First Solar (NasdaqGS: FSLR), a major component in exchange traded funds tracking the solar energy industry, reduced its yearly sales and profit projection and cut its 2012 guidance after a drop in solar panel prices and diminished government subsidies.

Guggenheim Solar (NYSEArca: TAN) was down 4.7% at last check Wednesday. FSLR is 20.64% of the fund.

Market Vectors Solar Energy ETF (NYSEArca: KWT) lost 3.3%. FSLR is 6.90% of the fund.

Europe, a large solar power market, has cut back on incentives, forcing First Solar to reduce its costs and move toward growth in new areas, reports Matt Daily for Reuters. [Solar ETFs Worst Performers in 2011]

“Transitioning away from the subsidies will put us on an entirely different trajectory from the rest of the industry. The business we’re describing will be capable of strong, consistent and profitable growth for decades,” Interim Chief Executive Mike Ahearn said in the report.

First Solar estimates downwardly revised net sales of $2.6 billion to $2.9 billion for 2011. The company also expects 2012 earnings of $3.75 to $4.25 per share, with net sales of $3.7 to $4.0 billion, compared to analyst expectations of $7.40 per share. Wall Street projected sales of $4.01 billion.