Deal With General Electric Is First Solar's Meat Or Poison

| About: First Solar, (FSLR)

General Electric (NYSE:GE) and First Solar (NASDAQ:FSLR) recently announced solar technology and commercial partnership which, I think, is mixed information for stakeholders of FSLR. As reported, FSLR has acquired GE's global cadmium telluride (CdTe) solar intellectual property portfolio by granting 1.75 million shares of First Solar common stock, which GE agreed to retain for at least three years. Commercial cooperation of FSLR's module and GE's inverter is also part of this partnership. GE's solar inverter business just started not long ago and is in the early stage of business development . From my viewpoint, FSLR takes more risks in terms of technology development, commercial cooperation and the impact to its whole business.


The following is a part of description in the partnership announcement.

The combination of the two companies' complementary technologies and First Solar's existing manufacturing capabilities are expected to accelerate the development of cadmium telluride (CdTe) solar module performance and improve efficiency at manufacturing scale. In addition, GE Global Research and First Solar R&D will collaborate on future technology development to further advance CdTe solar technology.

It is hard to understand why FSLR invests redundantly in CdTe technology, which is less and less competitive in comparison with c-Si. FSLR has been a dominant provider of CdTe thin-film photovoltaic (PV) module with its proprietary manufacturing facilities. In April this year, FSLR announced to acquire TetraSun, which is a silicon-based PV technology startup, and I believe it is a strategic move of shifting into the c-Si segment detailed in my another article "First Solar's Last Bet." Only a few months later, FSLR bought in GE's CdTe asset, which wasput on hold one year ago by GE. GE uses a different CdTe technology from FSLR's and reaches a lab record of CdTe cell efficiency at 19.6% while FSLR is at 18.7%, a 5% less gap. FSLR claims that both manufacturing platforms are consistent, which is good for FSLR. But a clear FSLR efficiency road map that integrates GE's technology and manufacturing equipment upgrade is not available yet, which is still an uncertainty and risk to FSLR.

Commercial cooperation

In the agreement, FSLR will purchase GE's inverters for use in FSLR's global solar deployments. Meanwhile GE will procure FSLR's module to match its inverter or power conversion business, which is a novice trying to ramp up capacity in China. FSLR should not count on module volume shipment going with GE's inverters. On the contrary, GE may take advantage of FSLR's 8GW pipeline to quickly expand market shares. Of course, this collaboration is to assist FSLR in improving solar grid integration in technical terms, but it may not help FSLR too much from a business perspective, at least in near term. It is understandable FSLR lowered its 2013 guidance at the same time as the announcement of commercial cooperation with GE.

The impact to FSLR

First, FSLR turned a competition into an alliance, which strengthens its dominance of CdTe technology. It is critical for FSLR to quickly and economically integrate GE technology into an existing manufacturing platform and get commercial CdTe modules with high efficiency and low cost. This job, which is the main risk to FSLR, is not easy.

Secondly, the GE inverter is not suitable to TetraSun that is targeting distributed or constrained space application such as rooftops or tight commercial and industrial locations; GE's megawatt inverter only fits with central power plant market. So the partnership will have no positive long-term influence on TetraSun, which will be an important business portfolio of FSLR.

Lastly, as of the impact to FSLR's project pipeline, GE as a technology provider rather than a project developer, may not bring FSLR a sizable increment of the pipeline though a module purchase obligation is included in the agreement.


The partnership between GE and FSLR is not fairly symmetrical in that FSLR has more risks and less benefit. However, the agreement eliminates FSLR's potential competitor and strengthens its leadership in CdTe technology. Now FSLR has to invest in developing its own original CdTe, TetraSun c-Si portfolio and GE's CdTe technology integration. It seems that FSLR technology development is less focused and FSLR has to raise extra operating expenses to accommodate GE CdTe technology under a partnership that sees no substantial business created.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.