5 billion in government loan guarantees.

First Solar, the largest U.S. solar maker, for 12 years has tinkered with a process that sandwiches a film of toxic cadmium telluride between panes of glass to harness the sun’s power. The Chinese in contrast recently started manufacturing the polysilicon-based cells found in 90 percent of panels sold worldwide and are best known for powering the common calculator.

First Solar prospered as surging costs for polysilicon prevented the Chinese from dominating a global panel market worth $33 billion last year. The tables turned as Chinese manufacturers led by GCL-Poly Energy Holdings Ltd. (3800) and LDK Solar Co. ramped up production, pushing the cost of the raw material down 90 percent. That’s gutting margins across the industry and forcing First Solar to reduce prices.

“It seems likely to significantly pressure First Solar’s margins,” said Timothy Arcuri, an analyst at Citigroup Inc. in San Francisco. “Silicon manufacturers are struggling to remain solvent, and that’s causing inventory liquidation.”

First Solar, which ousted Chief Executive Officer Rob Gillette last week and cut its 2011 earnings forecast, plans to brief investors on its strategy at 4:30 p.m. in New York today. Ted Meyer, a company spokesman, declined to comment.

bloomberg.com
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