Structural Changes in the Global Solar Module Industry and HD Hyundai Energy Solutions’ Challenge
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Global Paradigm Shift in the Solar Module Industry
In 2024, the global solar module market is undergoing unprecedented structural changes. According to the International Energy Agency (IEA), the global solar installation capacity is expected to reach 346GW in 2024, marking a 29% increase from the previous year. However, behind this growth lies the overwhelming market dominance of Chinese manufacturers. Data from BloombergNEF indicates that, as of 2024, Chinese companies account for 85% of the world’s solar module production, with 8 out of the top 10 manufacturers being Chinese firms.
In this market environment, Korea’s HD Hyundai Energy Solutions, headquartered in Ulsan, faces significant challenges. The company recorded a consolidated revenue of 1.2847 trillion KRW in 2023, but its operating profit margin was only 2.1%. This is markedly lower than the 8.9% operating profit margin of China’s leading module manufacturer, LONGi Green Energy Technology, headquartered in Xi’an. Industry experts attribute this profitability gap not merely to differences in economies of scale but to the structural characteristics of the solar module industry.
The solar value chain is broadly composed of the stages: polysilicon → wafer → cell → module → system integration. Among these, module manufacturing is an area with relatively low technological entry barriers and is easily automated, making cost reduction through large-scale investment a key competitive factor. Leveraging proactive industrial support policies and low manufacturing costs, Chinese companies have reduced module prices by approximately 60%, from $0.45 per watt in 2020 to $0.18 in 2024. While this price drop is positive for the spread of renewable energy, it poses a survival threat to non-Chinese manufacturers, including those in Korea.
HD Hyundai Energy Solutions’ 2024 third-quarter results highlight these structural difficulties. The company’s consolidated revenue for the third quarter was 320.4 billion KRW, a 12.3% decrease from the same period last year, and it recorded an operating loss of 8.9 billion KRW. Notably, the shipment volume of its core solar module business decreased by 18% year-on-year to 1.2GW. This indicates that despite the growth of the global solar market, Korean companies are losing out in price competition.
Analysis of the Overwhelming Competitiveness of Chinese Solar Companies
The competitiveness of Chinese solar module companies stems from a comprehensive advantage that goes beyond mere low-wage labor. The top company, LONGi, has an annual production capacity of 85GW as of 2024, which is 17 times that of HD Hyundai Energy Solutions’ 5GW. The second-ranked company, Trina Solar, headquartered in Changzhou, has a capacity of 75GW, and the third, JA Solar, headquartered in Beijing, has 65GW. This large-scale production capacity leads to bargaining power in raw material procurement, the dispersal of R&D costs, and reduced manufacturing costs.
Notably, Chinese companies’ vertical integration strategy is a key point. LONGi internalizes all processes from polysilicon to modules, minimizing supply chain risks. In contrast, HD Hyundai Energy Solutions sources a significant portion of its key raw material, solar cells, externally, resulting in structural disadvantages in cost competitiveness. According to industry research firm PV InfoLink, as of 2024, the module manufacturing cost of integrated producers in China is $0.12 per watt, while the average manufacturing cost for Korean companies is $0.19, 58% higher.
The policy support from the Chinese government is also an undeniable factor. Through its ’14th Five-Year Plan,’ China announced plans to expand solar power capacity to 1,200GW by 2030, offering benefits such as low-interest policy funds and land use fee reductions to manufacturers. Additionally, as part of the ‘Made in China 2025’ strategy, the solar industry is designated as one of the top 10 key industries for focused development. This policy backing allows Chinese companies to focus on expanding market share rather than short-term profitability.
In terms of technological innovation, Chinese companies are also leading. In the first half of 2024, LONGi set a world record with a conversion efficiency of 33.9% in perovskite-silicon tandem cells, surpassing the theoretical limit of 29% for traditional silicon cells, demonstrating China’s leadership in next-generation solar technology. In contrast, HD Hyundai Energy Solutions’ main product, monocrystalline silicon modules, has a conversion efficiency of 22.5%, highlighting the widening technological gap.
Strategic Response of the Korean Solar Industry and HD Hyundai Energy Solutions’ Position
In this challenging environment, the Korean solar industry is seeking differentiation strategies. HD Hyundai Energy Solutions began full-scale operation of its high-efficiency N-type module production line in the second half of 2024. N-type technology offers 5-10% higher conversion efficiency and better durability compared to the existing P-type, but it has the drawback of 15-20% higher manufacturing costs. The company is pursuing a strategy to shift from price competition to quality competition through these premium products.
However, there are mixed opinions within the industry regarding the effectiveness of this strategy. According to the 2024 report by solar market research firm Solar Power Europe, premium products account for only about 15% of the total solar module market, with most buyers still prioritizing price as the primary consideration. Particularly in large utility-scale solar power plant projects, reducing initial investment costs is a key factor, indicating limitations in the market expansion of high-efficiency products.
Hanwha Solutions, headquartered in Seoul, faces similar challenges. As of the third quarter of 2024, the company recorded an operating loss of 18.7 billion KRW in its solar module division and is operating its Georgia, USA plant at a 30% utilization rate. Despite establishing a local production base eligible for benefits under the U.S. Inflation Reduction Act (IRA), the company struggles with the increased indirect import of low-cost Chinese products. This suggests that merely relocating production bases does not solve fundamental competitiveness issues.
On the other hand, some experts see opportunities for Korean companies from a long-term perspective. According to a recent report by the Korea Energy Economics Institute, the European Union’s Carbon Border Adjustment Mechanism (CBAM) will be fully implemented from 2025, imposing carbon taxes on Chinese solar modules. Additionally, ‘de-risking’ policies aimed at reducing dependence on China are being strengthened in major markets such as the U.S. and India, potentially creating new opportunities for Korean companies. Indeed, the U.S. Department of Energy designated Korea as a key partner country in its ‘Solar Supply Chain Diversification Strategy’ announced at the end of 2024.
To respond to these changes, HD Hyundai Energy Solutions is pursuing business portfolio diversification. From the second half of 2024, the company has been actively expanding its energy storage system (ESS) business and has entered the solar power plant development and operation business. The ESS market is a high-growth sector with a global market size of $12 billion in 2024 and an expected annual growth rate of 25%. However, Chinese companies CATL, headquartered in Ningde, and BYD, headquartered in Shenzhen, hold the top two market shares at 34% and 18%, respectively, indicating another round of competition with China.
At the group level, HD Hyundai is pursuing a synergy strategy to link energy solutions with the group’s power infrastructure business. The core of this strategy is to provide integrated solutions by combining HD Hyundai Electric’s power equipment business, including transformers and switchgear, with HD Hyundai Energy Solutions’ solar modules. However, this synergy effect has not yet translated into visible results, and skepticism prevails among investors. In fact, HD Hyundai Energy Solutions’ stock price fell by 35% in 2024 compared to the beginning of the year, contrasting with a 28% rise in HD Hyundai Electric’s stock during the same period.
Industry experts evaluate HD Hyundai Energy Solutions’ current situation as “a good company in a bad industry.” While the company’s technology and quality are internationally recognized, the solar module industry itself is structurally challenged in securing profitability due to China’s overwhelming dominance. This is similar to the structural characteristics seen in the global semiconductor industry, where Korea excels in memory semiconductors, but Taiwan’s TSMC dominates foundries.
Ultimately, the future outlook for HD Hyundai Energy Solutions depends on the speed of its transition away from the solar module business and its ability to secure new growth drivers. If the company’s ongoing ESS and power plant development businesses successfully take root, it could mark a new turning point, but the current situation is fraught with uncertainty. From an investor’s perspective, the company is considered a relatively less attractive investment within the HD Hyundai Group, and independent growth is deemed challenging without strategic support from the group. This serves as a representative case demonstrating that the growth of the renewable energy industry does not necessarily lead to improved profitability for related companies.
Disclaimer: This blog is not a news outlet, and the content reflects the author’s personal views. Investment decisions are the responsibility of the investor, and no liability is accepted for investment losses based on the content of this article.
