LG Siltron Withdraws from LED and Solar Energy Wafer Businesses

LG Siltron, which is an unlisted wafer production company of LG Group’s affiliate, was able to convert its loss into surplus in 2 years. It withdrew from solar energy wafer and LED sapphire wafer businesses that were not making any profits and has focused on reducing production cost.

It is predicted that its profit indicators will become even better this year. However if it wants to make profits and sales during its heyday, it will require significant time due to reduction of price of silicon wafers.

According to 2015 business report that was submitted by LG Siltron to Financial Supervisory Service (FSS) on the 29th, LG Siltron made $667 million (777.3 billion KRW) and $4.63 million (5.4 billion KRW) in sales and operating profit respectively in 2015. Although its sales decreased by 0.4% compared to 2014, operating profit’s indicators have converted to surplus. Net profit’s indicator was loss of $14.1 million (16.4 billion KRW), and LG Siltron was able to decrease margin of loss compared to 2014. Fact that it was still able to make profits even though its sales decreased indicates that LG Siltron focused on high-intensity activities that would reduce production cost. LG Siltron made operating loss of $14.9 million (17.9 billion KRW) and $29.8 million (34.8 billion KRW) in 2013 and 2014 respectively.

“Although there are still more supplies compared to demands, situation of supply and demand somewhat has improved compared to previous years and margin of reduction in price was less.” said a representative for LG Siltron. “Also because we focused on improving production cost, we were able to record operating profit after 2 years of making operating losses.”

Fact that LG Siltron withdrew from solar energy wafer and LED sapphire wafer businesses, which were making losses in December of 2013, also helped LG Siltron to make operating profit. Solar energy and LED industries are still in recession as Chinese industries are continuously putting out low-priced products. Experts believe that turnaround for LG Siltron would have delayed if it did not withdraw from these businesses back then.

LG Siltron is planning to strengthen its competitive edge by supplying more silicon wafers to foreign businesses that have system semiconductor production lines. As of right now, it is supplying more to domestic businesses especially in memory field. Its current proportion of domestic sales is 50%. Its relationship with domestic businesses is very good as it was selected as an excellent partner to Samsung Electronics’ Semiconductor Business Department for 2 years in a row in 2014 and 2015. LG Siltron is planning to increase overall sales by actively going after foreign businesses while maintain proportion of domestic sales. It is predicted that profit indicators will continue to improve since most of equipment depreciation that is installed at major production lines is ending. A representative for LG Siltron emphasized that net profit’s indicators might also be able to convert to surplus this year.

Silicon wafer is a main material that is used for base material of a semiconductor chip. Circular silicon wafers are divided into variety of sizes (diameter from 1 to 12 inches), and LG Siltron usually supplies 12-inch (300mm) products. Global silicon wafer markets are dominated by Japan’s Shin-etsu and SUMCO as they take up 50 to 60% market shares. Including these two Japanese businesses as well as SunEdison from the U.S. and Siltronic from Germany, LG Siltron is a top 5 silicon wafer supplier globally.

LG Siltron’s sales and operating profit in 2011 surpassed $858 million (1 trillion KRW) and $85.8 million (100 billion KRW) respectively and recorded its best performance. This kind of performance was hugely affected by large earthquake that occurred in East Japan at that time. However as Japanese businesses quickly recovered their supply systems and as silicon wafers were pouring out from newly-invested lines, downward trend of price had become worse. 

“If LG Siltron wants to have its performance that it was making in its heyday in 2011, increase of production size and recovery of market situation are required.” said a representative for this industry.

Staff Reporter Han, Juyeop | [email protected]