LG to close solar business - what does this mean for people who have or want LG solar panels?
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On February 22nd, 2022, South Korean manufacturing giant LG announced that it would stop making solar panels and close its solar manufacturing facilities.
The announcement came as something of a shock to the solar industry, because LG solar panels are both highly regarded and quite popular. In fact, here at SolarReviews, we rated the brand the best solar manufacturer in the U.S. for 2021, and the company’s solar panels are also rated very highly by end users.
The news has many current and future customers wondering what will happen to them in the future. In its statements, LG has promised to provide severance or new jobs within the company to existing employees, and also to continue operating its plant in Huntsville, Alabama until the second quarter of this year “to maintain adequate inventory for future service support.”
But does that actually mean the company will maintain stock long into the future for warranty claims? What can current customers expect, and should you continue with an LG solar panel installation if you’re in the middle of the process now? The article below discusses the implications of this decision for all those folks and more.
The official statements from LG indicated that “the impact of increasing material and logistics costs, as well as severe supply constraints” were among the reasons it decided to shut down its manufacturing. Basically, LG doesn’t imagine that they can compete in the solar marketplace, now or in the future.
This makes sense, as low-cost solar panels from east Asia remain popular, despite being saddled with tariffs that sought to make U.S.-made products (like LG’s panels) more appealing to American consumers. Despite the brand’s popularity, it has long positioned its solar panels as premium products - and sold them at premium prices. Their quality has earned LG’s products a reputation as some of the best in the world, and LG earned the top spot in our own ranking of solar manufacturers.
It’s hard to mass produce and sell a premium product (with a premium price to match) in a marketplace where good, solid low-cost options exist. LG may have won the hearts and minds of thousands of customers and industry analysts, but the fact is, quality solar panels are becoming a commodity that can be obtained for lower prices and perform nearly as well.
Facing increased costs of materials on top of the other challenges it listed, LG had a choice between ceasing production or raising prices. Given the current climate of the marketplace, they made the decision that would expose them to the least amount of risk.
LG has a history of ending product lines that aren’t performing well. It did so in 2021 when it ended its decades-old smartphone business. A lot of people still own LG phones, and the company still supports many of those phones with an additional year of warranty coverage and operating system updates. That’s a good sign.
Unfortunately, LG’s smartphones weren’t as well-regarded as its solar panels, and they also aren’t designed to last for a quarter-century, so this isn’t a perfect apples-to-apples comparison. Still, a commitment to support the products from a shuttered arm of the business is a good sign.
In its announcement, LG said that it plans to keep producing solar panels through the second quarter of 2022 “to maintain adequate inventory for future service support.” The company’s solar panel warranties say it will “repair, replace, or offer pro-rated refund(s)” for products that prove to be defective in materials and workmanship during the 25-year coverage period.
If you’re one of the thousands of homeowners with LG solar panels, you can feel reasonably confident that the company will be there for you in the event that its products fail to meet your needs.
LG is a multi-billion dollar company with a long history and a profitable business model. While it’s true the company’s solar and smartphone businesses didn’t meet expectations, LG is still quite solvent, posting an operating profit of $3.27 billion for 2021. It’s safe to say that the company stands to be around long into the future.
However, that doesn’t mean that purchasing LG panels now is a smart idea for everyone. While we have no reason to believe the products will perform badly, and the warranty protection offered by LG exceeds industry standards, there are still some risks.
The way the warranty is structured means you could receive either a new module from old stock or your money back, in the case that one of your LG panels fails during the 25-year warranty period. That isn’t a perfect solution, and people who don’t want the risk of someday having to look at the empty roof space where their old LG panel used to be should be wary of purchasing LG panels for their new solar installations.
On the other hand, if you’re okay with the thought that you might get a prorated cash payment (instead of a new panel) in the event of a failure, we think it’s safe to trust LG with upholding their commitment to future service.
The good news is, you may never need to worry about any of this; statistics show the failure rate of solar panels is something like 0.05%, and LG panels really are above average when it comes to their quality and construction. Even at 0.05% failure, that means only 1 in 125 solar owners with average-sized systems will experience a single failure.
If LG uses these predictions to guide how much stock it maintains, they should have plenty of panels on hand to replace all failures for decades to come.