First Solar, the Arizona-based world’s largest maker of solar cells, breaks into the difficult Chinese market with a $5-6-billion deal to build a two gigawatt plant and a stock analyst downgrades the company’s stock from “hold” to “sell” and halves the target price. Why? In the analyst’s words:
Even the best thin-film manufacturer in the world is not immune to the effects of over-capacity and the downward spiral that is occurring in solar module pricing … FSLR will remain the low-cost producer of a solar module over the next several years … There is widespread recognition that the polysilicon industry is moving into a period of overcapacity….
China — which was building one coal-fired power plant a week until recently — may have something to do with this overcapacity. Thanks to its lower costs and government subsidies, Chinese companies are rapidly growing market share and setting up plants in the U.S. to overcome protectionist policies. China’s Suntech is on track to surpass Germany’s Q-Cells and become the second-largest solar cell maker this year.
As capacity grows in the emerging economies, business models will be challenged leading to a different set of growth pangs for incumbent companies.
