First Solar’s Q3 business was impacted by a drop in shipment volume and product warranty reserve charge
It claims that the Chinese dumping in the Indian market is creating an artificially-low and challenged ASP environment
The company has lowered annual guidance for shipments and net sales
The management is confident of its TOPCon patent claims and says it has started sending letters to defaulting companies
US thin-film solar module manufacturer First Solar has offered a downward revision of its FY 2024 guidance after its Q3 2024 shipments declined. The decrease in volume sold and a product warranty reserve charge pulled down its net sales for the reporting quarter to $888 million from $1.01 billion in the previous quarter (see First Solar Reports $1.0 Billion Net Sales For Q2 2024; FY 2024 Guidance Unchanged).
The same was offset by termination payments from certain customers in the US and India, it added. The product warranty charge of $50 million is attributed to manufacturing issues for Series 7, which have since been addressed.
Net income narrowed to $313 million, down from $349 million in the previous quarter, but up from $268 million in Q3 2023.
The same trend followed for operating income with $322 million reported, down from $373 million last quarter and $273 million in Q3 2023.
During the reporting quarter, First Solar produced 2.3 GW of Series 6 and 1.5 GW of Series 7 modules. It, however, sold 12% less, but there was a higher mix of modules sold from its US factories. Thanks to this, First Solar secured $264 million of Section 45X tax credits during the period.
Chinese challenge in India
While First Solar’s position remains solid in the US, Chinese dumping is making the management concerned about an ‘artificially low and challenged ASP environment’ for domestic sales in India. For the Indian market, its ASP is close to $0.19/W.
To deal with this, Bradley said, “With such artificially depressed ASPs in the India market, we see the updated safe harbor guidance, the IRA domestic content bonus released in May 2024, providing us with an opportunity to shift India production from fixed tilt to tracker product and ship a portion of our future Indian manufactured product into the U.S. market at higher ASPs.”
Bookings
As of December 31, 2023, First Solar’s contracted backlog totaled 78.3 GW representing an aggregate value of $23.3 billion, with 3.5 GW of YTD net bookings as of September 30, 2024. Through the end of September this year, it recognized 9 GW of sold volume.
As of Q3 2024-end, its total booking opportunities totaled 81.4 GW, with a lion’s share of 74.2 GW in North America and 5.4 GW in India. Of these, mid-to-late-stage opportunities add up to 23.5 GW.
A contract termination with Plug Power pulled down its total backlog to 72.8 GW, representing $21.7 billion in value with an ASP of around $0.298/W. It has now filed a complaint against Plug Power, and commenced arbitration proceedings against 1 Indian customer while planning to initiate similar proceedings against another Indian company to enforce full termination payment rights on the contracts.
Jeff Osborne of TD Cowen remarked, “On the macro side, the management team did note they are seeing more frequent and longer duration pushout requests which we see as a potential concern for other utility scale exposed equities as it may lead to softer guidance for 4Q and/or more muted commentary around 2025 growth prospects, at least in the first half.”
Guidance
Due to the above-mentioned factors, First Solar has lowered its annual guidance for 2024, bringing down the shipments from the previously guided 15.6 GW to 16.3 GW to now between 14.2 GW and 14.6 GW. Net sales are now forecast to be $4.10 billion and $4.25 billion, down from $4.4 billion to $4.6 billion.
Operating income is now aimed to be between $1.48 billion and $1.54 billion, while gross margin is anticipated to be within $1.95 billion to $2.00 billion.
By Q4 2024, it plans to launch the CuRe lead line and the perovskite development line. Between Q4 2024 and Q1 2025, it may produce under 500 MW of this product. After field and performance testing, it will launch CuRe towards the end of 2025. First Solar is positioning CuRe as the world’s ‘most technologically advanced’ thin film solar module with the ‘lowest’ warranted degradation rate of 0.2% annually (see First Solar: ‘Lowest’ Degradation Rate For New Modules).
“As we approach the end of 2024, we remain pleased with the progress made across our business, navigating against a backdrop of industry volatility and political uncertainty, with a continued focus on balancing growth, profitability, and liquidity,” stated CEO Mark Widmar. “We expect that our disciplined, long-term approach will allow us to work through the outcomes of the upcoming US elections as well as the continued volatility across the solar manufacturing industry.”
TOPCon Patent
During the call with analysts, First Solar said it has sent letters to JA Solar, Canadian Solar, LONGi, Trinasolar and JinkoSolar for infringing on its TOPCon patents. For the unversed, in July this year, First Solar claimed ownership of TOPCon solar cells through its acquisition of TetraSun in 2013 and launched an investigation of several crystalline silicon solar manufacturers for potential infringement without naming them (see First Solar Initiates Infringement Investigation).
Widmar shared that his company recently secured a victory in China where the Patent Reexamination and Invalidation Department, or PRID, of the China National Intellectual Property Administration, the patent office in China, upheld the validity of all 17 claims of its Chinese TOPCon patents against a number of asserted prior art references.
He cautioned developers, project owners and power purchase agreement (PPA) off-takers as well as debt and tax equity financing parties to take into consideration the intellectual property (IP) concerns while procuring modules for their projects. New names are being added to the list of late (see TOPCon Patent War Heating Up: Trinasolar & Canadian Solar New Additions).
“Our TOPCon portfolio includes patents and patent applications in the United States, Australia, Canada, China, Europe, Hong Kong, Japan, Mexico, Malaysia, Singapore, South Korea, Vietnam, and United Arab Emirates, with patent terms extending to 2030. Note regarding the India market, although First Solar does not possess a TOPCon patent in India, several jurisdictions where we do have patents are sourcing India-bound cell manufacturing and exports,” added Widmar.
Philip Shen of ROTH MKM believes First Solar has the potential to drive value ‘as more competitors realize how strong of a position the company has.’
.png?w=50&fm=png){kind=logo}