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First Solar, Inc. (FSLR - Analyst Report) has entered into two-year collaboration and licensing agreement with Intermolecular, Inc. (IMI - Snapshot Report). Per the agreement, both will work together to improve the conversion efficiency of First Solar's cadmium telluride (CdTe) solar cell technology.

First Solar uses CdTe as a semiconductor to produce panels that are less expensive than those manufactured from crystalline silicon. By means of Intermolecular's proprietary High Productivity Combinatorial (HPC) platform, the partners intend to work jointly to increase the performance of CdTe solar cell technology.

Intermolecular, Inc. aims at improving conversion efficiency in the semiconductor and clean-energy industries with the help of its HPC platform. The main motive behind this collaboration is to provide advancement to First Solar's module conversion efficiency.

First Solar has been providing its CdTe solar cell technology to power plants. In October last year, First Solar was chosen by the Dubai Electricity & Water Authority (DEWA) to construct a solar photovoltaic (“PV”) power plant in Seih Al Dahal. Apart from providing engineering, procurement and construction services, First Solar will provide CdTe thin-film PV modules to the 13 megawatt (MWDC) plant.

Solar cell manufacturers continue to invest in research and development (R&D) with the sole objective of producing advanced PV modules with higher conversion rates. This is crucial as higher conversion rates bring down the cost of implementing a solar power project. However, they are facing strong competition from their Chinese counterparts in the U.S. The China-based companies have flooded the market with lower priced solar modules. We believe the one way to counter this threat is by developing cheaper, high-quality solar modules. In December last year, the company manufactured its most advanced thin-film photovoltaic (PV) module, the Series 3 FS-392, which is rated at 92.5 watts.

First Solar Inc. designs, manufactures, and sells solar electric power modules using a proprietary thin film semiconductor technology. Though First Solar’s solar cells convert sunlight to electricity less efficiently than traditional silicon PV modules, thin film PV cells have an advantage in producing electricity even in less light. Also, First Solar designs and manufactures solar modules using a proprietary thin-film-semiconductor technology, which allows it to reduce its average solar module manufacturing costs to the lowest in the world.

However, along with its solar peers like SunPower Corporation (SPWR - Analyst Report) and Suntech Power Holdings Co. Ltd. , First Solar is currently witnessing a steep drop in Average Selling Prices. Also, the current macro scenario does not bode well for the solar industry, which thrives mainly on subsidies and grants. First Solar presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

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