Siemens is pulling out of its loss-making solar power business, the latest sign of difficulties in the renewable energy market. The company intends to concentrate its renewable energy business on wind and hydroelectric power in a bid to increase productivity. It hopes to sell the solar unit and is in talks with potential buyers.

Siemens Solar business was formed from its purchases of Israeli company Solel Solar in 2009 for $418m and a stake in Archimede Solar Energy, an Italian solar thermal specialist. But business has not been as profitable as Siemens had hoped. “Due to the changed framework conditions, lower growth and strong price pressure in the solar markets, the company’s expectations for its solar energy activities have not been met.” the company said in a statement. By contrast its solar and hydro division which has 800 employees generated sales “in the low triple-digit millions” in the year to September and its wind division has a more than €10bn order backlog.

But growing competition from manufacturers in Asia has caused the cost of solar panels to fall rapidly. The industry has also been hit by weaker sales and falling government subsidies. Various German solar manufacturers have filed for bankruptcy in the past 12 months, including QE Cells and Solar Millennium.

Siemens said it would not renew its membership of the Desertec Industrial Initiative, a consortium of companies set up to study the feasibility of supplying Europe with solar power generated in the Sahara desert.

Joe Kaeser, Siemens’ chief financial officer, has flagged up the move in July, when he told analysts “The solar business in general, and at Siemens in particular, didn’t turn out to deliver what we hoped for and what has been expected, so there has to be some material realignment in that sector.” He said losses at the solar businesses were about the same magnitude as revenues.