[넘버스]Hanwha Solutions’ crisis, not crisis | Bloter.net

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“It cannot be said that Hanwha Solutions’ photovoltaic module manufacturing technology is ahead of those of the top 5 companies in the world. When economies of scale start to diverge, they will lag behind the competition. Currently, they are benefiting from the trade dispute between the US and China, but they may not be able to withstand free competition. It’s a crisis, not a crisis.”

This is the evaluation made by Kang Jeong-hwa, a senior researcher at the Export-Import Bank, on the solar power business of Hanwha Solutions. Considering that Hanwha Solutions has been performing well in the solar power sector recently, this is a skewed analysis. Hanwha Solutions generated more than 200 billion won in solar power business as of the 3rd quarter of 2020, even when other companies are struggling with Corona 19.

However, the analysis that Hanwha Solutions is in crisis is convincing when looking at global market trends. In the report of’Green New Deal-Solar Industry Analysis (2H 2020)’ prepared by Senior Researcher Kang, there is something that stands out. That is, the ranking of Hanwha Q CELLS has stepped back from the production capacity ranking of major solar module companies.

According to the report, as of the fourth quarter of 2020, Hanwha Q Cells’ solar module production capacity was 10.7GW. Compared to the fourth quarter of 2019, a year ago, there is no change. However, the ranking has dropped four places from the previous 3rd to 7th. This is because other companies have increased production capacity through large-scale investments.

Compared to semiconductors, the photovoltaic industry is evaluated as having low technical barriers. This means that it is a fight between capital and productive power. Currently, the global solar module market is dominated by the evaluation that it is being reorganized around top companies making large-scale facility investments.

In the long run, it is said that it cannot be ruled out that the situation in which the solar material market has been lost to China will be reproduced in the module market. OCI is representative. Although OCI showed considerable competitiveness as a solar polysilicon manufacturer, it was decided to stop production of polysilicon at its Gunsan plant in Korea last year due to the Chinese supply and price offensive. Likewise, Hanwha Solutions left its hands on the polysilicon manufacturing business.

Based on this analysis, we can see the reason why Hanwha Solutions’all-in’ in the solar power business through a massive capital increase of 1.2 trillion won. Hanwha Solutions plans to invest 2.8 trillion won, including the capital increase over the next five years. It can be viewed as an investment to give wings to a business that is currently performing well, but on the contrary, it can be interpreted as an investment that threatens survival.

There is something remarkable when looking at the trend of operating performance by business segment over the past six years from 2015 to the third quarter of 2020. That is, the photovoltaic division’s operating profit exceeded that of the raw material division. As of the third quarter of 2020, Hanwha Solutions made a profit of 2235 billion won in the solar power sector, while only 1749 billion won in the raw material sector. However, it is not possible to be assured with just these business results.

Accordingly, there are observations that Hanwha Solutions, which aimed to expand the petrochemical business, turned to the solar power business. An official from the securities industry said, “We may have strategically decided to prioritize investment in the solar energy business over petrochemicals.”

It is known that Hanwha Solutions participated in the acquisition of the US ethane cracking facility (ECC) last year by Sasol, a global energy chemical company in the US. Even though they participated in the original bidding, they burned their will to take over, but it is said that the price offered showed a big difference from the competitors, and that they drank high praise.

ECC is a facility that produces petrochemical products such as ethylene from shale gas and ethane extracted from natural gas. With the shale gas revolution, the supply of ethane increases and the price drops, and ECC is being evaluated as being ahead of cost competitiveness. Most of the domestic petrochemical companies have grown mainly in naphtha cracking facilities (NCC) that use crude oil, so they are considered as a business that will complement this when entering the down cycle. Lotte Chemical is the only domestically owned ECC facility.

Earlier, it was said that the photovoltaic business performance exceeded the raw material division. This is largely due to the decline in profits in the raw material division. In the raw material sector, Hanwha Solutions also made a whopping 630 billion won in profits in 2018, but the following year, the amount of profits in 2019 decreased to 370 billion won, which is less than half. Last year, there was a variable called Corona 19, but it is the industry’s opinion that it has entered a full-scale down cycle.

Of course, investment in the photovoltaic business is made with funds secured through a capital increase, so it is not without the possibility of investing in petrochemicals. We cannot rule out the possibility of borrowing or reappearing in the M&A market through financial investors (FIs).

An official at Hanwha Solutions said, “We invest a lot in the solar power business, but petrochemical is still a cash cow business.”

Solar power is a business led by Hanwha Solutions President Kim Dong-gwan, who is considered the successor of Hanwha Group. It is actually the only basis for evaluating President Kim’s managerial ability. At the same time, it is very important in terms of future food for the group. I wonder what the solar power business of Hanwha Solutions will look like five years after the investment plan ends.