Dawn of a New Era? First Solar Uniquely Positioned
With incentives on the horizon, this solar cell manufacturing company has competitive advantages.
Asia has long dominated the manufacturing of solar modules, accounting for approximately 90% of production in 2020, as the industry sought low manufacturing costs. However, we see changes afoot and observe an increasing movement toward reshoring of solar manufacturing because of an increased focus on energy security. In the United States, recently passed manufacturing incentives as part of the Inflation Reduction Act of 2022 are set to unleash a dramatic buildout of solar manufacturing. We view First Solar (FSLR) as uniquely positioned to capitalize on this policy given its different technology, existing manufacturing presence, and multiyear forward contracts. We view shares as fairly valued following a 47% jump year to date.
Why We Favor First Solar
U.S. Tariffs on Imported Solar Modules Have Largely Proven Ineffective
As industry capacity migrated to Asia, domestic producers in the U.S. sought trade protection over the years against what they argue are unfair trade practices by China competition. Despite tariffs being enacted in 2018, the U.S. solar industry has continued to largely rely on imports as tariffs have largely proved ineffective. The tariffs’ goal of establishing domestic production has largely been unsuccessful, with module firms instead migrating cell and module production to nontariff countries within Southeast Asia.
Following repeated failed success with tariffs to spur domestic solar module manufacturing, industry participants shifted to lobbying for domestic manufacturing incentives. This was ultimately successful, as desired incentives were included as part of the Inflation Reduction Act of 2022.
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