The Solar Industry Shake-Up: First Solar And SunPower Rise To The Top

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Includes: FSLR, JASO, SPWR, STP, TSL, YGE
by: Kevin Quon

The American solar industry received some welcome news in the past few days. Ironically led by the German company SolarWorld AG, the anti-subsidy customs duty announced on May 15 by the U.S. Department of Commerce will be imposed on the import of Chinese solar power products.

According to Energy Trend, depending on the manufacturer or the exporter, the customs duties are expected to amount to between 2.9% and 4.7%. They will also be applied retroactively to products that had been imported in the last 90 days before the announcement.

However, the larger news item is the anti-dumping duties imposed on Thursday, May 17. The U.S. Department of Commerce issued anti-dumping duties of 31.14% on the imports of solar cells and panels from Suntech Power (NYSE:STP), 31.22% for Trina Solar (NYSE:TSL), and 31.18% on all other companies that had requested the study but not received individual duty determinations. All other Chinese producers, including those controlled by the Chinese government, would receive a 249.96% duty imposed on them. Clearly, the incentive is for those who had filed for the study.

The clear winners from this ruling in the investment world are American companies First Solar (NASDAQ:FSLR) and SunPower (NASDAQ:SPWR). On the other hand, the clear losers explicitly mentioned are Trina Solar and Suntech Power. However, with the larger duty being imposed on all Chinese producers who did not request a study with the US Government, the greater harm could fall onto companies like Yingli Green Energy (NYSE:YGE) and JA Solar (NASDAQ:JASO). It's uncertain whether these companies had indeed filed for the study.

Overall, the ramifications of these duties are far from clear as the Chinese government is sure to implement policies to counteract the effect. However, the known benefits to companies like First Solar and SunPower are immense. For First Solar in particular, which has struggled to compete in light of falling silicon prices and cheap Chinese manufacturing, the company gains a competitive advantage in regards to the domestic US market. Now cornered into the utility-scale sector as it improves on its efficiencies, First Solar should gain a helping hand when it comes to securing domestic projects. As it stands, there are few companies that are able to produce on the scale necessary for such large utility projects.

Disclosure: I am long FSLR.