FIRST SOLAR INC

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Securities Act of 1933, as amended (the “Securities Act”), which are subject to risks, uncertainties, and assumptions that are difficult to predict. All statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements, among other things, concerning: effects resulting from certain module manufacturing changes; our business strategy, including anticipated trends and developments in and management plans for our business and the markets in which we operate; future financial results, operating results, module volumes produced, module volumes sold, revenues, gross margin, operating expenses, products, projected costs (including estimated future module collection and recycling costs), warranties, solar module technology and cost reduction roadmaps, restructuring, product reliability, investments, and capital expenditures; our ability to successfully integrate an acquired business; our ability to continue to reduce the cost per watt of our solar modules; the impact of public policies; the potential impact of legislation intended to encourage renewable energy investments through tax credits; our ability to expand manufacturing capacity worldwide, including our plans to construct new manufacturing facilities in the United States and related increases in manufacturing capacity; the impact of supply chain disruptions, which may affect the procurement of raw materials used in our manufacturing process and the distribution of our modules; R&D programs and our ability to improve the wattage of our solar modules; sales and marketing initiatives; and competition. In some cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “seek,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,” “could,” “predict,” “continue,” “contingent,” and the negative or plural of these words, and other comparable terminology.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Securities Act of 1933, as amended (the “Securities Act”), which are subject to risks, uncertainties, and assumptions that are difficult to predict. All statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements, among other things, concerning: effects resulting from certain module manufacturing changes; our business strategy, including anticipated trends and developments in and management plans for our business and the markets in which we operate; future financial results, operating results, module volumes produced, module volumes sold, revenues, gross margin, operating expenses, products, projected costs (including estimated future module collection and recycling costs), warranties, solar module technology and cost reduction roadmaps, product reliability, investments, and capital expenditures; our ability to successfully integrate an acquired business; our ability to continue to reduce the cost per watt of our solar modules; the impact of public policies; the potential impact of legislation intended to encourage renewable energy investments through tax credits; our ability to expand manufacturing capacity worldwide, including the construction of new manufacturing facilities in the United States and related increases in manufacturing capacity; the impact of supply chain disruptions, which may affect the procurement of raw materials used in our manufacturing process and the distribution of our modules; R&D programs and our ability to improve the wattage of our solar modules; sales and marketing initiatives; and competition. In some cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “seek,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,” “could,” “predict,” “continue,” “contingent,” and the negative or plural of these words, and other comparable terminology.

Previous wording

Forward-looking statements are only predictions based on our current expectations and our projections about future events. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q and therefore speak only as of the filing date. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update any of these forward-looking statements for any reason, whether as a result of new information, future developments, or otherwise. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. These factors include, but are not limited to:

Current wording

Forward-looking statements are only predictions based on our current expectations and our projections about future events. All forward-looking statements included in this Quarterly Report on Form 10-Q are based upon information available to us as of the filing date of the report and therefore speak only as of the filing date. You should not place undue reliance on these forward-looking statements. We undertake no obligation to update any of these forward-looking statements for any reason, whether as a result of new information, future developments, or otherwise. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements. These factors include, but are not limited to:

Previous wording

•our ability to avoid manufacturing interruptions, including during the ramp of our Series 7 modules manufacturing facilities;

Current wording

•our ability to avoid manufacturing interruptions, including during the ramp of our manufacturing facilities;

Previous wording

•future collection and recycling costs for solar modules covered by our module collection and recycling program;

Current wording

•future collection and recycling costs for solar modules covered by our module collection and recycling program or otherwise as required by external laws and regulation;

Previous wording

We are a leading American solar technology company and global provider of PV solar energy solutions. Developed at our R&D labs in California and Ohio, we manufacture and sell PV solar modules with an advanced thin film semiconductor technology that provide a high-performance, lower-carbon alternative to conventional crystalline silicon PV solar modules. From raw material sourcing through end-of-life module recycling, we are committed to reducing the environmental impacts and enhancing the social and economic benefits of our products across their life cycle. We are the world’s largest thin film PV solar module manufacturer and the largest PV solar module manufacturer in the Western Hemisphere.

Current wording

We are a leading American solar technology company and global provider of responsibly produced eco-efficient PV solar energy solutions. Developed at our R&D labs in California and Ohio, we manufacture and sell PV solar modules with an advanced thin film semiconductor technology that provide a high-performance, lower-carbon and lower-water alternative to conventional crystalline silicon PV solar modules, and the smallest environmental footprint in the industry. From raw material sourcing through end-of-life module recycling, we are committed to reducing the environmental impacts and enhancing the social and economic benefits of our products. Our PV solar modules are produced using a fully integrated, continuous process that does not rely on Chinese crystalline silicon supply chains.

Previous wording

•Net sales for the three months ended March 31, 2024 increased by 45% to $794.1 million compared to $548.3 million for the same period in 2023. The increase was primarily driven by an increase in the volume of modules sold to third parties and an increase in the average selling price per watt of our modules.

Current wording

•Net sales for the three months ended June 30, 2024 increased by 25% to $1.0 billion compared to $0.8 billion for the same period in 2023. The increase was primarily driven by an increase in the volume of modules sold to third parties and an increase in the average selling price per watt of our modules.

Previous wording

•Gross profit as a percentage of net sales for the three months ended March 31, 2024 increased 23.2 percentage points to 43.6% from 20.4% for the same period in 2023. The increase in gross profit was primarily due to the recognition of the advanced manufacturing production credit under Section 45X of the IRC, reductions in sales freight costs, and a higher average selling price per watt for modules sold in the current period.

Current wording

•Gross profit as a percentage of net sales for the three months ended June 30, 2024 increased 11.1 percentage points to 49.4% from 38.3% for the same period in 2023. The increase in gross profit was primarily due to a higher sales mix of modules qualifying for the advanced manufacturing production credit under Section 45X of the IRC, higher utilization across our manufacturing plants, and our entitlement to a contract termination payment from one of our European customers that reduced its module demand in the current period.

Previous wording

•As of March 31, 2024, our total installed nameplate production capacity across all our facilities was approximately 17.6 GW. During the three months ended March 31, 2024, we produced 3.6 GW and sold 2.7 GW of solar modules. During 2024, we expect to produce between 15.6 GW and 16.0 GW and sell between 15.6 GW and 16.3 GW of solar modules.

Current wording

•As of June 30, 2024, the total installed nameplate production capacity across all our facilities was approximately 17.6 GW. During the three months ended June 30, 2024, we produced 3.7 GW and sold 3.4 GW of solar modules. During 2024, we expect to produce between 15.6 GW and 16.0 GW and sell between 15.6 GW and 16.3 GW of solar modules.

Previous wording

•In December 2023, we entered into an agreement with Fiserv for the sale of $687.2 million of Section 45X tax credits we generated during 2023 for aggregate cash proceeds of $659.7 million. We received initial cash proceeds of $480.0 million during the three months ended March 31, 2024 and received the remaining cash proceeds of $179.7 million in April 2024.

Current wording

•In December 2023, we entered into an agreement with Fiserv for the sale of $687.2 million of Section 45X tax credits generated during 2023 for aggregate cash proceeds of $659.7 million. We received the full cash proceeds during the six months ended June 30, 2024.

Previous wording

Solar energy is one of the fastest growing forms of renewable energy with numerous economic and environmental benefits that make it an attractive complement to and/or substitute for traditional forms of energy generation. Over the past decade, the cost of producing electricity from PV solar power systems has decreased to levels that are competitive with or below the wholesale price of electricity in many markets. This price decline has opened new possibilities to develop systems in many locations with limited or no financial incentives, thereby promoting the widespread adoption of solar energy. Other technological developments in the industry, such as the advancement of energy storage capabilities, have further enhanced the prospects of solar energy as an alternative to traditional forms of energy generation. In addition to these economic benefits, solar energy has substantial environmental benefits. For example, PV solar power systems generate no greenhouse gas or other emissions and use minimal amounts of water compared to traditional energy generation assets. As a result of these and other factors, worldwide solar markets continue to develop and expand.

Current wording

Solar energy is one of the fastest growing forms of renewable energy with numerous economic and environmental benefits that make it an attractive complement to or substitute for traditional forms of energy generation. Over the past decade, the cost of producing electricity from PV solar power systems has decreased to levels that are competitive with or below the wholesale price of electricity in many markets. This price decline has opened new possibilities to develop systems in many locations with limited or no financial incentives, thereby promoting the widespread adoption of solar energy. Other technological developments in the renewable energy industry, such as the advancement of energy storage capabilities, have further enhanced the prospects of solar energy as an alternative to traditional forms of energy generation. In addition to these economic benefits, solar energy has substantial environmental benefits. For example, PV solar power systems generate no greenhouse gas or other emissions and use minimal amounts of water compared to traditional energy generation assets. As a result of these and other factors, worldwide solar markets continue to develop and expand.

Previous wording

Supply and demand. As a result of the market opportunities and increased demand described above, we are in the process of expanding our manufacturing capacity by approximately 7.6 GW, including the construction of our fourth and fifth manufacturing facilities in the United States, which are expected to commence operations in the second half of 2024 and late 2025, respectively; and the expansion of our manufacturing footprint at our existing facilities in Ohio, which is expected to be completed in the first half of 2024. We continue to evaluate opportunities for future expansion worldwide. In the aggregate, we believe manufacturers of solar cells and modules, particularly those in China, have significant installed production capacity, relative to global demand, and the ability for additional capacity expansion. Accordingly, we believe the solar industry may experience periods of structural imbalance between supply and demand, which could lead to periods of pricing volatility. In light of such market realities, we continue to focus on our strategies and points of differentiation, which include our advanced module technology, our manufacturing process and distributed manufacturing presence, our R&D capabilities, the sustainability advantage of our modules, and our financial stability.

Current wording

Supply and demand. As a result of the market opportunities described above, we are in the process of expanding our manufacturing capacity, including the construction of our fourth and fifth manufacturing facilities in the United States, which are expected to commence operations in the second halves of 2024 and 2025, respectively. We continue to evaluate opportunities for future expansion worldwide. We believe manufacturers of solar cells and modules, particularly those in China, have significant installed production capacity, relative to global demand, and the ability for additional capacity expansion. Accordingly, we believe the solar industry may experience periods of structural imbalance between supply and demand, which could lead to periods of pricing volatility. Further, demand for solar energy in key markets, such as the United States, India, and Europe, may be affected by the nature and extent of commitments to the renewable energy transition at the local and global levels. For example, certain large oil and gas and energy companies have experienced investor pressure to pursue returns commensurate with those currently associated with fossil fuel projects. Notwithstanding these considerations, utility and corporate demand for clean energy, and overall electric load growth, especially as a result of artificial intelligence-driven data center demand, continue to increase. In light of such market realities, we continue to advocate for industrial and trade policies that provide a level playing field for manufacturers of solar cells and modules. We also continue to focus on our strategies and points of differentiation, which include our advanced module technology, our manufacturing process and distributed manufacturing presence, our R&D capabilities, the sustainability advantage of our modules, and our financial stability.

Previous wording

Pricing competition. The solar industry has been characterized by intense pricing competition, both at the module and system levels. This competition may result in an environment in which pricing falls rapidly, which could potentially increase demand for solar energy solutions but constrain the ability for project developers and module manufacturers to sustain meaningful and consistent profitability. Our results of operations could be adversely affected if competitors reduce pricing below their costs, bid aggressively low prices for module sale agreements, or are able to operate at minimal or negative operating margins for sustained periods of time. For certain of our competitors, including many in China, these practices may be enabled by their direct or indirect access to sovereign capital or other forms of state support. Although module average selling prices in many global markets have declined, near-term module pricing in the United States, our primary market, remains relatively stable due, in part, to the rising demand for domestically manufactured modules as a result of the IRA.

Current wording

Pricing competition. The solar industry has been characterized by intense pricing competition, both at the module and system levels. This competition may result in an environment in which pricing falls rapidly, which could potentially increase demand for solar energy solutions but constrain the ability for module manufacturers and project developers to sustain meaningful and consistent profitability. Our results of operations could be adversely affected if competitors reduce pricing below their costs, bid aggressively low prices for module sale agreements, or are able to operate at minimal or negative operating margins for sustained periods of time. For certain of our competitors, including many in China, these practices may be enabled by their direct or indirect access to sovereign capital or other forms of state support. Although module average selling prices in many global markets have declined, near-term module pricing in the United States, our primary market, remains relatively stable due, in part, to the rising demand for domestically manufactured modules as a result of the IRA.

Previous wording

•Bifacial. While conventional solar modules are monofacial, meaning their ability to produce energy is a function of direct and diffuse irradiance on their front side, most module manufacturers offer bifacial modules that also capture diffuse irradiance on the back side of a module. Bifaciality compromises nameplate efficiency, but by converting both front and rear side irradiance, such technology may improve the overall energy production of a module relative to nameplate efficiency when applied in certain applications, which could potentially lower the overall levelized cost of electricity (“LCOE”) of a system when compared to systems using monofacial solar modules. We recently began commercial production of bifacial solar modules at certain of our manufacturing facilities in Ohio. Our bifacial module features an innovative transparent back contact which, in addition to converting both front and rear side irradiance, allows infrared light to pass through rather than be absorbed as heat. This design lowers the operational temperature of the module, resulting in a higher energy yield.

Current wording

•Bifacial. While conventional solar modules are monofacial, meaning their ability to produce energy is a function of direct and diffuse irradiance on their front side, most module manufacturers offer bifacial modules that also capture diffuse irradiance on the back side of a module. Bifaciality compromises nameplate efficiency, but by converting both front and rear side irradiance, such technology may improve the overall energy production of a module relative to nameplate efficiency when applied in certain applications, which could potentially lower the overall levelized cost of electricity (“LCOE”) of a system when compared to systems using monofacial solar modules. We recently began commercial production of bifacial solar modules at certain of our manufacturing facilities in Ohio and, during the three months ended June 30, 2024, delivered our first bifacial modules to customers. Our bifacial module features an innovative transparent back contact which, in addition to converting both front and rear side irradiance, allows infrared light to pass through rather than be absorbed as heat. This design lowers the operational temperature of the module, resulting in a higher energy yield.

Previous wording

•CuRe. Our CuRe program is intended to improve our current semiconductor structure by replacing copper with certain other elements that are expected to enhance module performance by improving its bifaciality characteristics, improving its temperature coefficient, and improving its warranted degradation. As a result of these performance improvements, our PV solar modules are expected to produce more energy in real world operating conditions over their estimated useful lives than crystalline silicon modules with the same nameplate capacity. In September 2023 and January 2024, we established new world record CdTe research cell conversion efficiencies of 22.4% and 22.6%, respectively, which were based on our CuRe program and certified by the U.S. Department of Energy’s National Renewable Energy Laboratory. We currently expect to complete our lead line implementation of CuRe in the fourth quarter of 2024.

Current wording

•CuRe. Our CuRe program is intended to improve our current semiconductor structure by replacing copper with certain other elements that are expected to enhance module performance by improving its bifaciality characteristics, improving its temperature coefficient, and improving its warranted degradation. As a result of these performance improvements, our PV solar modules are expected to produce more energy in real world operating conditions over their estimated useful lives than crystalline silicon modules with the same nameplate capacity. We currently expect to complete the lead line implementation of our CuRe technology in late 2024 and intend to begin replication of the technology across our fleet in late 2025.

Previous wording

•Multi-junction. We continue to evaluate opportunities to develop and leverage other solar cell technologies in multi-junction applications that combine our thin film PV technology with another high efficiency PV semiconductor, with each layer optimized for a different range of the solar spectrum. We believe such applications, which are expected to utilize at least one thin-film semiconductor, have the potential to significantly increase the efficiency of PV modules beyond the limits of traditional single-junction devices. Our acquisition of Evolar accelerates the development of high efficiency multi-junction devices by integrating Evolar’s know-how with First Solar’s existing R&D capabilities.

Current wording

•Multi-junction. We continue to evaluate opportunities to develop and leverage other solar cell technologies in multi-junction applications that combine our thin film PV technology with another high efficiency PV semiconductor, with each layer optimized for a different range of the solar spectrum. We believe such applications, which are expected to utilize at least one thin-film semiconductor, have the potential to significantly increase the efficiency of PV modules beyond the limits of traditional single-junction devices. Our acquisition of Evolar is expected to accelerate the development of high efficiency multi-junction devices by integrating Evolar’s expertise with First Solar’s existing R&D capabilities.

Previous wording

Product efficiencies. The efficiencies gained from the vertical integration of our manufacturing model and our continued ability to reduce costs allow us to compete favorably in markets where pricing for modules and systems is highly competitive. Our cost competitiveness is based in large part on our advanced thin film semiconductor technology, module wattage (or conversion efficiency), proprietary manufacturing process (which enables us to produce a CdTe module in a matter of hours using a continuous and highly automated industrial manufacturing process, as opposed to a batch process), and our focus on operational excellence. In addition, our CdTe modules use approximately 2% to 3% of the amount of semiconductor material that is used to manufacture conventional crystalline silicon solar modules. The cost of polysilicon is a significant driver of the manufacturing cost of crystalline silicon solar modules, and the timing and rate of change in the cost of silicon feedstock and polysilicon could lead to changes in solar module pricing levels. In recent years, polysilicon consumption per cell has been reduced through various initiatives, which have contributed to declines in our relative manufacturing cost competitiveness over conventional crystalline silicon module manufacturers.

Current wording

Product efficiencies. The efficiencies gained from the vertical integration of our manufacturing model and our continued ability to reduce costs allow us to compete favorably in markets where pricing for modules and systems is highly competitive. Our cost competitiveness is based in large part on our advanced thin film semiconductor technology, module wattage, proprietary manufacturing process (which enables us to produce a CdTe module in a matter of hours using a continuous and highly automated industrial manufacturing process, as opposed to a batch process), and focus on operational excellence. In addition, our CdTe modules use approximately 2% to 3% of the amount of semiconductor material that is used to manufacture conventional crystalline silicon solar modules. The cost of polysilicon is a significant driver of the manufacturing cost of crystalline silicon solar modules, and the timing and rate of change in the cost of silicon feedstock and polysilicon could lead to changes in solar module pricing levels.

Previous wording

While our modules are generally competitive in cost, reliability, and performance attributes, there can be no guarantee such competitiveness will continue to exist in the future to the same extent or at all. Any declines in the competitiveness of our products could result in further declines in the average selling prices of our modules and additional margin compression. We continue to focus on enhancing the competitiveness of our solar modules through our module technology and cost reduction roadmaps.

Current wording

While our modules are generally competitive in cost, reliability, and performance attributes, there can be no guarantee such competitiveness will continue to exist in the future to the same extent or at all. Any declines in the competitiveness of our products could result in further declines in the average selling prices of our modules and additional margin compression. Accordingly, we continue to focus on enhancing the competitiveness of our solar modules through our module technology and cost reduction roadmaps.

Previous wording

•United States. In August 2022, the U.S. President signed the IRA into law, which is intended to accelerate the country’s ongoing transition to clean energy. Among other things, the financial incentives provided by the IRA have significantly increased demand for modules manufactured in the United States. Accordingly, the demand for these solar modules is expected to increase domestic manufacturing in the near term, which may result in localized supply chain constraints and periods of inflationary pricing for certain of our key raw materials. The financial incentives provided by the IRA have also increased demand for solar modules in general due to the incremental tax credit available for the qualified production of clean hydrogen that is powered by renewable resources. There are currently several critical and complex aspects of the IRA pending further technical guidance and final regulations from the IRS and the U.S. Treasury Department, which in 2023 released a notice of intent to issue proposed regulations for the domestic content bonus tax credit and notices of proposed rulemaking and temporary regulations for the direct payment election and the tax credit transfer election. This initial guidance is subject to revision prior to the publishing of final regulations by the IRS and U.S. Treasury Department. Given the complexities of the IRA, we continue to evaluate the extent of benefits available to us, which we expect will favorably impact our results of operations in future periods. For example, we currently expect to qualify for the advanced manufacturing production credit under Section 45X of the IRC, which provides certain specified benefits for solar modules and solar module components manufactured in the United States and sold to third parties. See Note 5. “Government Grants” to our condensed consolidated financial statements for discussion of our expectation of the financial benefits available to us under the IRA.

Current wording

•United States. In August 2022, the U.S. President signed the IRA into law, which is intended to accelerate the country’s ongoing transition to clean energy. Among other things, the financial incentives provided by the IRA have significantly increased demand for modules manufactured in the United States. Accordingly, the demand for these solar modules is expected to increase domestic manufacturing in the near term, which may result in localized supply chain constraints and periods of inflationary pricing for certain of our key raw materials. The financial incentives provided by the IRA have also increased demand for solar modules in general due to the incremental tax credit available for the qualified production of clean hydrogen that is powered by renewable resources. There are currently several critical and complex aspects of the IRA pending further technical guidance and final regulations from the IRS and the U.S. Treasury Department. Given the complexities of the IRA, we continue to evaluate the extent of benefits available to us, which we expect will favorably impact our results of operations in future periods. For example, we currently expect to qualify for the advanced manufacturing production credit under Section 45X of the IRC, which provides certain specified benefits for solar modules and solar module components manufactured in the United States and sold to third parties. See Note 5. “Government Grants” and Note 13. “Income Taxes” to our condensed consolidated financial statements for discussion of our expectation of the financial benefits available to us under the IRA and developments to technical guidance and regulations, respectively.

Previous wording

•United States. The United States currently imposes antidumping and countervailing duties (“AD/CVD”) on certain imported crystalline silicon PV cells and modules from China and Taiwan. Such AD/CVD can change over time pursuant to annual reviews conducted by the U.S. Department of Commerce (“USDOC”), and a decline in duty rates or the USDOC’s failure to fully enforce U.S. AD/CVD laws could have an adverse impact on our operating results. In August 2023, the USDOC issued final affirmative circumvention rulings, finding that solar panels completed in Cambodia, Malaysia, Thailand, and Vietnam using parts and components produced in China circumvent the pre-existing AD/CVD orders on China. Such duties are set to apply to circumventing imports on or after June 6, 2024, as well as any circumventing imports prior to that date in violation of certain requirements, including that they are imported, used, and installed by certain dates in 2024. Our operating results could be adversely impacted if the USDOC and other U.S. government agencies do not enforce the affirmative circumvention rulings as expected or if pending litigation challenges result in a modification of the rulings. Conversely, effective enforcement could positively impact our operating results.

Current wording

•United States. The United States currently imposes antidumping and countervailing duties (“AD/CVD”) on certain imported crystalline silicon PV cells and modules from China and Taiwan. Such AD/CVD can change over time pursuant to annual reviews conducted by the U.S. Department of Commerce (“USDOC”), and a decline in duty rates or the USDOC’s failure to fully enforce U.S. AD/CVD laws could have an adverse impact on our operating results. In August 2023, the USDOC issued final affirmative circumvention rulings, finding that solar panels completed in Cambodia, Malaysia, Thailand, and Vietnam using parts and components produced in China circumvent the pre-existing AD/CVD orders on China. Such duties apply to circumventing imports on or after June 6, 2024, as well as any circumventing imports prior to that date that are not used or installed on or before December 3, 2024. Our operating results could be adversely impacted if the USDOC and other U.S. government agencies do not enforce the affirmative circumvention rulings as expected or if pending litigation challenges result in a modification of the rulings. Conversely, effective enforcement could positively impact our operating results.

Previous wording

•United States. In October 2023, a coalition of U.S. aluminum extruders and a labor union filed AD/CVD petitions with the USDOC related to aluminum extrusions from 15 countries. The USDOC has initiated investigations based on the petitions. First Solar imports certain items that appear to be within the scope of the investigations. Our operating results could be adversely impacted if the USDOC imposes duties on such imports. A preliminary determination related to the petitions is expected to be announced by the USDOC in early May 2024.

Current wording

•United States. In October 2023, a coalition of U.S. aluminum extruders and a labor union filed AD/CVD petitions with the USDOC and the U.S. International Trade Commission (“USITC”) related to aluminum extrusions from 15 countries. The USDOC and USITC have initiated investigations based on the petitions. We import certain items that appear to be within the scope of the investigations. Our operating results could be adversely impacted if the USDOC imposes duties on such imports. The USITC issued affirmative preliminary AD/CVD determinations in November 2023, and the USDOC issued preliminary antidumping determinations in May 2024, which found that our Malaysian supplier of aluminum extrusions was not dumping. The USDOC’s and USITC’s final determinations are expected to be announced in September 2024 and October 2024, respectively.

Previous wording

•United States. In April 2024, the American Alliance for Solar Manufacturing Trade Committee, which includes First Solar, filed a set of AD/CVD petitions with the U.S. International Trade Commission and the USDOC to impose duties on unfairly traded solar products from four countries in Southeast Asia. The investigations could potentially lead to the imposition of AD/CVD orders on such solar products.

Current wording

•United States. In April 2024, the American Alliance for Solar Manufacturing Trade Committee, which includes First Solar, filed a set of AD/CVD petitions with the USDOC and the USITC to impose duties on certain unfairly traded solar products from Cambodia, Malaysia, Thailand, and Vietnam. The investigations could potentially lead to the imposition of AD/CVD orders on such solar products. In June 2024, the USITC issued affirmative preliminary determinations. The USDOC is expected to announce preliminary determinations in the CVD and AD investigations in October 2024 and November 2024, respectively.

Previous wording

•India. The Approved List of Module Manufacturers (“ALMM”) was introduced in 2021 as a non-tariff barrier to incentivize domestic manufacturing of PV modules by approving the list of models and manufacturers who can participate in certain solar development projects. The ALMM is approved by the Ministry of New and Renewable Energy, and any modifications to the ALMM and its application may affect future investments in solar module manufacturing in India. In April 2024, the government of India reimposed the ALMM, thereby requiring solar project developers to procure modules from companies included in the ALMM; as of April 2024, First Solar has been included in the ALMM with respect to our modules manufactured in India. Our operating results could be adversely impacted if the ALMM requirements are significantly relaxed to allow modules to be imported from countries that are part of the Association of Southeast Asian Nations. Also in April 2024, the ALMM was amended to include specific minimum module efficiency thresholds for CdTe solar technologies starting at 18% for solar lighting, 18.5% for rooftop applications, and 19% for utility-scale applications.

Current wording

•India. The Approved List of Models and Manufacturers (“ALMM”) was introduced in 2021 as a non-tariff barrier to incentivize local manufacturing of PV modules by approving the list of models and manufacturers who can participate in certain solar development projects. The ALMM is approved by the Ministry of New and Renewable Energy, and any modifications to the list and its application may affect future investments in solar module manufacturing in India. In April 2024, the government of India reimposed the ALMM, thereby requiring solar project developers to procure qualifying modules from companies on the list, which includes our Indian manufacturing facility. Our operating results could be adversely impacted if the ALMM requirements are significantly relaxed to allow modules to be imported from other countries. Also in April 2024, the ALMM was amended to include specific minimum conversion efficiency thresholds for CdTe solar technologies starting at 18% for solar lighting, 18.5% for rooftop applications, and 19% for utility-scale applications.

Previous wording

Our ability to provide solar modules on economically attractive terms is also affected by the availability and cost of logistics services associated with the procurement of raw materials or equipment used in our manufacturing process and the shipping, handling, storage, and distribution of our modules. To mitigate certain logistics costs, we employ module contract structures that provide additional consideration to us if the cost of logistics services, excluding demurrage and detention, exceeds defined thresholds. We may also adjust our shipping plans to include additional lead times for module deliveries and/or utilize our network of U.S. distribution centers. Additionally, our manufacturing capacity expansions in the U.S. and India are expected to bring manufacturing activities closer to customer demand, further mitigating our exposure to the cost of ocean freight.

Current wording

Our ability to provide solar modules on economically attractive terms is also affected by the availability and cost of logistics services associated with the procurement of raw materials or equipment used in our manufacturing process and the shipping, handling, storage, and distribution of our modules. To mitigate certain logistics costs, we employ commercial contract structures that provide additional consideration to us if the cost of logistics services, excluding demurrage and detention, exceeds defined thresholds. We may also adjust our shipping plans to include additional lead times for module deliveries and/or utilize our network of U.S. distribution centers to mitigate logistics costs. Additionally, our manufacturing capacity expansions are expected to bring production activities closer to customer demand, further mitigating our exposure to the cost of ocean freight.

Previous wording

We generally price and sell our solar modules on a per watt basis. As of March 31, 2024, we had entered into contracts with customers for the future sale of 78.3 GW of solar modules for an aggregate transaction price of $23.4 billion, which we expect to recognize as revenue through 2030 as we transfer control of the modules to the customers. Such volume includes contracts for the sale of 40.2 GW of solar modules that include transaction price adjustments associated with future module technology improvements, including enhancements to certain energy related attributes. Based on these potential technology improvements, the contracted module volumes as of March 31, 2024, the expected timing such technology improvements are incorporated into our manufacturing process, and the expected timing of module deliveries, such adjustments, if realized, could result in additional revenue of up to $0.5 billion, the majority of which would be recognized in 2025, 2026, and 2027. In addition to these price adjustments, certain of our contracts with customers may include favorable price adjustments associated with sales freight in excess of defined thresholds. Certain of our contracts with customers may also include favorable or unfavorable price adjustments associated with changes to certain commodity prices and/or the module wattage committed for delivery. As a result, the revenue recognized from such contracts may increase or decrease in future periods relative to the original transaction price.

Current wording

We generally price and sell our solar modules on a per watt basis. As of June 30, 2024, we had entered into contracts with customers for the future sale of 74.6 GW of solar modules for an aggregate transaction price of $22.3 billion, which we expect to recognize as revenue through 2030 as we transfer control of the modules to our customers. Such volume includes contracts for the sale of 38.4 GW of solar modules with anticipated price adjustments for future module technology improvements, including enhancements to certain energy related attributes. Based on these potential improvements, the contracted module volume as of June 30, 2024, the expected timing such improvements being incorporated into our manufacturing process, and the expected timing of module deliveries, such adjustments, if realized, could result in additional revenue of up to $0.7 billion, the majority of which would be recognized between 2025 and 2028. In addition to these price adjustments, certain of our contracts with customers may include favorable price adjustments associated with sales freight in excess of defined thresholds and/or favorable or unfavorable price adjustments associated with changes to (i) certain commodity prices, (ii) the module wattage committed for delivery, and (iii) the volume of modules sold that meet certain U.S. domestic content requirements. As a result, the revenue recognized from such contracts may increase or decrease in future periods relative to the original transaction price.

Previous wording

We continue to increase the nameplate production capacity of our existing manufacturing facilities by improving our production throughput, increasing module wattage (or conversion efficiency), and reducing manufacturing yield losses. Additionally, we are in the process of expanding our manufacturing capacity by approximately 7.6 GW, including the construction of our fourth and fifth manufacturing facilities in the United States, which are expected to commence operations in the second half of 2024 and late 2025, respectively; and the expansion of our manufacturing footprint at our existing facilities in Ohio, which is expected to be completed in the first half of 2024. This additional capacity, and any other potential investments to add to or otherwise modify our existing manufacturing capacity in response to market demand and competition, may require significant internal and possibly external sources of capital, and may be subject to certain risks and uncertainties described in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

We continue to increase the nameplate production capacity of our existing manufacturing facilities by improving our production throughput, increasing module wattage, and reducing manufacturing yield losses. Additionally, we are in the process of expanding our manufacturing capacity by approximately 7.6 GW, including the construction of our fourth and fifth manufacturing facilities in the United States, as well as capacity expansion at our existing facilities. This additional capacity, and any other potential investments to add to or otherwise modify our existing manufacturing capacity in response to market demand and competition, may require significant internal and possibly external sources of capital, and may be subject to certain risks and uncertainties described in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

The following table sets forth our condensed consolidated statements of operations as a percentage of net sales for the three months ended March 31, 2024 and 2023:

Current wording

The following table sets forth our condensed consolidated statements of operations as a percentage of net sales for the three and six months ended June 30, 2024 and 2023:

Previous wording

We generally price and sell our solar modules on a per watt basis. During the three months ended March 31, 2024, we sold the majority of our solar modules to developers and operators of systems in the United States, and substantially all of our modules business net sales were denominated in U.S. dollars. We recognize revenue for module sales at a point in time following the transfer of control of the modules to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Net sales from our residual business operations primarily consists of revenue recognized for sales of development projects or completed systems, including any modules installed in such systems and any revenue from energy generated by such systems.

Current wording

We generally price and sell our solar modules on a per watt basis. During the three and six months ended June 30, 2024, we sold the majority of our solar modules to developers and operators of systems in the United States, and substantially all of our modules business net sales were denominated in U.S. dollars. We recognize revenue for module sales at a point in time following the transfer of control of the modules to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Net sales from our residual business operations primarily consists of revenue recognized for sales of development projects or completed systems, including any modules installed in such systems and any revenue from energy generated by such systems.

Previous wording

The following table shows net sales by reportable segment for the three months ended March 31, 2024 and 2023:

Current wording

The following table shows net sales by reportable segment for the three and six months ended June 30, 2024 and 2023:

Previous wording

Net sales from our modules segment increased $256.8 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to a 39% increase in the volume of modules sold to third parties and an 6% increase in the average selling price per watt. Net sales from our residual business operations during the three months ended March 31, 2024 decreased $11.0 million compared to the three months ended March 31, 2023 as operations from our residual business operations continue to wind down.

Current wording

Net sales from our modules segment increased $206.5 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to a 21% increase in the volume of modules sold to third parties and an 4% increase in the average selling price per watt. Net sales from our residual business operations during the three months ended June 30, 2024 decreased $6.7 million compared to the three months ended June 30, 2023 as our residual business operations continue to wind down.

Previous wording

Our modules business cost of sales includes the cost of raw materials and components for manufacturing solar modules, such as glass, transparent conductive coatings, CdTe and other thin film semiconductors, laminate materials, connector assemblies, edge seal materials, and frames. In addition, our cost of sales includes direct labor for the manufacturing of solar modules and manufacturing overhead, such as engineering, equipment maintenance, quality and production control, and information technology. Our cost of sales also includes depreciation of manufacturing plant and equipment, facility-related expenses, environmental health and safety costs, and costs associated with shipping, warranties, and solar module collection and recycling (excluding accretion). Cost of sales for our residual business operations includes project-related costs, such as development costs (legal, consulting, transmission upgrade, interconnection, permitting, and other similar costs), EPC costs (consisting primarily of solar modules, inverters, electrical and mounting hardware, project management and engineering, and construction labor), and site-specific costs.

Current wording

Our modules business cost of sales includes the cost of raw materials and components for manufacturing solar modules, such as glass, transparent conductive coatings, CdTe and other thin film semiconductors, laminate materials, connector assemblies, edge seal materials, and frames or back rails. In addition, our cost of sales includes direct labor for the manufacturing of solar modules and manufacturing overhead, such as engineering, equipment maintenance, quality and production control, and information technology. Our cost of sales also includes depreciation of manufacturing plant and equipment, facility-related expenses, environmental health and safety costs, and costs associated with shipping, warranties, and solar module collection and recycling (excluding accretion). Cost of sales for our residual business operations includes project-related costs, such as development costs (legal, consulting, transmission upgrade, interconnection, permitting, and other similar costs), EPC costs (consisting primarily of solar modules, inverters, electrical and mounting hardware, project management and engineering, and construction labor), and site-specific costs.

Previous wording

The following table shows cost of sales by reportable segment for the three months ended March 31, 2024 and 2023:

Current wording

The following table shows cost of sales by reportable segment for the three and six months ended June 30, 2024 and 2023:

Previous wording

Cost of sales increased $11.9 million, or 3%, and decreased 23.2 percentage points as a percent of net sales for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in cost of sales was driven by a $17.6 million increase in our modules segment cost of sales primarily due to (i) higher costs of $147.9 million due to an increase in the volume of modules sold, partially offset by (ii) the recognition of the advanced manufacturing production credit under Section 45X of the IRC, which decreased cost of sales by $124.3 million, and (iii) lower sales freight of $28.4 million. The increase in cost of sales was partially offset by a $5.7 million decrease in our residual business operations cost of sales as operations from our residual business operations continue to wind down.

Current wording

Cost of sales increased $23.2 million, or 2%, and decreased 15.7 percentage points as a percent of net sales for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase in cost of sales was driven by a $27.7 million increase in our modules segment cost of sales primarily due to (i) an increase in the volume of modules sold resulting in higher costs of $304.5 million and (ii) continued module costs reductions of $10.0 million. These increases were partially offset by (iii) the recognition of the above-mentioned advanced manufacturing production credit, which decreased costs by $227.9 million, (iv) lower sales freight of $70.3 million, and (v) lower production ramp costs of $29.7 million. The overall increase in cost of sales was partially offset by a $4.5 million decrease in our residual business operations cost of sales as our residual business operations continue to wind down.

Previous wording

The following table shows gross profit for the three months ended March 31, 2024 and 2023:

Current wording

The following table shows gross profit for the three and six months ended June 30, 2024 and 2023:

Previous wording

The following table shows selling, general and administrative expense for the three months ended March 31, 2024 and 2023:

Current wording

The following table shows selling, general and administrative expense for the three and six months ended June 30, 2024 and 2023:

Previous wording

The following table shows research and development expense for the three months ended March 31, 2024 and 2023:

Current wording

The following table shows research and development expense for the three and six months ended June 30, 2024 and 2023:

Previous wording

Research and development expense for the three months ended March 31, 2024 increased compared to the three months ended March 31, 2023 primarily due to higher material, module, and other testing costs and higher employee compensation expense resulting from an increase in headcount.

Current wording

Research and development expense for the three and six months ended June 30, 2024 increased compared to the three and six months ended June 30, 2023 primarily due to higher depreciation and maintenance costs resulting from our investments in R&D facilities and equipment and higher employee compensation expense resulting from an increase in headcount.

Previous wording

The following table shows production start-up expense for the three months ended March 31, 2024 and 2023:

Current wording

The following table shows production start-up expense for the three and six months ended June 30, 2024 and 2023:

Previous wording

During the three months ended March 31, 2024, we incurred production start-up expense primarily for our fourth manufacturing facility in the U.S., which is expected to commence operations in the second half of 2024. During the three months ended March 31, 2023, we incurred production start-up expense primarily for our first manufacturing facility in India and our third manufacturing facility in the U.S., both of which commenced operations during 2023.

Current wording

During the three and six months ended June 30, 2024, we incurred production start-up expense primarily for our fourth manufacturing facility in the U.S., which is expected to commence operations in the second half of 2024. During the three and six months ended June 30, 2023, we incurred production start-up expense primarily for our first manufacturing facility in India, which commenced operations during 2023.

Previous wording

The following table shows foreign currency loss, net for the three months ended March 31, 2024 and 2023:

Current wording

The following table shows foreign currency loss, net for the three and six months ended June 30, 2024 and 2023:

Previous wording

Foreign currency loss, net for the three months ended March 31, 2024 decreased compared to the three months ended March 31, 2023 primarily due to a benefit from differences between our economic hedge positions and the underlying currency exposures, partially offset by higher costs associated with hedging activities related to our subsidiaries in India.

Current wording

Foreign currency loss, net for the three and six months ended June 30, 2024 increased compared to the three and six months ended June 30, 2023 largely due to higher costs associated with hedging activities related to our subsidiaries in India.