Posted : 2014-04-03 17:51
Updated : 2014-04-04 14:44

SK gives up solar business

By Kim Yoo-chul

Korea's major conglomerates, such as Samsung, LG, SK and Hyundai, are moving to scale down or restructure their solar businesses due to snowballing losses caused by a prolonged market slump.

The solar technology business was once considered one of the next cash cows for the conglomerates, which vowed to increase their investments in facilities.

However, the market has since become less lucrative and many Chinese manufacturers have started producing cheaper solar technology products.

"The downturn in the solar technology market continues, and recovery is not yet in sight. For example, the market for polysilicon, a key material for solar energy solutions, is still grappling with severe oversupply and weak demand," said a researcher at the Korea Institute for Industrial Economics and Trade by telephone.

The researcher, who declined to be named, said that some big companies are planning to fold their solar energy businesses due to worsening financial soundness.

"Worsening performance financially burdens big companies. Withdrawal from the market will come," said Sohn Ji-woo, an analyst at SK Securities.

Such bearish moves have brought a new market order, with Chinese manufacturers emerging as the winners, pushing Korean companies to the side.

Officials at Samsung, LG, SK and Hyundai admitted that they are conducting a zero-based review of the business as it is highly unlikely to yield any visible returns.

"There won't be any big investment in facilities for polysilicon, meaning that the solar technology business isn't as attractive as it was believed to be a few years ago," said an official at LG Chem.

LG Siltron, the solar technology business affiliate of LG Group, admitted that the company is reeling from increased losses, hit by the aggressive expansion by Chinese manufacturers.

POSCO Energy is also seriously considering completely leaving the market as its solar energy business has been in the doldrums, even though the company won a deal with solar technology firm SECP in Nevada in the United States in late 2010.

"This is a red ocean not a blue ocean. POSCO Energy is restructuring its solar business. The investment decision for solar energy was simply wrong," said an official at POSCO, who declined to be named.

Samsung Fine Chemicals also said it will soon drop its solar business by selling its entire 35-percent stake in its polysilicon joint venture to SunEdison.

The two formed the venture in 2011. Its project to construct a polysilicon plant in the southern industrial city of Ulsan, which would have an annual capacity of 10,000 tons, is now on hold, said Samsung officials.

"Samsung decided not to take the investment risk. Competition is very intense, and according to our own analysis, Samsung isn't in a position to increase its stake in the crowded market," said an official at Samsung.

Earlier, Samsung said it wanted to be the No. 1 solar technology company by 2015 and it would invest around $6.6 billion into solar and wind energy projects in Ontario, Canada.

Its alternative plan to acquire thin-film solar assets to acquire patented technologies and put its ailing solar technology business on track as soon as possible has also been scrapped, said the official.

SK Innovation, the battery-making unit of SK Group, also sold its 47.9 percent stake in Austin, Texas-based HelioVolt as the market outlook isn't rosy.

In 2011, SK Innovation invested $76 million in the U.S. firm, hoping to jump into the solar market and diversify its portfolio.

"SK Innovation's solar business has been put on hold," according to an official at the company by telephone.

Hyundai Heavy Industries and KCC exited the market last year, and Woongjin Holdings is in the process of selling its solar plant in the local provincial city of Sangju, said Woongjin officials.

"Big Korean companies had no strategy. They just jumped into the market, and now they are abandoning the business. As Chinese companies positioned themselves through aggressive pricing, the Koreans can't win. This is a complete failure," said Lee Jeong-koo, researcher at the Korea Institute of Science and Technology Information.

Unlike the desperate situation in the Korean market, the solar industry in Beijing is growing.

Deutsche Bank said in a recent report that the global solar market may see improvement after previous struggles thanks to demand pickup from China, the U.S. and Japan.

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