South Korea's Solar Supply Chain Crumbles Amid Chinese Price War

The Collapse of the Domestic Solar Power Industry

The domestic solar power industry has faced a significant downturn, with its supply chain effectively collapsing. This situation has arisen due to the gradual displacement of local companies from the market, spanning from basic materials to finished products. Over the past decade, Chinese companies have maintained a low-price strategy that has made it difficult for domestic firms to remain competitive.

Polysilicon Production and Its Decline

Polysilicon is a critical material in the manufacturing of solar power generation facilities. However, domestic production of polysilicon is virtually nonexistent. Following Samsung Precision Chemicals' exit from the business in 2014, leading domestic solar power companies such as OCI and Hanwha Solutions, along with Hanwha Q CELLS, ceased domestic production in 2020. This decision was driven by a global price drop in polysilicon, which was largely influenced by Chinese companies engaging in a "chicken game." These companies benefited from low electricity rates, labor costs, and a large domestic market, making it nearly impossible to generate profits through domestic production.

Impact on Ingots and Wafers

As the polysilicon supply chain collapsed, the effects quickly spread to the ingot and wafer markets. Woongjin Energy, which had established itself as a specialist in ingots and wafers during the 2010s, ultimately went bankrupt in 2022. This marked a significant loss for the domestic industry, as these components are essential for the production of solar cells and modules.

Challenges in Finished Products

Companies involved in the production of finished products, such as solar cells and modules, have also been severely impacted. LG Electronics, a major player in this sector, exited solar module production in 2022 after 12 years in the industry. This move was a direct result of intensified price competition as low-cost products became more prevalent in the market. The remaining companies, Hanwha Solutions and OCI Holdings, have been reducing their operations in Korea and seeking new opportunities in the United States, where they can avoid the aggressive competition from Chinese products.

Expansion into the United States

Hanwha Solutions is currently constructing a "Solar Hub" in Georgia, United States. This facility will be capable of producing solar ingots, wafers, cells, and modules. The company's strategy aims to avoid price competition with China while benefiting from subsidies under the U.S. Inflation Reduction Act (IRA).

Political Uncertainties in the U.S.

Despite these efforts, the situation remains uncertain due to growing political instability in the United States. The emergence of President Donald Trump, who has claimed that "renewable energy is a fraud," could significantly alter future U.S. policy directions. Concerns are already rising that market demand will shrink as subsidy requirements for solar facilities in the U.S. have been significantly strengthened under a tax cut bill passed in July.

Conclusion

The Korean solar power industry is facing a dual challenge: the low-price offensive from China and the uncertainty of U.S. policies. As the industry continues to shake, it must navigate these complex challenges to find a sustainable path forward. The collapse of the domestic supply chain highlights the need for strategic adjustments and potential support mechanisms to ensure the survival and growth of the industry.