[Infinite Power] The Glory and Challenges of the World's Best 'K-Battery'

[Asia Economy Reporter Park So-yeon] LG Chem, Samsung SDI, and SK Innovation, the three 'K Battery' companies, achieved remarkable results in their battery business performance for the third quarter of this year.

The global market share of the three domestic battery companies more than doubled from 16% last year to 35% this year, and battery companies are continuing aggressive investments beyond this.

However, there are also pressing issues such as recent domestic and international electric vehicle fire incidents and the ongoing 'battery lawsuit' between LG Chem and SK Innovation.

'K Battery' Three Companies Record Historic Best Performance

According to the industry on the 1st, LG Chem, the world's number one electric vehicle battery market leader, recorded sales of 7.5073 trillion KRW and operating profit of 902.1 billion KRW in the third quarter. Both sales and operating profit are the largest quarterly results ever achieved by LG Chem.

Sales increased by 8.8% and operating profit by 158.7% compared to the same period last year. Compared to the previous quarter, sales rose by 8.2% and operating profit by 57.8%.

In particular, growth in the battery division was remarkable. Operating profit reached a record high of 168.8 billion KRW due to expanded supply of automotive batteries and small batteries, and sales also achieved an all-time high of 3.1439 trillion KRW.

The company explained that the launch of new electric vehicle models by major European automakers and the expansion of cylindrical batteries and IT product supplies contributed to the improved performance.

Samsung SDI also recorded sales of 3.0872 trillion KRW and operating profit of 267.4 billion KRW in the third quarter, increasing by 20.2% and 61.1% respectively compared to the same period last year. Sales are the largest quarterly figure ever.

Among these, sales in the battery business division reached 2.3818 trillion KRW, driving the strong performance. This is a 24.1% increase from the previous quarter and a 22.0% increase from the same period last year.

Samsung SDI stated that entering the seasonal peak and strengthened electric vehicle support policies in Europe led to significant growth in automotive battery sales, and the launch of new smartphones by major customers expanded the supply of pouch batteries.

SK Innovation posted an operating loss of 28.9 billion KRW in the third quarter due to sluggish chemical business, but the battery business showed clear improvement by significantly reducing the deficit.

SK Innovation's battery business sales reached 486 billion KRW, 2.5 times higher than the same period last year and up 43.7% from the previous quarter. Operating loss improved by 14.9 billion KRW from the previous quarter to 98.9 billion KRW.

It is analyzed that the increase in sales volume is due to the full-scale operation of newly established overseas plants in Changzhou, China, and Kom?rom, Hungary.

On the 21st, visitors are touring the LG Chem exhibition hall at the battery industry exhibition 'InterBattery 2020' held at COEX in Gangnam-gu, Seoul. Marking its 8th year, InterBattery showcases core technologies of 'K-Battery,' including batteries for automobiles, smartphones, energy storage systems (ESS), and key materials. Photo by Hyunmin Kim kimhyun81@

'K Battery' Shaking the Global Market with 35.1% Market Share This Year

According to market research firm SNE Research, the combined market share of the three Korean companies in the battery market from January to September this year is 35.1%. This is more than double the 16.2% market share during the same period last year.

The three battery companies are not stopping there; they are focusing on expanding scale by spinning off their battery businesses into separate specialized corporations, expanding overseas plants, and making new investments.

LG Chem held an extraordinary general meeting of shareholders on the 30th of last month and announced the establishment of a separate corporation, LG Energy Solution Inc., for its battery business.

The goal is to expand investment in the new company and nurture it into the world's top energy solutions company with sales of 30 trillion KRW centered on batteries by 2024.

Latecomer SK Innovation is also rapidly catching up through aggressive investments such as expanding overseas plants.

SK Innovation plans to start mass production of its 9.8GWh-scale second plant in Hungary in the first quarter of 2022, its 9.8GWh-scale first plant under construction in Georgia, USA, in the first quarter of 2022, and its 11.7GWh-scale second plant from the first quarter of 2023.

SK Innovation expects to achieve its battery business performance targets this year and forecast sales exceeding 3 trillion KRW, more than double this year's, next year. It aims to reach mid-50 trillion KRW in sales and achieve break-even point (BEP) in 2022.

Additionally, in the battery core material separator business, SK Innovation plans to aggressively expand facilities overseas in China, Poland, and other locations, increasing production capacity to 870 million square meters by the end of this year and 1.87 billion square meters by 2023.

On the 21st, at the battery industry exhibition 'InterBattery 2020' held at COEX in Gangnam-gu, Seoul, SK Innovation CEO Ji Dong-seop (first from the left) is visiting and touring the exhibition hall. Marking its 8th year, InterBattery features the core technologies of 'K-Battery,' including batteries for automobiles, smartphones, energy storage systems (ESS), and key materials. Photo by Kim Hyun-min kimhyun81@

Challenges to Address: Electric Vehicle Fires and Battery Lawsuits

Despite the recent strong performance and rapid growth of the three K Battery companies, the domestic battery industry faces numerous challenges to resolve.

The battery safety controversy triggered by the Hyundai Motor Kona electric vehicle fire is a representative issue facing LG Chem.

The Ministry of Land, Infrastructure and Transport pointed to possible battery cell manufacturing defects as the cause of the Kona EV fire, while LG Chem denies any manufacturing defects in the battery. An investigation to determine the exact cause is currently underway.

Depending on the investigation results, LG Chem may have to bear the cost of replacing the Kona batteries. Industry sources estimate the battery replacement cost at about 13 million KRW per vehicle. Assuming 10% of the recall target vehicles require battery replacement, the cost would amount to approximately 100 billion KRW.

Overseas, safety controversies have also arisen due to fires suspected to be caused by batteries installed in GM Chevrolet Bolt electric vehicles equipped with LG Chem batteries.

The battery-related lawsuit between LG Chem and SK Innovation in the United States is also dragging on longer than initially expected, becoming a burden on the industry.

At the U.S. International Trade Commission (ITC), LG Chem's trade secret infringement and patent infringement lawsuits against SK Innovation, as well as SK Innovation's patent infringement lawsuit against LG Chem, are ongoing.

The ITC was scheduled to make a final decision on the battery trade secret infringement lawsuit on the 26th of last month but postponed the decision by six weeks to December 10.

LG Chem claims that SK Innovation poached its personnel and infringed on trade secrets. In February this year, the ITC made an early loss decision against SK Innovation due to evidence destruction related to LG Chem's battery technology theft.

If the ITC's early loss decision is finalized, an import ban on SK Innovation's battery cells, modules, packs, and related parts and materials in the U.S. could take effect, which would cause significant damage to SK Innovation.

As the lawsuit has dragged on for over a year and a half, uncertainty about the outcome continues, and litigation costs are increasing. It is known that LG Chem and SK Innovation have paid around 400 billion KRW in legal fees so far.

Jidong Seop, head of SK Innovation's battery business division, recently said in a media interview, "This lawsuit is a problem between the two companies, but it also has a significant negative impact on the domestic K Battery industry. We think it is better to resolve it quickly and are keeping channels open to continue dialogue."