First presentation

Technology & Strategy on

Presented by,

Miguel Van den Bogaert

Kannan Ramalingam

3/23/2011 1Technology & Strategy

Evolution of the solar industry

1883: Charles Fritts made scientificdiscovery of solar power

1954: Bell Labs

- Discovery of semiconductor waferdiodes generate voltage at lightexposure (space devices)

1980’s: silicon p-n junction solarcells

- By large semiconductor companies

- But: small-scale & low-powerconsumer device (calculators)

Large scale in the early 90’s:

1) Peak-load reduction

2) Reduce transmission &distribution losses


Solar energy today

2009: solar power = fastest-

growing energy technology

Demand is growing at an

average of 48%/year since

2002

Global energy demand is

around 15TW/year

Solar energy= 0.04% of the

world’s total energy

consumption

Worldwide driven by energy

prices & government

policies


Brief company’s history

Started as a glass company, created by HaroldMcMaster (physicist)

- 1948: founded Permaglass; shatters in small pieceswhen broken automotive industry

- 1984: Solar industry Glasstech Solar

( importance of cost competitiveness)

- 1990: Found Solar Cells (use of CdTe)

- very slow progress 1999: acquired by True NorthPartners and renamed First Solar (productioncapacity > 20MW)


First Solar: Today

World’s leading manufacturer of solar panels (13% of the market-share)

- Annual production capacity of solar modules > 1 GW

Convert sunlight into electricity at a lower cost (< $1 cost/W) than its competitors

Use of Cadmium Telluride (CdTe) Crystalline Silicon

Recently in the system segment business (setup & maintenance of solar panels)


Brief company overview

Type: Public (NASDAQ: FSLR) , share price: 150.75USD

Founded in 1999 (as First Solar Holdings, LLC)

Headquarters: Tempe, Arizona, U.S.

Key people:

- CEO :Robert J. Gillette

- Chairman of Supervisory Board: Michael J. Ahearn

- President Operations: Bruce Sohn

Revenue: US$ 2.56 Billion (FY 2010)

Operating income: US$ 748.9 Million (FY 2010)

Net income: US$ 664.2 Million (FY 2010)

Total assets: US$ 3,35 Billion (2009)

Total equity: US$ 2,65 Billion (2009)

Employees: 5,200 (2010)


Types and patterns of innovation

Product innovation:

- Industry still developing

Competence-enhancing vs competence-destroying

- Depending on a lot of factors (new technology disruption)

Architectural innovation

Eg: Derbisolar from Derbigum

Beginning of the S-curve

Early adopters


Sources of Innovation: Porter’s diamond

Factor conditions:

- Rise of interest in renewable energy

- Price of fossil fuel

- Inexhaustibility of the sun

- Rich subsidies

Related and supporting industries:

- Semiconductor business

- System-setup sector

Firm Strategy, structure and rivalry:

- Focus on single technology ( CdTe)

- Low manufacturing cost

- Solar industry relies on subsidies

Demand conditions:

- Developing countries


Value Chain

Solar panels= Technology push

Scientific discovery of solar power (in 1883 by

Fritts)

Invention of solar panels

Manufacturing (at. lowest

cost possible)

Marketing (subsidies)


Value Chain

Competitive advantage of First Solar

- Choice of CdTe

- Cost leader position

Defend position:

- No match with other energy sources (cost, performance)

- Industry still in its infancy many opportunities

Market instability: very fragmented

Unpredictability

- Survive major technology disruption

- Dependant on government regulations


Standard Wars No dominant player of the industry

- First Solar = leader, but only 13% market-share

Increasing returns:

- Learning-curve: Cost decreasing, performance increasing

- Network externalities: system integration/installation

- Path-dependency: Huge bet on CdTe First Solar= non-dominant leader


Standard Wars

Government regulation

- Connection to grid, certified installer of

solar power, allowance of installations

- Grants, financial assistance

- Targets: RPS: by 2020, 20% of electrical

power is coming from renewable sources


Market forces of First solar

Good Solar Resource to have High annual insulation

Favorable High electricity prices as they reduced the cost hurdle for substitution by PV

Large area needed in close proximity to maximize the amount of geneartion

Access to development land to support the buliding of solar facilities


Buyers

In 2009, 10-K: First Solar’s largest systems integration customers in Europe were responsible for more than 90 percent of its revenue

System integrators in Germany & Spain

In U.S. at the start, only Residential customers using net metering & ITCs

By 2010, Sempra, PG&E and Southern California Edison became largest customers


FIRST SOLAR’s mission

“ To Create enduring value by enabling a world powered by clean, affordable solar electricity”

SUSTAINABLITY Remark

“ The real thing to notice with renewable is not necessarily how they stack up against each other, but rather that they are all orders of magnitude better than the use of fossil fuels”


THREAT OF ENTRY & SUBSTITUTES FIRST SOLAR commands only 13 percent of the

market

Major competitors: Suntech, Sharp, Yingli and Qcells

Solundra and Nanosolar represents potential future threats if their technology could achieve commercial scale

Life Cycle Analysis(LCA) is being performed on c-Si, CdTe to evaluate the environmental modules

Krueger hopes that “One day it might be a critical consideration”


SOLAR INDUSTRY MARKET

SHARE

13%

7%

7%

7%

5%

5%4%4%4%

4%

40%

First Solar

Suntech

Sharp Electronics

Qcells

Yingli

JA Solar

SunPower

Kyocera

Motech

Gintech Energy

Others


ENTRY STRATEGY CATEGORIES

FIRST MOVERSGE (General Electric)

EARLY FOLLOWERSKodak

Monosolar

Matsushita and Ametek

LATE ENTRANTSSUnTech

Sharp

Qcells


TIMING OF ENTRY PATTERNS

Early CdTe cell were GE in 1960’s and then Kodak, Monosolar, Matsushita and AMETEK

But the First commercial success of Solar cell modules was achieved by Glasstech Solar(now named as First Solar)

From 2002 when their 7% of commercial products were available, till now First Solar continues as the leader by extending their production lines in many countries


FACTORS INFLUENCING FIRST

SOLAR ENTRY

In order to make CdTe a commercial product,

McMaster raised his funds to additional of $15

million during 1990.

Despite many challenges, the company was

able to produce a commercially viable process

for producing thin cells with CdTe by 1993.

By 1998, It had annual production of 20MW

and in 1999, True North Partners acquired it

and renamed as First Solar


TIMING OF ENTRY PATTERNS

First Solar had a substantial lead over its competitors in terms of module cost/watt.

But the entire industry was still in its infancy with many opportunities for competitors to usurp company’s lead

The huge success of First Solar in 2002 attracted not only the European market, but also companies like SUNTECH POWER, SHARP, YINGLI, QCELLS, JUWI SOLAR


CONCLUSION

Out of world’s average rate of 15TW electricity produced yearly, only 0.04% is from solar resource

Present crisis of Fossil Fuels can increase their price. So at one critical stage, there will be a need of renewable sources

Solar industry not yet viable without Government financial support

More Improved Infrastructure, More Isolated land resource, more grants from Government, expansion of market in Asian countries can ease a tremendous growth for First Solar in the Future


THANK YOU

&

QUERIES???Visit our blog on First Solar at:

http://innovtechnovision.blogspot.com/

3/23/2011 Technology & Strategy 23

http://innovtechnovision.blogspot.com/

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