Faced with tough competition from Chinese manufacturers and market slump, South Korean tech giants including SK, LG, and Samsung are finding it tough to turn their solar ventures into profitable businesses.
The solar technology market, once deemed to be a potential cash cow, is proving to be less than lucrative for the Korean companies, which also have to contend with Chinese manufacturers able to produce the products at a lower cost.
"The downturn in the solar technology market continues, and recovery is not yet in sight," a researcher from the Korea Institute for Industrial Economics and Trade, who declined to be named, told The Korea Times. "For example, the market for polysilicon, a key material for solar energy solutions, is still grappling with severe oversupply and weak demand."
He said some big companies were planning to shutter their solar energy businesses to stump the weakening financial crisis.
Sohn Ji-woo, an analyst at SK Securities, concurred: "Worsening performance financially burdens big companies. Withdrawal from the market will come."
According to the report, Samsung, LG, SK, and Hyundai confirmed they were reviewing their respective business since they were unlikely to generate any viable rewards.
"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 a spokesperson from LG Chem. Another subsidiary under the LG Group, LG Siltron, said it was registering increased losses under aggressive expansion by Chinese manufacturers.
Samsung Fine Chemicals also said it would exit the solar market by selling its 35 percent stake in its polysilicon joint venture back to SunEdison. The two companies established the joint entity in 2011 with the goal to build a polysilicon plant, which would have a yearly production capacity of 10,000 tonnes. This target is currently on hold.
"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,” a Samsung official told The Korea Times, which noted that Samsung had targeted to be a leading solar technology player by 2015, with an investment of some US$6.6 billion in solar and wind energy projects in Canada. The Korean tech company had also abandoned its plan to purchase thin-film solar assets.
Meanwhile, SK Group's battery-manufacturing business unit, SK Innovation, sold its 47.9 percent stake in Austin-based HelioVolt. It had poured US$76 million into the U.S. company in 2011 as part of efforts to tap a then-growing solar market and expand its product portfolio.
A company spokesperson confirmed SK Innovation's solar business "has been put on hold".
Hyundai Heavy Industries and KCC had pulled out of the market in 2013.
Lee Jeong-koo, researcher at the Korea Institute of Science and Technology Information, said in the report: "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."
In stark comparison, market players in China and India are finding some success in solar technology. China's National Energy Administration, for instance, said investments in solar power generation were expected to reach 250 billion yuan (US$39.5 billion) with some 500,000 people forecasted to be employed.
In India, the state of Madhya Pradesh last month accepted a bid by HimgiriEnergy Ventures to supply solar power to the state grid at Rs 6.5 (US$0.106) a unit. This was 13 percent lower than the lowest price recorded to date in India.