[Company Insight] Iljin Materials, Full-Scale Expansion of Overseas Factories

Chinese electric vehicle (EV) companies are making significant strides in the global EV market. As the Chinese government continues its policy to expand EV adoption, 2,474,000 EVs were sold in China in the first half of this year, marking a 121% increase compared to the same period last year. During the same period, sales in the North American region increased by 59% to 508,000 units.

In the EV market, China's BYD surpassed the U.S. company Tesla to become the top seller. BYD sold 647,000 units, a 323% increase compared to the first half of last year. During the same period, Tesla recorded EV sales of 575,000 units, up 52%. China's Shanghai Automotive Industry Corporation (SAIC) sold 370,000 units, a 30% increase compared to the same period last year.

Asia Economy examines the business structures and growth strategies of Iljin Materials and Amogreen Tech, which are expected to benefit from the growth of the Chinese EV market.

[Asia Economy Reporter Park Hyungsoo] Iljin Materials, a producer of electrode foil (copper foil) for secondary batteries, has been making successive expansion investments. As the EV market rapidly grows, demand for electrode foil is increasing. Iljin Materials is responding to the surging demand through overseas expansions. However, the fact that the largest shareholder, CEO Heo Jaemyung of Iljin Materials, is pursuing a stake sale is considered a variable in the growth strategy.

According to SNE Research, the supply volume of the top 10 global secondary battery companies reached 33.7 GWh in May, a 58.4% increase year-on-year. It also rose 23.1% compared to the previous month. This recovery is due to the rebound in supply from China, which had experienced severe disruptions due to the COVID-19 pandemic. CATL supplied 11 GWh, a 107.7% increase compared to the same period last year.

Among the top 20 global EV manufacturers, combined sales of battery electric vehicles (BEV) and plug-in hybrid electric vehicles (PHEV) reached 720,000 units, a 52.1% increase year-on-year. Compared to the previous month, sales increased by 25.3%.

As EV sales rise and secondary battery demand grows, the importance of secondary battery materials is increasing. Electrode foil is a thin film with a thickness of less than 10 μm (micrometers, one-millionth of a meter) made by electrolyzing a copper sulfate solution. It is one of the essential materials used in the anode current collector of secondary batteries. The electrode foil industry is both a capital-intensive and highly technology-intensive sector. Worldwide, only six companies, including Iljin Materials, can produce high-quality electrode foil suitable for supplying to automobile manufacturers. Iljin Materials has secured high technological capabilities, having succeeded in domestic production of 1.5 μm ultra-thin electrode foil for semiconductors for the first time in Korea. This product was previously monopolized by Japan, and Iljin Materials is the first Korean company to achieve mass production. Its customers include Samsung SDI, LG Energy Solution, and China's BYD.

Iljin Materials recently reaffirmed its technological prowess by signing a large-scale supply contract with Samsung SDI. On the 24th of last month, Samsung SDI signed a contract with Iljin Materials worth KRW 8.5262 trillion for the supply of electrode foil for secondary batteries. Iljin Materials will supply 60% of the total electrode foil volume used by Samsung SDI's domestic and overseas plants until 2030. Both companies agreed that the supply volume could be reduced by up to 5% or increased by up to 20%. The supply scale could exceed KRW 10 trillion.

Iljin Materials is also participating in Volkswagen Group's Spanish EV project consortium, "Future Fast Forward." The project, promoted by Volkswagen Group together with the Spanish government, involves 62 companies including Iljin Materials and SEAT, a Volkswagen subsidiary and Spanish automaker. The project aims to build an entire EV ecosystem, from lithium extraction at mines to secondary battery and EV production. The total investment is estimated at EUR 70 billion (approximately KRW 94 trillion).

Iljin Materials has begun full-scale expansion investments. Its Malaysian subsidiary IMM plans to invest KRW 600 billion to increase annual production capacity by 50,000 tons. It will build an electrode foil production plant with a capacity of 25,000 tons in Spain with an investment of KRW 500 billion. The company plans to produce 100,000 tons annually in Europe, including Spain. By 2024, it aims to expand its annual electrode foil production capacity to 130,000 tons. As the North American EV industry pushes to secure secondary battery materials, expectations for Iljin Materials' entry into the U.S. market are also growing.

Separately from Iljin Materials' steady expansion investments, there is a possibility of a change in the largest shareholder. CEO Heo Jaemyung, the second son of Iljin Group founder Heo Jinkyu, is pursuing the sale of his 53.3% stake. Citigroup Global Markets Securities, the sales agent, has selected and notified a shortlist. Lotte Chemical and Bain Capital are among the acquisition candidates. After the change of the largest shareholder, the company may pursue more aggressive investments than planned.

In the first quarter of this year, Iljin Materials recorded sales of KRW 200.1 billion and operating profit of KRW 21.6 billion, representing increases of 45.0% and 58.1%, respectively, compared to the same period last year. Profitability is improving as the Malaysian plant's operating rate rises. As of the end of the first quarter, the debt ratio was 21.6%, and the total debt dependency was 8.2%.