LG Electronics to Exit Solar Panel Business... A Strategic Bet on 'Selection and Concentration' (Comprehensive)

Decision to End Business After 12 Years Amid Repeated Profitability Decline
Focus on Core Business Strategy... "Medium to Long-Term Improvement in Structure and Financial Health Expected"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Hye-young] LG Electronics is finally exiting the solar panel business. The company has decided to terminate its solar cell and module business, which has seen declining profitability, in order to focus on its core businesses and future preparations.

On the 23rd, LG Electronics announced that at the board meeting held the previous afternoon, it decided to end its solar panel business as of June 30. This marks 12 years since entering the solar panel market in 2010.

LG Electronics had been reviewing whether to downsize or withdraw from the solar panel business for a long time due to the continuous deterioration of its profitability. The sharp increase in demand for the key raw material polysilicon caused prices to soar, and the ongoing low-price competition from Chinese products repeatedly worsened profitability, making it difficult to find a breakthrough, ultimately leading to the decision to end the business.

LG Electronics stated, "Although there may be some short-term decrease in overall sales due to the termination of the solar panel business, in the mid to long term, we expect improvements in business structure and financial health."

Market Share and Performance Both 'Poor'

The solar panel business was a ‘sore spot’ for LG Electronics. After entering the solar panel market in 2010, seeing growth potential, the company secured world-class N-type cell technology and increased its market share.

However, the business environment worsened due to fierce price competition from low-cost Chinese products and rising prices of the key raw material polysilicon, causing performance to decline.

Sales, which were around 1.1 trillion KRW in 2019, dropped to about 800 billion KRW in 2020. This accounted for approximately 1.5% of LG Electronics’ total sales. The global market share was also a disappointing '1%', deepening the management’s concerns. Although a sale was attempted, ongoing business uncertainties made this difficult as well.

LG Electronics also mentioned the challenging situation of the solar business during the Q4 earnings conference call held in January.

Park Chung-hyun, Executive Director of the BS Business Division, which handles the solar business, explained, "Profitability deteriorated due to poor performance in the solar module business." As the solar business struggled, the BS Business Division recorded operating losses of 12.3 billion KRW and 35.1 billion KRW in the third and fourth quarters of last year, respectively, turning to losses compared to the first half.

Minimizing Impact of Business Closure... Reassignment of 900 Employees

LG Electronics plans to continue producing solar panels until the second quarter, considering necessary volumes for maintenance and support, to minimize the impact of withdrawal.

Regarding about 900 employees in the energy business division, including around 600 in Korea related to the solar panel business, reassignment will begin.

An LG Electronics official said, "Reassignment will prioritize employees’ capabilities and preferences, while comprehensively considering manpower needs of other business divisions and LG affiliates. For employees relocating to other regions, we will actively support them to quickly adapt to their new workplaces through sufficient consultation with labor unions."

Advancing Business Portfolio... Focusing on Core Businesses

After exiting the mobile business last year, which had lasted 26 years, LG Electronics is focusing on refining its business portfolio by consecutively streamlining non-core businesses.

The BS Business Division, responsible for B2B businesses including the solar panel business, will focus on IT (monitors, laptops, etc.), ID (signage, commercial TVs, etc.), and robotics businesses.

The company plans to review and nurture new businesses at both the division and corporate levels. For new businesses, it will introduce innovation processes such as internal ventures and company-in-company (CIC), and consider mergers and acquisitions (M&A) and strategic partnerships to secure capabilities. Additionally, ongoing energy-related businesses and R&D, including ESS (Energy Storage Systems) and LG BECON, a building energy management solution, will continue.

In its existing core businesses such as home appliances and TVs, LG Electronics is expanding its hardware-centered business structure to include software and content areas, focusing on enhancing customer value and competitiveness. Last year, alongside the mobile phone business exit, it established LG Magna e-Powertrain, a joint venture in the electric vehicle powertrain sector, partnering with Magna International, the world’s third-largest automotive parts supplier.

This content was produced with the assistance of AI translation services.