LG axes solar panel business in midst of rising material costs and supply contraints
LG Electronics has announced it will exit the solar panel sector due to rising material costs, supply chain constraints, and intensified price competition.
"The decision comes as uncertainties in the global solar panel business continue to increase due to a variety of contributing factors, including the intensification of price competition and the rising cost of raw materials," LG said.
LG's solar business panel business joins the company's smartphone business in the graveyard, with the latter business being canned last April as it could not compete with other smartphone brands in the market. Prior to the smartphone business closing shop, it had recorded 23 consecutive quarters of loss.
The decision was approved by the board of directors on Monday night, LG said.
LG's solar panel production will start winding down next month, the company said, with the business to officially shut down at the end of June.
Addressing existing customers, the company said it would continue to provide solar panel support for US customers for "years to come". The company did not disclose how many years of support would be provided.
The decision to close the solar panel business will see 160 employees and 60 contract workers based in Huntsville, Alabama either be let go or moved to LG's other manufacturing units. In South Korea, approximately 900 employees will be repositioned to other business units and tasks.
The company added it would reallocate the business' resources into other "growth sector" products, such as energy storage systems and home energy management solutions.
The story of rising material costs and supply chain constraints adversely impacting LG's operations extends beyond its solar panel business, as the company's total operating profit during the fourth quarter slumped 21% year-on-year due to these factors.
In announcing the fourth-quarter slump, LG said at the time it expected these issues to persist in 2022.
"Difficulties may persist as uncertainties remain with the spread of the COVID-19 variant, continued supply chain issues and increase of raw material price and logistics expense," LG said.