A  company named S concluded a three-year export contract for its solar modules worth some 1 trillion won and applied for a loan to buy materials and expand its plant facilities. 

But banks turned down the loan applications with the excuse that the solar energy industry is in a slump. Another company engaged in the same business line was pressured to quickly repay loans or pay higher interest rates by the banks.

Member companies of the association have often been subjected to these kinds of painful situations of late, just like their global counterparts around the world suffering from a slump in their photovoltaic business operations resulting in a slow down in the business of related firms and a worsening short-term management environment.

These problems should not be left to the industry alone. The government should intervene and help solve the problems as the industry’s future growth outlook is brighter than ever and Korea’s photovoltaic companies are very competitive compared to their counterparts around the world in terms of technology and products. But if the problems go unsolved for long, some of them might have to fold their operations due to these short-term financial shortcomings.

The photovoltaic industry requires financial support because of the massive investments needed to achieve an economy of scale to purchase polysilicon and operate plants to produce cells, modules, and other key parts so that a manufacturer can be competitive.

The photovoltaic industry is similar to the semiconductor and LCD production industry in such areas as industrial structures and special features in which Korea excels and, therefore, can easily top the world.

The industry is also a high value-added industry, particularly in such areas as the production of raw materials, the sale of complete products, the installation and operation of power generation facilities, among all industrial processes linking all stages together, and is furthermore an export-oriented industry with more than 80 percent of its output exported overseas.

We have to keep an eye on China, which is moving fast to catch up with Korea in the photovoltaic industry. The Chinese government has been fully extending its support to the industry for a long time, treating it as a strategic industry in such areas as finance by providing it with favorable interest rates.

With such government support, the Chinese photovoltaic industry has now taken around 60 percent of the global photovoltaic market, which has been growing at a rapid pace in the past five years with the market for modules expanding 80 percent annually on average.

The photovoltaic industry has been struggling due to the EU debt crisis coupled with its own financial pinch brought on by a glut in the supply of modules and other parts. While the industry has been caught up with serious restructuring to cope with the crisis, China has been providing extensive support to its photovoltaic industry for its survival. The rationale for such extensive support is that once the industry survives from the slump, it will reap all the benefits that come to the survivor after the crisis is over.

This does not mean that we should emulate China unconditionally. We should prevent companies with great potential from going down due to this short-term crisis as it is related to the closure or survival of hopeful firms.

We must give special consideration to photovoltaic firms with a technological competitive edge, attracting continuous investments and generating normal sales revenues in such areas as credit evaluation and interest rates on loans as they are in the beginning stages. They also deserve to have the favor of export financing, since around 70 percent of their businesses come from overseas.

The government has already been providing support to photovoltaic firms to help them weather short-term slumps. The government has also designed the industry to be among the top five in the world by 2015 and give it all kinds of support to achieve the goal, which has greatly encouraged the industry.

The government plans to build a solar power plant with a 100-kw capacity this year and also provide support to the industry’s overall R&D activities through financial support.

The global photovoltaic industry is projected to grow 20 percent annually by 2015 and Korea’s photovoltaic industry will certainly be a firm global leader in the future as it already has enough segregated technologies and products on offer that government support plans can be carried out as planned.

By  KOPIA Chairman Kim Sang-yeol