First Solar Navigates Tariff Crosswinds Amid Solar Sector Turbulence

The solar energy sector is at a crossroads, and First Solar (NASDAQ: FSLR) finds itself in the eye of a perfect storm of tariff-related headwinds. The company’s revised 2025 earnings guidance—dropping diluted EPS to $12.50–$17.50 from an earlier $17.00–$20.00—underscores the severity of these challenges. Yet, beneath the near-term pain lies a story of strategic resilience and long-term promise. Let’s dissect the risks and opportunities.

The Tariff Trap: Costs Rise, Margins Squeeze

First Solar’s revised outlook is a direct consequence of escalating tariff pressures and supply chain bottlenecks. Starting July 2025, reciprocal tariffs on imports of finished goods, raw materials like tellurium, and period costs (e.g., warehousing) could collectively drain $100–$375 million from revenue. These costs are already forcing operational shifts: production idling in Malaysia and Vietnam, and rising freight expenses for U.S. shipments from India.

The financial toll is stark. Cash reserves have nearly halved to $897 million by Q1 2025, while accounts receivable doubled to $1.61 billion, signaling liquidity strains. Meanwhile, capital expenditures are being slashed to $1.0–$1.5 billion, a retreat from earlier ambitions to fund growth. Investors must ask: Can First Solar weather these pressures without compromising its long-term vision?

Operational and Competitive Crosscurrents

Beyond tariffs, First Solar faces dual operational hurdles. Its Ohio factory, central to its 14 GW domestic capacity target, is grappling with ramp-up delays for its next-gen CuRe technology, reducing output and inflating costs. Simultaneously, Chinese competitors like JinkoSolar (JKS) are leveraging price cuts to dominate global markets, squeezing margins as module prices decline.

The company’s reliance on U.S. tax credits—$1.65–$1.7 billion in Section 45X funds under the Inflation Reduction Act—is another vulnerability. Delays or reductions in these subsidies could further depress operating income, especially as fixed costs per watt rise due to underutilized plants.

The Silver Lining: Backlog, Technology, and Reshoring Momentum

Despite the turbulence, First Solar’s position as America’s sole vertically integrated solar manufacturer offers critical advantages. Its 66.3 GW sales backlog (extending to 2030) and 81.0 GW pipeline—including 69.6 GW in Europe—provide demand stability. Its CdTe-based thin-film technology, with lower carbon emissions than silicon modules, aligns perfectly with U.S. clean energy goals.

Moreover, the Louisiana factory’s 2025 launch and IRA incentives position First Solar to capitalize on U.S. electricity demand growth (50% by 2050), which will increasingly rely on solar. The company’s domestic manufacturing focus also shields it from Chinese competition in key markets.

Risks and Reward: A Balancing Act

The near-term risks are acute. Tellurium shortages, tariff-driven delays, and potential policy shifts could derail progress. Cash flow is already stressed, with free cash flow turning negative and shares down 11.4% year-over-year. Yet, First Solar’s leadership remains bullish on execution:

• Cost Mitigation: By optimizing production schedules and lobbying for tariff exemptions, management aims to reduce tariff-related losses.
• Technological Pivot: Scaling CuRe technology to its Series 6 Plus and 7 TR1 modules could lower costs and boost output.
• Policy Advocacy: Leveraging its “America’s Solar Company” brand to secure IRA incentives and counter trade barriers.

Conclusion: A Test of Resilience, but With Solar Potential

First Solar’s 2025 guidance reflects a sector in flux, where policy, trade, and technology intersect. While the near-term path is fraught with liquidity strains and margin pressures, the company’s 66.3 GW backlog, CdTe technology edge, and IRA-backed reshoring momentum position it to thrive as the U.S. solar market matures.

Investors should weigh the risks—$95–$220 million in ramp costs, tellurium supply risks, and Chinese price competition—against the long-term tailwinds: $1.7 billion in tax credits, a 50% U.S. electricity demand rise, and First Solar’s unique domestic manufacturing moat.

The verdict? For those with a multi-year horizon, First Solar’s struggles may represent a buying opportunity in a sector critical to global decarbonization. The question is whether management can navigate the tariffs and inefficiencies without derailing its strategic moorings. The stakes, as the sun rises on solar’s next chapter, could not be higher.