First Solar's Path to Dominance: Assessing TAM, Technology, and Scalability

The US solar market is expanding rapidly, creating a massive opportunity for domestic manufacturers. The industry installed 11.7 gigawatts-direct current (GWdc) of capacity in the third quarter of 2025, a 20% year-over-year jump, and is on track for a total of 246 GWdc through 2030. This growth is driven by a surge in utility-scale projects and a developing manufacturing base, with the US now boasting 60.1 GW of solar module manufacturing capacity. Yet, a key constraint remains: domestic production still lags behind demand, creating a clear gap for companies that can scale quickly.

First Solar is positioned at the center of this dynamic. The company is the only US-headquartered company among the world's ten largest solar manufacturers that does not manufacture in China. This strategic distinction is becoming a critical advantage as US policy and supply chain security concerns favor domestic production. With a global annual nameplate manufacturing capacity of over 21 gigawatts (GW) targeted by 2026, First Solar is building the scale needed to capture a significant share of this growing market.

Its competitive edge is further fortified by its proprietary Cadmium Telluride (CdTe) technology. This thin-film approach offers a superior environmental profile, a key selling point in a sustainability-focused industry. First Solar's modules have a life cycle carbon footprint up to 2.5x lower and a water footprint up to 3x lower than conventional silicon panels. This efficiency extends to production, requiring only 1-2% of the semiconductor material needed for traditional panels. For a growth investor, this translates to a scalable, lower-cost manufacturing process with a smaller environmental footprint, aligning perfectly with both regulatory trends and long-term market demand.

Scalability: Capacity Expansion vs. Demand Growth

First Solar is betting heavily on its ability to outpace demand through aggressive capacity expansion. The company has set ambitious targets: 14 GW of domestic production capacity in 2026 and 17.7 GW in 2027. This plan is being executed with remarkable speed, as evidenced by the recent inauguration of its new Louisiana facility, which is expected to add 3.5 GW of annual nameplate capacity and is already operating ahead of schedule. The company's strategy is clear: build scale now to capture market share as US policy and supply chain dynamics favor domestic production.

The demand backdrop is undeniably strong. The US solar industry installed 11.7 gigawatts direct current (GWdc) of capacity in Q3 2025, a 20% year-over-year jump, and is on track for a total of 246 GWdc through 2030. This growth is being driven by a surge in utility-scale projects, which installed 9.7 GWdc in the third quarter alone. First Solar's own order book reflects this momentum, with a 54.5 GW bookings backlog that provides strong visibility into near-term demand. This visibility is a critical asset for a growth investor, signaling that the company's capacity build-out is likely to be absorbed.

Yet, a key tension exists between manufacturing capacity and actual production relative to domestic demand. While the US has added significant manufacturing capability-60.1 GW of solar module manufacturing capacity as of Q3 2025-the actual production of these facilities still remains below domestic demand. This gap is a major bottleneck. Equipment constraints, for instance, are already holding back installation growth, as seen in the quarter's residential segment decline. First Solar's plan to scale to 17.7 GW by 2027 aims to close this gap, but it must do so while navigating a complex landscape of policy uncertainty and a lagging supply chain.

The company is also preparing for technological competition. First Solar has launched a lawsuit against JinkoSolar for alleged infringement of a TOPCon patent and signed a licensing deal with US cell maker Talon PV. This move into TOPCon, a dominant Chinese technology, is a strategic hedge. It shows the company is not resting on its CdTe laurels but actively investing in the next generation of photovoltaics to maintain its competitive edge as the market evolves.

The bottom line for scalability is one of execution risk versus opportunity. First Solar's capacity targets are aggressive and well-funded, with a clear path to over 17 GW of domestic production. Its demand visibility is solid, backed by a large backlog and a booming market. The primary hurdle is not a lack of demand, but the industry-wide challenge of converting new manufacturing capacity into actual, shipped product fast enough to meet surging deployment rates. If First Solar can successfully ramp its new facilities and navigate supply chain constraints, it is positioned to become the dominant US solar manufacturer.

Technological Leadership and Competitive Moats

First Solar's strategy for maintaining its competitive edge is a dual-pronged approach: fiercely defending its core technology while simultaneously investing in the next generation. This balance is critical for a growth investor, as it addresses both the durability of today's moat and the company's ability to adapt tomorrow's market.

On one front, the company is using intellectual property as a shield. First Solar has launched a lawsuit against JinkoSolar for alleged infringement of a TOPCon patent it acquired in 2013. This move, following investigations into other major Chinese manufacturers, is a clear signal that the company is not willing to cede ground in the dominant photovoltaic technology. The lawsuit underscores a broader trend of rising patent disputes, driven by a competitive pricing environment and the maturation of TOPCon. By asserting its IP rights, First Solar aims to protect its CdTe business and potentially generate licensing revenue, reinforcing its position as a technology leader.

On the other front, it is preparing for the future. In a strategic pivot, First Solar has signed a TOPCon licensing agreement with US cell maker Talon PV. This deal, announced on the same day as the Jinko lawsuit, is a hedge against technological disruption. It provides First Solar with a foothold in the dominant Chinese technology, ensuring it can access or supply TOPCon cells as the market evolves. This dual strategy-defending its CdTe portfolio while securing a path into TOPCon-demonstrates a proactive management team focused on long-term relevance, not just short-term dominance.

A major capital investment bolsters this technological playbook. The company plans to invest approximately US$300 million in a new 3.7 GW US manufacturing facility, with production forecast to begin at the end of 2026. This project is not just about scale; it is a direct play to improve the economics of its core business. By onshoring the finishing of its Series 6 modules, the plant is designed to improve the gross margin profile of sales by reducing tariff charges and logistics costs associated with importing finished goods. This targeted investment aims to make domestic production more profitable, directly enhancing the company's financial scalability.

The timing of this build-out is crucial, aligning with an expected policy catalyst. The Department of the Treasury is looking at a January release of guidance for the foreign-entity-of-concern (FEOC) rules tied to clean energy tax credits. Industry analysis suggests this guidance is likely to be taxpayer-friendly rather than punitive, which would benefit domestic manufacturers like First Solar. The company's new facility is explicitly forecast to be fully compliant with forthcoming FEOC guidance, positioning it to capture the Section 45X manufacturing tax credits. This policy tailwind, combined with the strategic investment, creates a powerful setup for margin expansion and market share gain.

The bottom line is that First Solar is building a multi-layered moat. It defends its unique CdTe technology through litigation, secures its future through a strategic licensing deal, and simultaneously invests in domestic manufacturing to improve economics and align with favorable policy. For a growth investor, this integrated approach-combining technological, financial, and regulatory advantages-strengthens the case for its long-term dominance.

Catalysts, Risks, and Forward-Looking Metrics

The growth thesis for First Solar now hinges on a handful of near-term catalysts and execution milestones. For a growth investor, the focus shifts from broad market tailwinds to specific, measurable events that will confirm the company's ability to convert its strategic advantages into scalable revenue and profits.

The most immediate catalyst is the January release of guidance for the foreign-entity-of-concern (FEOC) rules. Industry analysis suggests this guidance will be "taxpayer-friendly," which is a major positive for First Solar. The company's new Louisiana facility, which began production ahead of schedule, is explicitly designed to be fully compliant with this forthcoming guidance. The key metric to watch is whether this regulatory clarity translates into a meaningful cost advantage. If the guidance allows First Solar to capture the Section 45X manufacturing tax credits without onerous supply chain vetting, it could significantly improve the economics of its domestic production versus imported alternatives. The risk is that the final rules, while not punitive, may still impose administrative burdens or narrow eligibility, diluting the expected benefit.

Execution on capacity ramp-up is the next critical test. The company has set a clear target: 14 GW of domestic production capacity in 2026 and 17.7 GW in 2027. The inauguration of its new Louisiana facility, which is already operating ahead of schedule, is a strong early signal. The forward-looking metric here is not just nameplate capacity, but actual production output and the speed of ramp. Any delays or underutilization at this new plant, or at the planned South Carolina facility, would challenge the scalability narrative. The Jefferies downgrade highlights this risk, noting that underutilisation at overseas facilities is a concern, and the planned relocation of 3.7 GW of Southeast Asia capacity could introduce non-cash charges. The company must demonstrate it can efficiently fill its new US factories.

Finally, the business model's scalability must be validated by the quality of future demand. The current 54.5 GW bookings backlog provides visibility, but the forward-looking metric is the trend in mid- to late-stage bookings. After a difficult 2025 that saw guidance cuts and de-bookings, the market needs to see a return to higher revenue growth rates in upcoming quarters. This would signal that the company's capacity build-out is being met with robust, long-term demand. The Jefferies analysis points to a risk of weakening booking visibility, so any improvement in this area would be a key positive signal for the growth thesis.

The bottom line is that First Solar's path to dominance now requires flawless execution on three fronts: navigating the January FEOC guidance to secure a cost advantage, rapidly ramping its new US manufacturing facilities to meet its ambitious targets, and converting its large backlog into sustained, high-growth revenue. These are the specific events and metrics that will determine whether the company's growth story accelerates or stalls.