That’s obviously gaining a lot of attention. I mean, if you look historically, I think you guys have had meaningful indirect exposure to selling to corporates, building some of that stuff out. Can you quantify or give us some sense of your best guesstimation of what percent of your demand in the U.S. is coming from those types of customers, data center-driven corporate, et cetera, and what you think that could become over time as you kind of look at that as being a new growth sector, if you will?
Mark Widmar: On the pricing one, Brian, look, let’s not get — look, I’m happy with what we’re seeing right now. I don’t want to commit to an ASP in the mid-30s is what we’d expect to be able to realize at this point in time. What I’m trying to indicate is that we have seen a move in the market price. And there is a difference between — just make sure we’re clear, a difference between international versus domestic. There’s an adder for the domestic product, as we’ve said before, $0.03, $0.04, $0.05 for that. So that volume will be priced at a higher ASP than not. So — but what I would say is that we’re encouraged, and our strategy for this year is to be patient and continue to move forward with bookings at attractive ASPs. And as we said before, this business model is still levered to growth and contribution margin.
If we can get to a stable ASP environment as we look out over the next several years and grow the production capacity that we have in front of us, drive costs as we continue to do, leverage our fixed costs across our overhead, there’s pretty strong operating margin expansion that we can realize if we do that well.
Alex Bradley: Yes. So I don’t know if I have a good number for you. I would say, if you look at the companies that we talked about on the call, the ones that we’re going to be adding today in demand significantly, Apple Google, Microsoft, Meta, they value certainty even more than the utility. So if you think about utility potentially contract multiple projects, and they can deal with a level of failure or delay in a way that you guys can’t if they have commitment to renewable targets at certain times. So they value certainty, and they certainly value the reliability of where the product is coming from and the concerns around slave labor. So we tend to be the first port of call for many of these companies or the developers who are doing the work for them.
And so in many cases, developers will come to us saying that they have had discussions with these people and that they’ve a preference to buy or work with the solar products, especially for U.S.-based demand. So I don’t think I have a percentage I can give you, but I would say that generally, we’re going to be the favored supplier to the project that are going to be supplying power to these data centers or these kind of asset owners.
Operator: And Moses Sutton from BNP Paribas has the next question.
Moses Sutton: What would be the biggest consideration in determining whether you add another factory? I know the pace of bookings that they’re naturally slow, considering how far out you booked. But if the industry needs, let’s say, 50 to 70 gigawatts per annum by late decade of ground mount in total and considering your market share position is further improving, could at least another fact that would be viable is watching interconnection bottlenecks, the poly-based competition unknowns as they ramp up in the U.S. or just waiting on developer visibility to get more confidence here for these out-years?
Mark Widmar: Look, I think the framework that we use is pretty consistent with what we’ve done in the past. One is whatever we do, we want it to be demand-driven. And if we get confidence, especially as we progress now through the second half of this year around a strong, enduring demand profile that we would need through the balance of this decade, and one of the catalysts that we referenced already is what’s going on with data centers, and there’s a lot of activity going on there right now. So first, I’ll start with demand. The other one, just to make sure, is a stable policy environment. And so for what I am doing and what — I think I said before and a couple of other calls that I’ve had is I’ve told my team is we need to be ready to go.
We need to figure out our supply chain. So we need to have our glass strategy. We’ve got to think about tellurium, right? We got to think about site selection process and access to power and ready to go to — as quickly as possible as we see those inflection points that we start to see strength in demand. And then we see through the other side of the November election that we believe we have a highly predictable and stable policy environment that we can then make informed decisions from. That starts to come into the mix, then I think we’re in a much more positive position to think about further capacity expansion. So that’s what we’re doing, and we’re going to be as nimble as possible. And if all those — we start filling out our scorecard a little bit there with the key dependencies that we need to further capacity expansion, we’ll be ready to go as quickly as possible.
And what we’ve put is that once we make decisions, we get projects built, constructed tools installed and up and running and ramped probably best than anyone else in this industry. And we want to continue to be able to do that. I know there’s been — at times, I’ve heard which someone was it caught be by surprise that there was some concern about execution risk because we exited last year at 12 gigawatts, and we’re going to 25, 26. That, in my mind, is the least of things that keep me up at night. We do this well, and we’ve demonstrated that. And like I said, our current activities that we currently have ongoing right now are progressing extremely well and on schedule. And we know if we need to continue to grow off the base we have right now, we have — truly have the capability of doing that.
And we just want to see the demand and the right policy environment to make that decision.
Operator: Up Next is Vikram Bagri, Citi.
Vikram Bagri: I realized 5-in-1 question is the way to go, so I’m going to try that. Mark, you previously commented that access panel inventory in the U.S. was nearly 30 to 40 gigawatts at year-end ’23. A lot of debate about how that — how much of that excess inventory is now. I was wondering if you can share some color on where you think that stands. And the reason for debate is the steep price increases as soon as the petition was filed indicates some level of concern that the excess inventory might not be that high. And then, Alex, you had mentioned delays in delays and potential cancellation from hydrogen customer in the past. Is there any way you can take advantage of the spot pricing in the market? And then finally, a couple of press releases about bookings in the last 2 days.
Were these contracts done in first quarter given the chart on Slide 5 shows no bookings since March? And if these contracts were entered into after 1st of May, can you share the price on those bookings as well?
Mark Widmar: All right. Please come back with me on some of this because I want to make sure I got some of the questions. As I start with the last one, the bookings that we reported really were all done from — what was our — was in Feb 20, whatever our earnings call was at 27 or 28, whatever the date was, and really through March 31. So that 854 megawatts, there’s very little of that, that happened in the month of April. That’s probably what I was trying to say before is that the indication of a potential case for — against Southeast Asia really wasn’t into the market at the time that we were negotiating and closing on that booking volume. So all that booking volume, the 854, which is incremental, was — happened pretty much in the month of March, the quarter-to-date numbers, 2.7 that we referenced as well.
And again, all that happened before there was any real indication of some of the policy changes or even some of the statements that the administration has made here recently. The inventory — I think the other question that you asked was about the inventory levels and how much inventory may be in the U.S. And I know there’s speculation and views of 30 gigawatts, maybe even more, that sits in the U.S. that’s been brought in, partly because of the moratorium that was provided on the circumvention. We’ve heard that type of number in the past. I have no real way to validate that. But I do believe that there has been, looking at the import records, an excessive amount of product that has been brought into the U.S. at a rate that’s much higher than current demand, which all is going to have to be managed and worked through.
And there’s issues that are going to have to be dealt with how once this moratorium is over, in theory, all that inventory has to be deployed and installed by the end of this year and to monitor and to ensure that truly is happening. Uncertain to me how that would happen, to be honest with you. So some of that inventory may be subject to tariffs, if that were not to happen. But to be seen on that regard. Then you asked me about — the other you can repeat. There was a question around high hydrogen, and then I think there was a question on spot prices, unless Alex, you got either one of those.
Alex Bradley: I think just related to spot, I mean we talked before that there isn’t a huge immediate spot market utility-scale solar in the same way that there is in resi. So when we talk spot, we’re still talking for projects that are 2, 3 quarters ahead, maybe just not 8, 10, 12 quarters ahead. So when I think about the opportunity for us, as we have potential holdings come up in the year, if we have some short-term holes open up with things like termination convenience, there’s an opportunity, yes, for us to capture what I think you would call spot on a utility-scale basis, which is forward a few quarters. I don’t think there’s a lot of ability to sell meaningful volume on an immediate basis given the time lines for permitting and development of a utility-scale project.
But certainly, if we have opportunities around termination convenience or if we have other customers that ask us to move product out, we’ll certainly go out and see if there’s an ability. If anyone else looks for products and wants to have product, we’re willing to or with customers in that way. There could be some opportunity there. We also said we continue to be cumulatively over sold through 2026. So we continue to do a almost daily balancing of our supply-demand and work with our customers to see where things need to move both in and out.
Mark Widmar: And then maybe if you could repeat your question on hydrogen or clarification on any of the things we responded to maybe that didn’t hit the spot.
Vikram Bagri: You already answered, Mark. I was asking if you have a hydrogen customer who might not take the delivery. If you could read out those volumes in the spot market and benefit from higher prices, but Alexander already answered.
Operator: And next, we’ll hear from Kashy Harrison, Piper Sandler.
Kashy Harrison: So I’m going to follow Vikram and just ask a bunch at once as well. First one is on AD/CVD. Does your alliance expect to ask for critical circumstances if the Department of Commerce accepts your case? And then as we think about just critical equipment shortages in the market, I’m just curious if you know what proportion of your customers have secured all their critical equipment, hot transformers, high-capacity circuit breakers for their project development needs over the next several years just given how long those lead times are. And then just finally, I was just checking if the credits this quarter were $124 million as it’s indicated in your Q. If so, it seems like your COGS per watt ex credit has come down quite a bit. And I was just wondering if you could talk to some of the drivers of the lower cost here.
Alex Bradley: Let me just take the credit one, and I’ll pass it back to Mark. The credit was higher than that. So we had $194 million in the quarter. I think the guide was $109 million, so a little bit over. If you go back into the Q, there’s a few moving pieces in the government grants receivables. So the number for Q1 was $194 million.
Mark Widmar: In terms of the AD/CVD, which critical circumstances are effectively retroactivity of some of these tariffs, that — facts and circumstances that will evolve. It depends on what happens. It’s extremely unfortunate, in my mind, that China has chosen to do what it’s done so far, right? I think we — this — we were in a position, a balanced environment that we believe it was adequate for a domestic industry to grow in sale and create domestic capabilities. China, clearly, not only here in the U.S. but in India, is aggressively trying to prohibit that from happening and given the amount of overcapacity and pricing. And just to be clear, you guys are listening to all their comments and everything else. I think Dag made a comment that — recently that 70%, 80% of the polysilicon guys are selling below cash cost, right?
Genco, but for a onetime item and including their subsidy income, their last order, they lost $3 a share. So everyone is — it’s a blood bath. And if China wants to continue to do that, let them do that on their own accord, right? We should not have to be exposing our domestic industry here in the U.S. in our domestic industry in India as an example, to China’s behaviors, right? We need to be able to find a way that allow companies to compete on their own merits and not be always threatened by China’s oversupply and abusive, aggressive behaviors. So if imports stay relatively stable as we go forward, pricing on those imports stay relatively stable, then I think there’s less of a likelihood that critical circumstances would be requested. But to be determined.
And again, this is not just the First Solar. This is the coalition that has to make that call. But to me, it’s around facts and circumstances that will determine that. The other question around equipment and critical procurement and critical components and transformers and everything else, a number of our large customers are very sophisticated, and they have gotten ahead of this procurement supply chain constraint as best they can. In some cases, people are ordering spares and other things that they can utilize across their development portfolio and trying to derisk as much as they can. But look, there’s no way you can insulate yourself 100% from that supply chain disruption and constraint. But we try to work as closely as possible. That’s also why when we do our — we’re over allocated on an annual basis.
When we did step back and assess the allocation against that, we do try to work as closely as we can with our customers to understand where they are in their development stage of their particular projects, and then things get moved out accordingly. But at any point in time, there’s always subject to change. And what we continue to try to do is create some resiliency as best we can as we enter into a year and hopefully manage some of that during the year as best we can as projects move around.
Operator: And everyone, that does conclude our question-and-answer session. It does also conclude today’s conference. We would like to thank you all for your participation today. You may now disconnect.
