K-Battery 'Funding Recharge' Roadmap... Changing the Group Affiliate Map

Seeking Spin-off, IPO, and Merger to Secure Lead in the Automobile Battery Market

[Asia Economy Reporter Park So-yeon] Amid fierce competition for facility investment to dominate the global electric vehicle battery market, the financing plans of the three major domestic battery companies have emerged as a key issue that could even change group governance structures.

According to industry sources on the 5th, electric vehicle battery manufacturers such as LG Chem, SK Innovation, and Samsung SDI have begun substantial structural changes to secure large-scale investment funds for electric vehicle batteries. They are seeking major changes beyond simply issuing corporate bonds or cooperating with automakers, including spin-offs, initial public offerings, and mergers.

SK Innovation is considering a spin-off and IPO of its battery business division as a mid-to-long-term strategy. SK Innovation plans to increase its annual electric vehicle battery production capacity from the current 4.7 gigawatt-hours (GWh) to 100 GWh by 2025, about 20 times growth, with the industry expecting at least around 10 trillion won to be invested during this period. Prior to the spin-off of the battery business division, SK Innovation is expected to list its valuable subsidiary SK IE Technology (SKIET) as early as the first half of next year to secure investment funds for future investments. SK IET is a wholly owned subsidiary of SK Innovation and a producer of key battery materials. The securities market estimates SK IET’s corporate value to be in the high 2 trillion won to low 3 trillion won range.

LG Chem, which currently holds an order backlog exceeding 150 trillion won, also faces an urgent need for additional production investment considering the growth of the electric vehicle market and its order backlog. Last year alone, the battery division’s facility investment amounted to 4 trillion won. Although LG Chem turned a profit in the electric vehicle battery division in the second quarter of this year as a result of long-term investments, it is expected to take more time before it fully becomes a 'cash cow.' LG Chem’s establishment of a joint venture with General Motors (GM) in the U.S. and its consideration of a battery joint venture with the domestic automaker Hyundai Motor Group are also interpreted as part of its funding strategies.

In the case of Samsung SDI, rather than making aggressive investments in the current electric vehicle battery market, it is taking a 'wait and see' approach to prepare for significant changes. Instead of struggling with losses due to cutthroat competition before the market matures, Samsung SDI plans to focus all efforts on next-generation technology development and expand its corporate scale at an appropriate time to make a 'quantum jump.' Industry insiders expect Samsung to explore various options in the long term, including mergers or investments from global automakers.

An industry official from the battery sector said, "Samsung SDI alone cannot keep up with the battery market growing at 30% annually," adding, "There will be internal changes to expand the battery business division, which is called the 'next-generation semiconductor.'"