FIRST SOLAR, INC. IN 2013
By May 2013, First Solar was valued as a $4.3 billion company with a stock price of roughly $49 per share. While this valuation was superior to its historical low of $17 per share nearly a year earlier, it was a far cry from the company’s peak valuation in 2008 of $27 billion and $311 per share. In addition to a sagging stock price, the company’s gross margin was down to 27 percent; the company had replaced the vast majority of its executive staff, shuttered manufacturing operations in Germany, reduced output elsewhere, and laid off nearly 25 percent of its overall workforce. Just a few years earlier the company had been on an incredible growth trajectory and seemed poised to revolutionize worldwide power generation. What could have happened in so short a time to change First Solar’s direction so substantially? BACKGROUND
In 2010, First Solar had been the number one producer of photovoltaic (PV) cells and modules in the world, with nearly 13 percent share of the market. Its unique cadmium telluride (CdTe) thin film technology had achieved the lowest levelized cost of electricity (LCOE) in the industry, and was thus the preferred module choice for many developers of utility-grade solar installations. First Solar had managed to get its manufacturing costs below $1 per watt, setting a new standard for capital efficiency. However, by 2011, many other companies had entered the solar module industry, with the goal of taking share from the undisputed leader. Specifically, c-Si (crystal silicon) producers, such as Suntech, Yingli, and Trina from China, had begun to dramatically increase output as well as reduce their overall module costs. By 2013, Suntech had surpassed First Solar as the world’s number one module producer.
The Chinese firms had, in a very short time, dramatically changed the solar landscape. In 2001, China accounted for less than one percent of overall production. By 2012, it produced more than Morgan Hallmon (MBA ’10), Professor Robert Burgelman, and Lecturer Robert Siegel prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Copyright © 2013 by the Board of Trustees of the Leland Stanford Junior University. Publically available cases are distributed through Harvard Business Publishing at hbsp.harvard.edu and The Case Centre at thecasecentre.org, please contact them to order copies and request permission to reproduce materials. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic, mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business. Every effort has been made to respect copyright and to contact copyright holders as appropriate. If you are a copyright holder and have concerns, please contact the Case Writing Office at email@example.com or write to Case Writing Office, Stanford Graduate School of Business, Knight Management Center, 655 Knight Way, Stanford University, Stanford, CA 94305-5015.
- 181 -
First Solar, Inc. in 2013 SM-190B
half of the world’s solar cells and modules. The Chinese government had made leadership in PV solar a major priority, naming it a “strategic emerging industry that should be targeted for preferential treatment” in its twelfth Five Year Plan in 2011.1 To this end, China had enacted a number of subsidy programs to help the industry get off the ground. These included a virtually unlimited 20 RMB/W (renminbi per watt) capital subsidy for solar producers. In addition, the government approved the “Golden Sun” program, which reimbursed 50 percent of all capital spending on PV solar installations of 500 MW (megawatts) or greater. Furthermore, the program reimbursed 70 percent of capital spending for installations in regions...
Please join StudyMode to read the full document