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First Solar, Inc. (FSLR), Sunedison Inc (SUNE): Clean Energy – To Play or Not to Play?

When several prominent solar companies soared in 2011, the stage was set for the entire clean-energy group to explode. Investing in sustainable energy seemed like an alluring way to make a profit: not only could investors contribute to creating a sustainable environment for the future, but they could gain potential returns on their investments in the meantime. It seemed as if it was only a matter of time before winners — those who could develop both cheap and sustainable sources of energy — would emerge.

First Solar, Inc. (NASDAQ:FSLR)

While not all clean energy companies profited as rapidly as many investors hoped, or even survived, several companies did indeed surface. The first was First Solar, Inc. (NASDAQ:FSLR), an Arizona-headquartered leading manufacturer of solar modules. The company provided an edge over its competition in that it had attained a manufacturing cost advantage by utilizing a proprietary method based on cadmium telluride (CdTe), a semiconductor material, whereas competitors in the market use silicon. This advantage allowed for First Solar, Inc. (NASDAQ:FSLR) to grow at a more rapid pace than its peers.

In addition, First Solar, Inc. (NASDAQ:FSLR) is a competitive clean-energy player on both qualitative and on a quantitative bases. Primarily, the emerging economies – which are driving an increasing demand for clean energy – display the most optimal environment for the CdTe to thrive. Countries such as India, Australia, and Chile, which all display hot and humid weather, display ideal environments for CdTe. This is because CdTe doesn’t lose as much power as the temperature increases in silicon, which loses voltage at a faster rate as heat levels increase.

In addition, in the near term, First Solar, Inc. (NASDAQ:FSLR) may likely benefit from a significant backlog of projects in the US that have not yet been sold, which could provide a fairly noteworthy upside to revenue over the next few quarters.

Competitive landscape

Two of First Solar, Inc. (NASDAQ:FSLR)’s primary competitors in the clean energy space are MEMC Electronic Materials, which recently renamed itself to Sunedison Inc (NYSE:SUNE) — a silicon-wafer and solar wafer manufacturer headquartered in Missouri, and SunPower Corporation (NASDAQ:SPWR), a solar-products company that makes and distributes solar-electric systems.

To begin with, Sunedison Inc (NYSE:SUNE) is currently broken into two segments: solar energy and semiconductor materials. Solar energy is the driver behind all large-scale solar energy projects, and the latter supplies raw silicon wafers to the semiconductor industry. However, given the fact that companies like First Solar, Inc. (NASDAQ:FSLR) are pioneering the way in emerging economies thanks to its CdTe technology, over the long term, it does not appear that Sunedison Inc (NYSE:SUNE) holds a significant competitive advantage.

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