NEW YORK (TheStreet) -- The solar industry can be divided into two main segments: the big, vertically integrated solar players, and the niche firms that focus on manufacturing expertise in cells or wafers.

Among the big boys,

First Solar

(FSLR) - Get Report

is the bellwether.

First Solar had its bell rung in the second half of 2009 and big questions loom for the company heading into 2010.

Some analysts, for one thing, have wondered aloud if

First Solar is really still a technology growth stock.

Still other analysts have pointed to hiccups in

First Solar's effort to develop a large-scale project business, a nascent market that focuses on selling solar-generated electricity to major utilities.

These developments come ahead of expected reductions in governmental support for the solar industry in Germany, a huge market for First Solar.

Still, the biggest question facing the company heading into 2010 may be if it can continue to eke out a cost advantage vs. Chinese competitors like

Trina Solar

(TSL)

and

Yingli Green Energy Holdings

(YGE)

.

At an investor event in New York last week, First Solar executives said they expect prices in 2010 to reach $1.50 to $1.60 per watt for the company's captive audience, which refers to those customers that use First Solar modules within larger solar projects. Analysts assume that by the end of 2010, average sale prices for Chinese modules could fall as low as $1.20-$1.25 per watt.

In the end, the premium First Solar intends to charge its customers could be a tough sell. It could also set up a price war with China in 2010 and beyond.

Other U.S. solar companies -- including the No. 2 player,

SunPower

( SPWRA) -- face similar pressures vis-a-vis their Chinese rivals.

Putting aside its ongoing internal accounting investigation,which may not be as dire as some have predicted,

as well as other management issues, SunPower must wrestle with competion from China just like the rest of the sector.

It's true that SunPower has one of the most efficient solar technologies in the industry, which has allowed the company to charge more for its products. But as its peers in China continue to narrow the quality gap, they're also widening their cost advantage. It's the same question faced by First Solar: Will customers continue to pay a premium in a market being rapidly altered by the Chinese?

Solar analysts often say that questions about the quality of Chinese solar products disappear when the discussion turns to price.

That discussion will continue to influence the fortunes of SunPower and First Solar.

All of which raises the following question: Can Trina Solar and its Chinese peers keep cutting prices in 2010?

Indeed,

Trina Solar

(TSL)

has benefited greatly at the expense of its U.S. rivals over the past year. For one thing, Trina's existing cost reductions were aided by a drastic drop in the price of polysilicon. But because polysilicon prices are expected to stabilize in 2010, some solar analysts think Trina and its Chinese cohorts are nearing the point of maximizing their cost advantage.

Trina shares have surged from under $10 at the beginning of 2009 to $53.49 this week. The big question for Trina's stock, then, may be if it can continue to trade at higher multiples, since investors have been leery, analysts say, of paying as much for Chinese stocks as for North American and European companies.

It may seem ironic that investors would be less inclined to pay higher multiples for Chinese names, when a U.S. company like SunPower is currently mired in an accounting scandal. What's more, Trina in 2009 has reduced its debt-to-total-assets ratio and increased revenue and income. Still, whether Trina's stock has peaked or can continue to make strides in 2010 is a legitimate question for investors, given its sharp run-up this year.

Yingli Green Energy Holdings

(YGE)

is on the same trajectory as Trina, with a growing share of the vertically integrated solar market and a stock price that has shot higher.

For Yingli, Trina and

Suntech Power

(STP)

, their big question is: Which of these Chinese solar players can most effectively internationalize their business?

Though Suntech is considered by some analysts to have the best international brand, it also has the worst balance sheet among the big three. Suntech's debt-to-total-assets ratio is in the range of 40%, while Yingli and Trina have ratios closer to 25%.

The same can't be said of Yingli; many analysts expect the company to widen its profit margins and beat consensus earnings in 2010.

But over the next several years, the competition among the China-based companies to become the first truly global player will be a key race for investors to watch.

Much of the recent trading in solar-sector stocks has been in the under-$10 pack of upstart Chinese companies, including

JA Solar

(JASO)

.

Thus, while Trina and Yingli battle it out with First Solar and SunPower for the vertically integrated market share, JA Solar represents the niche category. It does one thing and does it well: making best-in-class solar cells at low cost.

Many analysts believe JA Solar will benefit from tailwinds going into 2010, as global solar firms, particularly in Europe, opt to slow the pace of their own cell production and buy from companies like JA Solar to use within their own assembly lines. The goal in places like Europe is to support local job growth, and that goal would not be hurt by the use of low-cost JA Solar cells in European assembly.

Still, analysts caution that JA doesn't have the greatest balance sheet in the world, with its debt-to-total-assets ratio increasing throughout 2009.

Last and -- well, perhaps least -- is LDK Solar, which is Public Enemy No. 1 when it comes to poor balance-sheet management.

LDK recently announced a secondary equity offer to raise cash to help pay off its debt, a dilutive move for which

investors punished LDK's stock, sending it from a 52-week peak near $17 to below $10.

LDK is still a leader in the manufacture of solar wafers, and its performance in 2010 could depend as much on the outlook for the wafer market as it does on its finances.

Even if the capital-markets environment improves, the outlook for the solar wafers is murky. Overcapacity could keep any earnings improvements by LDK to a level that will still leave the company in the position of bailing water when earnings are compared to LDK's debt level. According to some analysts' estimates, LDK's debt totals more than 100% of the company's enterprise value.

The question for investors now: Have LDK shares fallen to a point where they represent a good buy, or will the company's debt-to-total-assets ratio of 50% be likely to cause more problems? Perhaps by the end of 2010 we will have shed a little (sun)light on that question.

-- Reported by Eric Rosenbaum in New York.

RELATED STORIES:

>>LDK Raising Cash, Shares Drop

>>First Solar: Is it Still a Growth Stock?

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