In the first quarter of this year, Suntech expects module prices to fall 10% to 15%, mainly driven by the weakening euro. But beyond that, the company said it doesn't see prices needing to fall much further over the course of the year. The company's confidence comes from what it expects to be satisfactory project-level rates of return in Germany (even after factoring in the tariff reduction) and "extremely strong" demand elsewhere in Europe.
Despite moving a lot of product, which should have helped the company burn through higher-cost silicon inventory, gross margins still fell in the quarter. The company is guiding for polysilicon costs to drop to $40 to $45 per kilogram by year's end, so Solarfun's cost structure could improve significantly over the next few quarters. That makes me think last week's sell-off may have been a bit of an overreaction.
On the second-half demand question, Solarfun echoed Suntech, arguing for significant pent-up demand elsewhere in Europe. The U.S. and China are also expected to be bright spots in the back half of the year, which would further cushion the decline in Germany.
Granting that the demand is there, do these other countries have the infrastructure and the manpower to handle a massive influx of modules? The floor is open for Fools "on the ground" to expound.