Industry cost leader First Solar (NASDAQ: FSLR) soon may face increased competition in the thin-film solar market in the form of GE, which is making the switch from traditional silicon to cadmium-telluride—the same material that First Solar uses—in its production of solar panels. Apparently following the same logic as the Arizona-based solar giant, GE’s research arm released on Thursday news about its activities in cadmium telluride, which it has deemed the most potentially cost-effective material to use in manufacturing solar photovoltaic cells.

“We think cad tel fundamentally has better cost structure than other thin-film technologies” [said Danielle Merfeld, the solar technology platform-leader at GE’s research facility in Niskayuna, NY]. “The combination of efficiency that we think we can get to, the yield of the manufacturing line, the cost of manufacturing, and the cost of raw materials–the combination gives us the best outcome for making electricity.”

GE’s thin-film solar cells will utilize technology from PrimeStar Solar, a Denver, Colorado-based company of which it was the majority shareholder in 2008, and will go into production sometime in 2011. While that’s still a long way off, GE isn’t letting its announcement go unnoticed by potential rivals.

In terms of efficiency, Merfeld said GE projects it can come to market with a solar panel that is more efficient than what First Solar already offers, which is about 11 percent.

As one of the two largest solar manufacturers in the world, First Solar is unlikely to allow GE into its space without a fight, particularly since the latter is targeting the utility market with its new panels. With its reputation for efficient manufacturing and its strong financial performance even in the face of economic crisis, First Solar has presumably long since begun to gear up for a fight.