After several years of growth, the solar industry's prospects are dimming. Even as the market for residential storage installations slows down, the U.S. International Trade Commission (ITC) dealt another blow to the industry by determining "injury" to local solar manufacturers from imports of cheap solar panels. The ruling sets the stage for the Commission to recommend that President Trump set "safeguards" in the form of tariffs to protect local solar panel manufacturers.

If the tariffs are set, they are expected to have an overall negative impact on the industry, resulting in a decline in employment and installation, according to trade bodies and researchers. A key point to note in these analyses is that they are for solar panels made using crystalline silicon, which is used for most residential and commercial installations. (See also: Will Solar Tariffs Help or Hurt Industry Leaders?)

The two largest solar companies listed on the stock markets – First Solar, Inc. (FSLR)  and SunPower Corporation (SPWR) – have had different trajectories since the announcement. While shares for First Solar have risen in value, SunPower's downward slide, which began a month ago, has continued. Here's brief analysis on why this has occurred. (See also: How First Solar and SunPower Differ.)

SunPower

SunPower is the second largest solar company in the United States and manufactures the world's most efficient solar panels. According to congressional testimony by Tom Werner, the company's founder and CEO, SunPower sources most of the raw materials for its solar panels from within the United States, but the California-based company has manufacturing facilities in Philippines and China. This means that it will likely be at the receiving end of solar panel tariffs if and when they are imposed.

However, SunPower could look toward international markets to contain the shortfall from domestic operations. The company is present in 28 markets globally (besides the United States), including India, a country that is poised to become the largest market for solar power soon. During SunPower's earnings call last quarter, CEO Werner stated that global demand for its solar panels remained strong. "SunPower has a long history of proactively adapting to policy shifts around the globe," he said. (See also: SunPower to Supply Community College With New Solar Project.)

First Solar

Responding to a question about tariffs during the most recent earnings call, Mark Widmar, CEO of First Solar, referenced similar rhetoric during 2012 discussions about dumping of solar panels from China. According to him, tariffs might help correct an oversupply situation in the market. In addition, he said an increase of up to 10% in prices for solar panels would not have an underlying impact on demand for solar.

First Solar is also comfortably placed as far as import restrictions are concerned. It uses thin film solar cells, which are not mentioned in the trade case, for its panels. Consequently, there is a strong likelihood that the market for its panels will not be affected. In fact, according to some estimates, the market for thin film solar cells is expected to exceed 15 GW by 2024. Thus, it is no wonder that First Solar's stock price shot up by 6% on the day that the ITC decision was announced. (See also: Buy First Solar on Better Products: Deutsche Bank.)

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