'SK Dream' at Risk... Battery Partners Growing Anxious

SK Inno Faces Risk of US Plant Shutdown
Local Investment Parts Suppliers on High Alert

[Asia Economy Reporter Hwang Yoon-joo] The pace of domestic and international battery partners is intensifying following the final ruling of the U.S. International Trade Commission (ITC) lawsuit between LG Energy Solution and SK Innovation. This is because, unless an agreement is reached between the two companies, SK Innovation's planned operation and expansion of its U.S. factory will be impossible.

According to the related industry on the 15th, small and medium-sized enterprises producing electric vehicle battery parts, aligned with SK Innovation's U.S. investment, have also made local investments such as establishing U.S. corporations and factories.

Enchem, an electrolyte supplier, is a representative example. Enchem established a U.S. corporation in 2019 and plans to complete a production plant in the first half of this year. This investment was made in conjunction with SK Innovation's mass production plan for its Georgia Plant 1, and the company expected to generate significant sales starting this year. However, after the ITC's final ruling, SK Innovation's battery business itself has become unstable, putting Enchem's local U.S. business in an uncertain position.

Dongwon Tech, which announced last year that it would invest $700,000 to open a high-end HVAC duct manufacturing plant and sales office in Georgia, is also facing increased management uncertainty.

The situation is similar for automotive parts companies that recently declared localization. Jintec, a representative automotive parts company, plans to invest $4.5 million to establish a factory in West Point, Georgia. Jintec supplies interior parts to automakers using SK Innovation batteries.

Battery parts suppliers are cautious with their words but hope for a swift conclusion to the negotiations. They believe that if compensation negotiations break down or drag on, they could lose a major customer. After SK Innovation's early loss ruling in February last year, it was reported that partner companies expressed concerns by inquiring about order prospects. SK Innovation is estimated to have placed orders worth about 1 trillion won with battery parts partners related to the operation of its factories in Hungary, China, and the U.S. last year, and the scale of orders from partners is expected to increase ahead of the operation of the Georgia Plant 1 this year.

A battery parts company official said, "Since we have received a grace period, orders are not immediately halted nor are we suffering damages," but added, "We are closely watching how the compensation negotiations will conclude." The official also stated, "For the sake of the partners supporting the domestic battery ecosystem, both companies must make a decisive decision."

Meanwhile, Georgia Governor Brian Kemp requested U.S. President Joe Biden to exercise a veto, arguing that the ITC decision could damage SK Innovation's electric vehicle battery plant construction. Governor Kemp said, "Unfortunately, the recent ITC decision puts at risk 2,600 clean energy jobs and significant investments in innovative manufacturing by SK during the (COVID-19) pandemic."