First Solar India’s Disconnect: Big Factory, Small Home Footprint

First Solar, Inc., a US solar manufacturer, ventured into India manufacturing business with the intention of serving the domestic India market as it inaugurated a fully vertically integrated solar manufacturing plant in Tamil Nadu with a capacity of 3.3 GW. The firm also had the distinction of making it to India’s ALMM list as the only foreign manufacturer, besides making it to India’s PLI (Performance Linked Incentives) for PV manufacturing from the government. However, the initial optimism has given way to a degree of skepticism about its domestic performance and unmet objectives, with an air of uncertainty now clouding the company’s performance in the Indian market and its future. 

The facility, located in Sriperumbudur, Tamil Nadu, was designed to produce First Solar’s Series 7 photovoltaic (PV) solar modules, which were developed in the United States and optimized specifically for the Indian market. Yet, the majority of the produce is being fed to the US market.

The company’s management has repeatedly blamed the hurdles shaping their India business. From policy twists and price wars to supply chain hiccups, several recurring issues are being highlighted throughout First Solar’s experience in the Indian market so far. As it stands, the country’s operations still fall short of thriving domestically, relying instead on exports​. 

Weak Sales in India; Soaring Exports

First Solar recently announced financial results for the fourth quarter as its net sales soared by USD 0.6 billion from USD 1.5 billion, compared to the previous quarter. The increase was primarily a result of increased module sales in the fourth quarter. 

The majority of its sales are due to sales in the US, with Indian numbers still far less than expected. Of about 2.6 GW India production planned for 2024, over 1 GW was earmarked for the US. The latter half of the year saw this trend become more pronounced. As per company’s spokespersons during analyst calls, the trend will continue through 2025. 

This is intriguing considering that the primary focus of the Chennai plant should be the Indian market, as highlighted by the firm for its Series 7 modules as “Made in India, for India,” with exports to the US or elsewhere would only be secondary. However, in the Earnings Call of Q1 2024 the company’s CEO Mark Widmar highlighted that the firm was shipping a lot of product into the US from the India plant. This was right around the time the Chennai facility was brought into complete service. 

Cost Competitiveness: A Major Setback

The management of the company has been highlighting stiff competition from highly competitive Chinese panels as a major challenge for the firm’s performance in the Indian market. First Solar mentioned artificially low average selling prices (ASPs) as a direct impact of cheap Chinese cheap products.  

For First Solar, being the only foreign firm that is part of the ALMM list, this should have been a game changer. Yet, it hasn’t yet translated into robust sales. Moreover, the company remains pessimistic about the Indian sales citing issues in cost competitiveness and plans to export over two-third of its 2025 Indian factory produce to the US, where ASPs are more favorable, as per the high officials of the firm. 

Not All Indian Deals Reach Finish Line

Despite the not so good situation, First Solar has a different approach in the Indian market which also seemingly limits their sales in the short term. The firm requires Indian customers to provide guarantees or letters of credit to ensure they’ll pay for the modules. 

This ‘cautious’ stance means First Solar’s India backlog (firm orders) gets even smaller than the pipeline of interested demand. At the end of 2024, for example, First Solar had 2.3 GW of potential sales in India in its mid-to-late-stage pipeline, but a portion of that was on hold due to conditions precedent and was eventually removed due to the 1 GW of contract terminations. 

Regulatory Hurdles and Policy Twists in India

The uncertain policy landscape and regulatory surprises are also at play affecting First Solar’s supply chain and costs, the company notes. In late 2024, First Solar reported that India’s import regulations incurred an additional cost of about USD 5 million in Q4 to the company due to a new duty on cover glass, a crucial component of solar modules.

However, First Solar seems to be struggling alone, as the shrinkage or negative market conditions don’t seem to be affecting major manufacturers like TP Solar (Tata Power’s solar manufacturing arm), Reliance Industries, Waaree Energies, Vikram Solar, Gautam Solar, and Adani Solar are planning capacity expansions in the gigawatt range. 

Apparently, this debunks the alleged unfair competition from Chinese imports as the cause of First Solar’s weak performance. The Indian Government’s policy shifts are in fact encouraging local production, a  Rubix study states. 

While the support under the Production-Linked Incentive (PLI) scheme is further expected to enhance local production even more, India will still need to rely on imports for solar photovoltaic cells and wafers due to the limited domestic manufacturing capacity for cells and the absence of wafer production facilities. This where First Solar’s thin film PV modules using its proprietary Cadmium Telluride (CdTe) semiconductor, should have come in useful. The company’s eco-efficient module technology is unique among the world’s ten largest solar manufacturers for not using a crystalline silicon (c-Si) semiconductor and not manufacturing in China. That should have given it a significant advantage in a market struggling to meet DCR module demand. To expect even higher prices for these than prevalent now seems self serving, to say the least. 

India as an Export Hub: A Strategic Pivot With Limited Future?

In its recent earnings call, First Solar reported that it had adjusted its strategy by redirecting a large portion of its India production to other markets, especially the United States. The firm has attributed the challenges, such as  cost and logistic challenges, and unready Indian market as the main reasons for its export strategy. The benefits of US policies, however, are seemingly among the major reasons for this shift too.

Under new US rules from the Inflation Reduction Act’s domestic content guidelines, there was an opportunity to send Indian-made modules for use in the US projects with trackers, which could fetch higher prices and even qualify for certain bonuses. Basically, it became more profitable to ship India-made modules to the US than to sell them in India.  

This strategy avails several advantages for the company’s business. The US utility-scale solar market has a strong appetite for First Solar’s thin-film modules. Due to supply chain nuances, these panels qualify for certain US incentives even when manufactured abroad.

Notably, First Solar’s US order backlog extends to 2030, the firm claims, and with domestic production capacity sold out, Indian exports help bridge the supply gap. Moreover, the US buyers pay around 30 cents per watt, compared to less than 20 cents in India, thus further incentivizing exports.

As it stands, despite a 3 GW+ annual capacity of First Solar plant in India, the actual 2024 sales were modest – only about 0.6 GW went to Indian customers in the full year​. This indicates that the India market hasn’t yet become a big revenue driver for First Solar. The firm might have inadvertently created an export hub in India. The question is, will the model work in case of reciprocal tariffs from the Trump admin from April, considering India’s high duties and protections for its own domestic solar sector?