LONDON — Solar module manufacturer First Solar Inc. had both bright and subdued forecasts for the emerging solar industry, unsettling investors with suggestions that it expects demand to fall, competition to increase and huge financial challenges for the industry in the near future, as it revealed it had broken the $1/watt price barrier by reducing manufacturing costs to just $0.98/watt.

The company also posted better than expected fourth-quarter profits and revenues.

"This achievement marks a milestone in the solar industry's evolution toward providing truly sustainable energy solutions," said First Solar CEO Mike Ahearn, referring to the manufacturing costs breakthrough.

First Solar (Tempe, AZ) has been manufacturing solar modules since 2004 and has massively increased manufacturing capacity to more than 500 MW in 2008.

When it started, manufacturing costs were over $3 per watt, so it has now achieved a two-thirds reduction in production costs.

The company is planning to further double annual production to more than 1 GW in 2009, which the company says will enable further cost reductions.

Ahearn suggested the company could produce cells with a cost per watt of between 65 cents and 75 cents by 2012.

First Solar has benefitted from government subsidies in Germany and elsewhere to support its ramp up of manufacturing capacity.

"Without forward-looking government programs supporting solar electricity, we would not have been able to invest in the capacity expansion which gives us the scale to bring costs down," said Ahearn.

The breakthrough on solar module manufacturing efficiencies was, however, offset by Ahearn warning investors that 10 percent to 15 percent of its 2009 orders were at risk of customer default. He also said that the company had stretched out payment terms for its customers, agreed to cut prices in exchange for volume orders, and was considering taking equity stakes in some projects which otherwise were having trouble getting financed.

First Solar doubled fourth-quarter net income, hitting $132 million, from $62 million in the corresponding quarter of 2007. Annual net income rose to $348 million, up from $158 million in 2007.

The company's revenue increased to $433 million in the past quarter from $200 million in fourth-quarter 2007, while yearly revenue topped $1.2 billion.

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