'Business Restructuring' LG Electronics Exits Solar Power and Focuses on New Ventures (Comprehensive Report 2)

Decision to End After Repeated Profitability Decline Since 2010 Entry... Workforce Reallocation
Expected Improvement in Structure and Financial Health, Strengthened Investment and Support for Future Projects

[Asia Economy Reporter Lee Hye-young] LG Electronics is finally withdrawing from the solar panel business. LG Electronics plans to boldly restructure its loss-making businesses and strengthen investment and support for future core businesses through 'selection and concentration.'

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

LG Electronics had been conducting a long-term review on whether to withdraw from the solar panel business as the business failed to gain momentum. It is analyzed that the company concluded it would be difficult to find a breakthrough in a situation where the demand for polysilicon, a key raw material, surged sharply, causing prices to skyrocket, coupled with a low-price offensive from Chinese products.

LG Electronics stated, "Although there may be some short-term decrease in overall sales due to the termination of the solar panel business, mid- to long-term effects such as improvement in business structure and financial health are expected."

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, LG Electronics secured world-class N-type cell technology and increased its market share.

However, the business environment deteriorated due to fierce price competition caused by low-priced Chinese products and the rise in the price of polysilicon, a key raw material, and performance also declined. Polysilicon prices have currently risen 3 to 4 times compared to the previous year, significantly increasing cost pressures on domestic companies including LG Electronics.

LG Electronics’ sales related to the solar panel business fell from around 1.1 trillion KRW in 2019 to about 800 billion KRW in 2020, accounting 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 it difficult.

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 worsened 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 Q3 and Q4 of last year, respectively, turning to losses compared to the first half.

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

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

Regarding about 900 employees in the Energy Business Division, including approximately 600 domestic employees related to the solar panel business, reassignment will begin.

An LG Electronics official said, "Reassignment will be conducted by prioritizing employees’ capabilities and preferences, while comprehensively considering manpower demands from 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."

Business Portfolio Advancement... Focus on Core Businesses

After withdrawing from the mobile business, which lasted 26 years, last year, LG Electronics is focusing on advancing its business portfolio by consecutively restructuring 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 company-wide levels. For new businesses, innovation processes such as in-house ventures and company-in-company (CIC) will be introduced, and mergers and acquisitions (M&A) and strategic partnerships to secure capabilities will also be considered. Additionally, ongoing energy-related businesses and R&D, including ESS (Energy Storage Systems) and LG BECON, a building energy management solution, will continue.

[Image source=Yonhap News]

LG Electronics is expanding its business structure, which was hardware-centered in existing core businesses such as home appliances and TVs, to include software and content fields, focusing on enhancing customer value and competitiveness. Last year, along with the termination of the mobile phone business, LG partnered with Magna International, the world’s third-largest automotive parts supplier, to establish LG Magna e-Powertrain, a joint venture in the electric vehicle powertrain sector.

An LG Electronics official said, "Although the solar panel business is ending, we will leverage the know-how and capabilities acquired through this business as a lever to apply to other B2B businesses and create a stable growth foundation."

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