The Counterattack of the Korean Solar Industry Begins – A 10 Trillion Won Market Shifts Away from Chinese Dependence

The winds of change are finally blowing in the Korean solar industry. News has emerged that President Lee Jae-myung has directly instructed the Ministry of Climate, Energy, and Environment to devise a plan for solar product localization. This development is expected to mark a turning point for the domestic solar market, which has been completely overrun by Chinese products. Alongside the government’s ambitious plan to increase the annual solar installation capacity from the current 3GW to 10GW, there is a clear determination not to cede the resulting multi-trillion won market to China.

The most notable aspect of this localization policy is its focus on the solar inverter sector. Currently, over 90% of the domestic solar inverter market is filled with Chinese products, and the government’s short-term goal is to reduce this to below 60%. It has been an open secret in the industry that major corporations like HD Hyundai Energy Solutions, Hanwha Solutions, Hyosung Heavy Industries, and OCI Power have been importing products from Chinese companies such as Chint Power, Sungrow, and Huawei, and selling them under their own brands.

This situation arose due to economic logic. With a 20-30% price difference between Chinese and domestic products, large corporations opted to close their inverter manufacturing plants and rely on Chinese imports to cut costs. However, the government is now stepping in to restore this distorted ecosystem. The first step is encouraging large corporations to enter into ODM (Original Design Manufacturing) contracts with mid-sized and small domestic companies like InnoElectric, Geumbi Electronics, Dongyang E&P, and Dasstech, which still have manufacturing facilities in Korea.

News has surfaced that OCI Power has initiated supply negotiations with a small company, and other large corporations are expected to begin full-scale collaborations starting next year. Inverter manufacturers have also decided to establish the ‘Korean Solar Inverter Industry Council’ to coordinate their efforts, indicating that the entire industry is mobilizing.

Government Support Measures and Protective Barriers

The government is not merely demanding localization but is also offering practical support measures. The most powerful card is the preferential policy for domestic products in public projects. In large public projects that will generate significant solar power demand, such as 100% renewable energy industrial complexes and rural solar power, the use of domestic inverters will be mandated or favored. This ensures a stable demand source for domestic companies.

Furthermore, the government is effectively establishing entry barriers against Chinese products. By strengthening KS certification, a non-tariff barrier is being erected that requires Chinese companies to develop separate products suitable for the Korean market. With ongoing controversies over ‘backdoors’ in Chinese inverters, communication equipment-related certifications are expected to be tightened, indicating a strategy to secure an advantage for domestic products in terms of security.

In the solar cell sector, the government is considering implementing production tax credits and expanding R&D support for the early commercialization of next-generation technologies like tandem cells. This is interpreted as a long-term strategy to secure technological superiority beyond mere import substitution.

However, the government acknowledges realistic constraints. There is a dilemma of achieving localization without slowing down the pace of solar adoption. Therefore, domestic inverter manufacturers are being asked to reduce costs by about 20%. This means that alongside government support, companies must also improve production efficiency to narrow the price gap with Chinese products.

Market Size and Economic Impact

To fully understand the economic significance of this localization policy, one must consider the market size. Increasing the annual solar installation capacity from the current 3GW to 8-10GW signifies a massive market expansion. It is anticipated that in 10 years, 30% of the electricity used domestically will be generated by solar power, forming an annual market worth 10 trillion won.

The problem is that if the current situation persists, this enormous market is likely to become the domain of Chinese companies. This is because most key components, including inverters, solar modules, and cells, are currently reliant on Chinese products. This is why both the government and the industry feel a sense of crisis.

The reactions from industry insiders also reflect a sense of urgency. One insider described it as “the last chance to save the domestic solar industry, which is on the brink of collapse due to China.” The statement “Once all domestic production facilities are gone, it will be difficult to revive them by any means” underscores the severity of the current situation.

However, for this policy to succeed, several challenges must be addressed. The biggest issue remains price competitiveness. Overcoming the 20-30% higher price compared to Chinese products is crucial. Government support alone has its limits, and ultimately, improvements in production efficiency and technological innovation by domestic companies are essential.

Additionally, the impact of rapid market changes on the pace of solar adoption must be considered. If supply shortages or price increases occur during the localization process, it could hinder the government’s goal of expanding renewable energy. This requires meticulous policy coordination.

Nevertheless, this localization policy is undoubtedly an opportunity for the Korean solar industry. It may be the last chance to reduce dependence on China and establish a self-reliant supply chain. Especially in 2025, when global supply chain restructuring and economic security are key topics, such a policy shift is timely.

It will be interesting to observe the changes in the Korean solar industry over the next few years. Will the government’s determination and corporate efforts combine to transform the market structure, which has been heavily reliant on China? And in the process, can Korea secure new competitiveness in the solar technology sector? At the very least, it is clear that we are now at the starting point of change.

This article was written after reading an article from Korea Economic Daily and adding personal opinions and analysis.

Disclaimer: This blog is not a news outlet, and the content reflects the author’s personal views. The responsibility for investment decisions lies with the investor, and no liability is assumed for investment losses based on the content of this article.