LG Electronics to pull out of solar panel market

South Korea's LG Electronics Inc. said on Wednesday it has decided to close its solar panel business in the face of deepening competition and sluggish sales, about one year after it exited the mobile phone market.

Since entering the solar cell and module manufacturing business in 2010, LG has focused on premium solar panels such as N-type and double-sided cells. But the business accounts for only 1.5% of LG Electronics' revenue with a meager 1% share in the global market.

“For the efficient management of our internal resources, we will restructure our business, focusing our capabilities on core businesses,” LG said in a regulatory filing. 

The decision, made at a Feb 22 board meeting, was in line with the company's choice and focus strategy and would improve its financial conditions in the medium to long term, it added.

For the first nine months of 2021, LG already cut solar panel production volumes by half to 640 megawatts, compared with a year earlier.

Sales from the solar panel business declined to 58 billion won ($50 million) last year, versus 800 billion won in 2020 and 1.1 trillion won in 2019.

It will relocate 900 employees in the solar energy division, including 600 workers based in South Korea, to other divisions by the end of June of this year.

But the home appliance maker said it will continue to do its other energy-related businesses such as energy storage systems and automotive parts manufacturing.

STRUCTURAL PROBLEMS

Competition from low-cost Chinese suppliers and a sharp increase in polysilicon and other raw materials prices, blamed as the industry's structural problems, forced smaller Korean solar panel makers to exit the business in the past few years.

Now larger solar energy companies in the country are scaling back their operations.

"Despite the growing demand for solar panels in the global push for carbon neutrality, the pace of supply growth is steep, too," said an industry source.

Hanwha Q Cells Co., a Korean manufacturer of photovoltaic solar cells, reported an operating loss of 328.5 billion won in 2021.

SKC Co. of SK Group in 2020 pulled out of the ethylene-vinyl acetate (EVA) sheet business. EVA sheets are used to protect solar modules.  

Shinsung E&G, another Korean solar cell and module manufacturer, sold its plant in North Chungcheong Province last year.

LG's decision to shut down the solar panel business comes after Cho Joo-wan took over the leadership of the world's No. 2 TV maker last month. 

Having served as the company's strategy chief between 2020 and 2021, he had led its drastic business restructuring, including the withdrawal from the mobile phone business. 

Write to Hyung-Suk Song at click@hankyung.com
Yeonhee Kim edited this article