Korean Batteries Blocked by Chinese Supply Offensive... Betting on Technological Advancement [Tech War, Birth of Advanced Nations]

Korean Companies Focus on High-Density, High-Quality Ternary Batteries
World's No.1 Market Excluding China
Advanced Countries like US and EU Check China
Market Landscape Changes, Creating Opportunities

[Asia Economy Reporter Donghoon Jeong] Batteries are called the rice of the green era. They are regarded as the next-generation food source following iron in the industrialization era and semiconductors in the information era. Since leading domestic companies entered the battery industry early, 'K-Battery' has entered its blooming phase and is recognized as a symbol of Korea's future food source. The global battery market is expected to grow up to 30% annually and reach a scale of 300 trillion won by 2030. However, the fruit that looks delicious to everyone is being targeted by everyone.

The battery industry is a battleground not only for domestic but also major global companies. With the supply chain restructuring spanning the US and China, and the mineral and energy wars added, the battery industry is witnessing the shifting alliances of economic and political hegemony. This is why the Korean battery industry and government cannot be complacent with their current achievements.

K-Battery, Can It Surpass China’s ‘Quantity Offensive’ to Become No. 1 in the World?

China's largest battery company, CATL, held a 32.6% share of the global market last year. This exceeds the combined 30.4% share of Korea’s top three battery companies: LG Energy Solution, SK On, and Samsung SDI. Adding the shares of other Chinese companies such as BYD and CALB, China's battery market share reaches about half at 48.7%. Although the three domestic battery manufacturers expanded their production capacity by 50-100% compared to the previous year, they were outpaced by CATL and BYD, which increased their annual capacity by over 165%, causing Korea’s global market share to decline.

The strongest competitor to Korea’s battery industry is undoubtedly the Chinese battery sector led by CATL. The biggest reason China can dominate the battery market is its control over key battery materials such as lithium, cobalt, and nickel. Recently, the Chinese government restricted exports of some key minerals citing increased domestic demand, which has triggered diplomatic and trade disputes. In this situation, raw material prices have surged significantly, further strengthening China’s competitiveness in the battery market. Professor Kim Pil-su of Daelim University said, "Chinese battery manufacturers grew based on their country’s overt subsidy policies in the past, which led to criticism of being ‘frogs in a well,’ but recently they have rapidly entered advanced markets like the US and Europe where they previously had no presence," adding, "CATL and others accelerating overseas expansion are indeed putting pressure on the three domestic battery companies."

The argument that Korea’s battery industry’s strength must be focused on technological advancement is gaining traction. Chinese companies mainly produce lithium iron phosphate (LFP) batteries, which have lower energy density but are inexpensive, while Korean companies focus on high-density, high-quality ternary batteries. This technological advancement is also seen as a way to shake the Chinese battery industry’s dominance. In fact, excluding China, Korean batteries are number one in the global market. Excluding the Chinese domestic market, the combined global market share of Korea’s top three battery companies rose from 52.4% in 2020, surpassing Japan to become number one, to 57.0% last year, an increase of 4.6 percentage points, maintaining their top position. Professor Lee Sang-young of Yonsei University’s Department of Chemical and Biological Engineering said, "To accelerate the expansion of batteries, the main power source in the Internet of Things era, into various fields, battery technology innovation including high energy density and high safety is essential."

Is Supply Chain Restructuring Another Opportunity? Challenges for the Battery Industry?

Until now, the global battery market has been led by Korea, China, and Japan. However, due to concerns about excessive external dependence relative to the importance of batteries, major advanced countries’ supply chain restructuring plans are expected to significantly change the market landscape. These supply chain restructuring plans by advanced countries are likely to present opportunities for Korean companies.

In particular, China, which has emerged as the biggest rival, is under scrutiny from the US and the European Union (EU) amid the US-China hegemony competition, and competition is intensifying even in the already saturated Chinese domestic market. Kim Bong-man, head of the International Headquarters at the Federation of Korean Industries, said, "The new government should strengthen cooperation with the US on electric vehicles and batteries, which has been rebuilding the battery supply chain since last year," adding, "It should also enhance policy support for domestic infrastructure expansion and for companies targeting emerging markets such as China and Indonesia." However, supply chain restructuring also presents challenges that Korea’s battery industry must solve. If overseas investment expands, a decrease in domestic battery production and direct exports is inevitable.

Developing high-level technical personnel and fostering startups, including creating a battery industry ecosystem, remain unresolved tasks. Professor Lee Sang-young said, "To maintain global competitiveness, Korea’s top three battery companies need about 3,000 technical personnel annually, but currently only about 600 are produced," adding, "Industry, academia, and research institutes must cooperate more closely to produce significantly more high-level technical personnel related to batteries."