Big firms ditch solar energy projects

Korean conglomerates are pulling out of the solar energy business following sales losses in the production of related products, such as solar panels, which are seen above in this file photo. / Korea Times fiile

By Yi Whan-woo

Korea’s conglomerates are pulling out of the solar energy business because of the gloomy outlook for an industry that was once considered the country’s next growth engine.

The companies including LG Group, OCI, Hyundai Heavy Industries and Woongjin Group made the move amid a fierce cost-cutting competition with their Chinese rivals. They say withdrawal from such green energy business is their best option dimming the prospects for eco-friendly products such as solar wafers, cells, panels and batteries.

LG Siltron was the latest solar power equipment maker to pull out of the business on May 22. The solar cell wafer manufacturing arm of LG Group said the decision comes as its wafer production totaled 16.1 million last year, down from 18.1 million of the previous year.

It said its operating profit plunged to 66.7 billion won ($59.4 million) in 2012 from 145.6 billion won in 2011.

“Our board of directors voted to scrap our solar energy business because we could not find ways to cope with dumping from our Chinese competitors,” it said.

The company added its decision was also influenced by LG Chem that in October 2012 postponed constructing a plant to make polysilicon. The material, extracted from sand, is used in semiconductors.

The price has remained in the $10 per kilogram range since the second half of last year, according to Son Young-joo, a senior analyst at Kyobo Securities.

“Many firms will see losses and find it difficult to run their businesses unless the price remains at $30 per kilogram or higher,” he said.

Another economist held a similar view.

“It’s really difficult to be positive on solar business investment as polysilicon prices are on a downward trend,” said Park Young-hoon, an analyst at LIG Investment & Securities.

LG Group’s solar battery production in the United States remains on hold following the less-than-expected popularity of electric vehicles. LG Chem built the world’s largest EV battery production plant in North Chungcheong Province and construction of a $300 million production plant in Michigan began in 2011.

In 2012, other companies such as KCC suspended its polysilicon business while SK Chemicals cancelled a pilot program to produce polysilicon with a Taiwanese firm.

OCI, the world’s fourth largest polysilicon maker, made up with a similar move. It said on May 15 that it will postpone construction of two additional plants.

“We’ve made abrupt changes although we carried out the plan since 2010 with an investment of trillions of won,” the firm said.

It said the decision was led by debt-crisis-struck Europe that accounts for more than 70 percent of demand for solar cells that use polysilicon wafers.

Hyundai Heavy Industries, one of the country’s three largest shipbuilders, decided in 2012 to restructure its solar business after scrapping plans to build two solar photovoltaic power plants, roughly valued at $700 million, in Arizona.

The restructuring came after the shipbuilder downsized its annual investment by over 40 percent.

“The market demand is way below expectations. It’s no longer feasible,” the firm said.

The case was more serious for Woongjin Group, a conglomerate that started from book sales business. It suffered from a credit crunch after selling off its cash cow water purifier business Woongjin Coway in order to focus more on the solar business carried out by its two affiliates Woongjin Energy and Woongjin Polysilicon.

The Kyobo Securities analyst said local firms should “wait and see” to expand.

“We expect the solar energy industry to turn around some time during the second half,” he said.

“European countries are demanding China to refrain from dumping.

“Korean firms that have competitiveness in the global market will have their chance because the future of solar energy will be prosperous.”