Kim Hyun-bin began his journalism career at Arirang TV from 2012 to 2017, specializing in defense, foreign affairs and the economy. In 2018, he joined The Korea Times, covering society and business, and is currently responsible for embassy affairs.
Solar industry faces major setback
Hanwha Solutions' solar panels installed in Frankfurt, Germany. Courtesy of Hanwha Solutions
By Kim Hyun-bin
Hanwha, OCI shut down polysilicon plants
By Kim Hyun-bin
The country's solar industry is facing a major setback after the top two solar businesses shutdown all polysilicon plants in Korea, which will inevitably have an impact on the Moon Jae-in administration's initiative to grow its renewable energy sector.
“We have decided to cease production of polysilicon, which recorded deficits for several years,” Hanwha Solutions said after a board meeting Thursday.
The announcement comes a week after its rival OCI, the country's leading and world No. 2 polysilicon manufacturer, said last week it would halt domestic production because it is unable to match the price of cheaper Chinese products.
Polysilicon is considered to be fuel to the solar industry and is used to produce silicon ingot and wafer. The ingot and the wafer are used to develop the cell modules that are embedded in the solar generator.
OCI locally produced 52,000 tons and Hanwha Solutions 15,000 tons a year of polysilicon, but all production stopped as of Thursday.
Power bills account for 45 percent of the cost of producing polysilicon, which makes it difficult to compete with Chinese competitors as electricity rates in China are only a seventh of Korea's. This comes after the Chinese government drastically increased its generation capacity by building scores of nuclear power plants.
However, Korea has been going in the opposite direction, with the Korea Electric Power Corp. under immense pressure to raise power prices to cover accumulated losses resulting from the government's efforts to phase out nuclear power plants.
“The selling price of the polysilicon is nearly half the cost of production, so if we increase operations, our deficit will rise with it,” a Hanwha Solutions official said. “So we plan to liquidate the business within the year's end. Just last year alone we suffered an 80 billion won operating loss.”
In 2008, a kilogram of polysilicon was $400, but in 2018, the price dropped to $17, further reducing to $7 this year. The break-even point for polysilicon is about $13 a kilogram.
As a result, the company suffered a net loss of 248.9 billion won ($207.4 million) for 2019 after a net profit of 160.4 billion won the previous year, despite a sales increase, the company said in a regulatory filing Thursday. Sales rose by 5.05 percent to 9.05 trillion won last year from a year ago.
Hanwha Solutions plans to focus on other solar-powered businesses.
“Our cell module technology is on the right track, so we plan to expand our business and enhance our profit model,” the company said.
The company's solar-power business delivered a record-breaking operating profit of 223.5 billion won last year, driven by strong sales worldwide from its more efficient mono solar cells production.
Hanwha Solutions was formed this year through the merger of Hanwha Chemical, Hanwha Q Cells and Hanwha Advanced Materials.
OCI shut down three plants in Gunsan, North Jeolla Province, Thursday. Two plants, which produced polysilicon for solar cells, have ceased operations for an undetermined period. The other plant that produces polysilicon for semiconductors is scheduled to resume operations in May.
"Since 2012, there has been a structural decline in polysilicon prices," the company said. "Given the current polysilicon price, we are skeptical about resuming the operation of the plants."
The company expects to cut costs by at least a 25 percent from the closures.
Currently, OCI only produces polysilicon for solar cells at its Malaysian plant.