On February 4th, the Ministry of Commerce, in conjunction with the General Administration of Customs, officially issued an announcement implementing export controls on items related to tungsten, tellurium, bismuth, molybdenum, and indium. Notably, cadmium telluride, a core material for thin-film solar cells, has also been included in the control scope, potentially exerting a profound impact on First Solar, a leading company in the global cadmium telluride thin-film photovoltaic industry.
Supply Chain Challenges and Rising Costs
China plays a pivotal role in global tellurium supply, accounting for over 70% of global production in 2023, with exports far exceeding domestic demand (partially supplemented by imports and inventory). The export control directly affects cadmium telluride materials (including cadmium telluride polycrystals and tellurium metal), depriving First Solar of a crucial low-cost tellurium source from China. In 2023, China exported approximately 1,200 tons of cadmium telluride materials, occupying a significant share of global supply, while First Solar heavily relies on these raw materials for its cadmium telluride module production. If Chinese exports are restricted, First Solar will have to turn to other sources such as Peru and Canada, but given the limited global tellurium reserves (about 24,000 tons), there is a high risk of prices spiking in the short term, thereby increasing production costs.
Moreover, cost pressures are being transmitted down the supply chain. Cadmium telluride materials account for about 53% of the cost structure of First Solar’s cadmium telluride modules. Raw material shortages and price hikes will undoubtedly compress its profit margins. For instance, in 2023, government subsidies accounted for 79.4% of its net profit. If costs continue to rise, profitability will become even more reliant on subsidy policies.
Hindered Capacity Expansion and Technological Route Challenges
Regarding capacity expansion, First Solar had planned to increase its capacity to 25GW by 2026, but insufficient cadmium telluride supply could pose an obstacle. Its existing capacity includes a 7.2GW factory in Southeast Asia, which highly depends on the Chinese supply chain, while raw material supply for its U.S. factories also faces uncertainty.
Simultaneously, the risk of technological substitution is growing. The global photovoltaic market is dominated by crystalline silicon batteries (accounting for over 95%), while First Solar’s cadmium telluride thin-film batteries have only a 5% market share. If raw material supply remains constrained for an extended period, it may accelerate the industry’s transition to crystalline silicon or other thin-film technologies (such as perovskite), thereby weakening the competitiveness of its technological route.
Dual Impact of Policy Subsidies and Trade Barriers
First Solar heavily relies on U.S. government subsidy policies (such as the Inflation Reduction Act), which contributed $660 million to its net profit in 2023. However, subsidy policies cannot fully offset the pressure from rising raw material costs, and its cadmium telluride technological route is already less economically viable than crystalline silicon batteries. If supply chain costs continue to climb, its market competitiveness may further decline.
On the other hand, the U.S. recently increased tariffs on Chinese photovoltaic products (such as a 50% tariff on Southeast Asian components), intended to create market space for domestic companies like First Solar. However, China’s export restrictions on cadmium telluride may offset this protective effect and even force First Solar to compete directly with Chinese companies for raw material procurement.
Exploration of Long-term Strategic Adjustment Directions
Facing raw material supply challenges, First Solar has attempted to reduce its dependence on raw ore through recycling technology (with a recycling rate of up to 95% for semiconductor materials), but this is difficult to fully replace in the short term. In the future, the company needs to accelerate the development of synthetic cadmium telluride technology or explore alternative materials (such as copper indium gallium selenide thin films) to achieve raw material diversification.
In the context of geopolitical competition, the U.S. may promote tellurium resource development in its own country or among allied nations (such as restarting mines in Peru) or use diplomatic means to request China to loosen export controls. However, these measures have long implementation cycles and high uncertainties, making them unreliable solutions for First Solar in the short term.
（Picture: Veer）
