When I visit my hometown of Philadelphia, I go straight to Pat's Cheesesteaks on 9th and Passyunk Avenue and order one up with whiz. I'll admit it: There are awfully long lines, the steaks are sloppy, and oftentimes the quality is unpredictable. But when they're good, they're really good. It's high-risk, high-reward.

The same can be said for leading solar energy company First Solar (NASDAQ:FSLR). Despite a 6% price drop from last week's high due to a continued decline in polysilicon prices and fear about First Solar's growth sustainability, it's still a risk worth taking.

Why it's the market leader
There's good reason First Solar is the darling of Wall Street (or at least it used to be).

  • It closed yesterday near $162, off its 52-week high of $301. The company boasts a PEG ratio of 0.56, well below the industry average and those of two of its strongest competitors, SunPower (NASDAQ:SPWRA) (NASDAQ:SPWRB) and Suntech (NYSE:STP).
  • With first-quarter earnings jumping 24% from last quarter and 253% year over year, it's easy to see why analysts are expecting a five-year growth rate of 39%.
  • Not to mention the fact that the Obama administration plans on spending $150 billion on renewable energy in the next 10 years. Couple that with solar growth in Germany and you have a global agenda that has helped the company secure about $6 billion in future commitments.
  • Furthermore, in a renewable world where cost competitiveness is the name of the game, First Solar is the global market leader, with the lowest solar manufacturing costs in the industry ($0.92/watt).

Why everyone is down on it now
I know, I know. Phoenix Solar, arguably First Solar's largest customer, recently adjusted its earnings downward and warned of pressure on margins, not to mention the decline in prices for solar modules.

And, oh yes, there's also the rapidly falling price of silicon helping to remove First Solar's cost competitiveness and providing companies that utilize polysilicon wafers, like Yingli Green Energy (NYSE:YGE) and Trina Solar (NYSE:TSL), a substantial advantage over First Solar. There seems to be a question about how long prices will remain depressed -- which is one of the main reasons everyone seems so down on First Solar -- so let's just take a moment to evaluate.

Supply
Polysilicon, like every other commodity, abides by the laws of supply and demand. Although silicon is the world's second-most-abundant resource, it has to be refined to a purity of 99.99% in order to be useful in solar and electronics applications, and therefore it becomes an extremely capital-intensive process. This puts polysilicon in somewhat limited supply.

Demand
On the demand side, poly remains a required material for the semiconductor industry. With the continual extension of globalization and PC distribution and the bursting evolution of PDAs and smartphones (and thus computer chips), semiconductors are constantly in demand. Just take a quick glance at recent cell-phone usage numbers in the most rapidly developing markets:

  • China: Population: 1.34 billion; 547 million cell-phone users.
  • India: Population: 1.17 billion; 362 million cell-phone users.

Furthermore, information provided by research firm Gartner Inc. says that worldwide PC replacements will rebound strongly in 2010-2011. This, coupled with its prediction that PC sales will grow by more than 10% in 2010, sets the stage for a strong PC recovery.

If you ask me -- looking at supply and demand -- I don't see the current low poly prices as sustainable if producers get hit with increasing demand on both the electronics and solar fronts.

Where does that leave us?
I'm not going to lie: As with those delicious cheesesteaks, First Solar comes with many risks. Technology is rapidly changing. R&D costs are abundant. Competition is fierce. And with 95% of First Solar's revenue coming from abroad, a sudden change in foreign demand could dry up a once-juicy appetite.

Should you buy First Solar with money you may need in the next few years? Absolutely not. But if you have time to buy and hold, and won't get finicky about commodity prices or the next market bottom, in my opinion First Solar is still the best and brightest of the solar bunch.

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Fool contributor Jordan DiPietro doesn't have a position in any of the companies mentioned above; you can check out his CAPS profile. Suntech Power Holdings is a Motley Fool Rule Breakers recommendation. Try any of our Foolish newsletters today, free for 30 days.The Motley Fool has a disclosure policy.