[Bojo, Battery] Order backlog surpasses 1,000 trillion won... "The issue is popularization"

K-Battery Big 3 Order Backlogs Surge... Consecutive Rosy Outlooks
Lithium-Ion Battery Dominates... 'Nickel vs Cheol' Leadership Battle

Automakers Increase Demand for Cheap Batteries
"Era of Massive Battery Consumption Approaching"

Editor's Note'Bojo, Battery' is a series that takes a closer look at the battery industry, which has emerged as the center of next-generation advanced industries. It examines the agile movements, strategies, and conflicts among governments and companies worldwide vying to dominate the battery manufacturing ecosystem. We will also cover the technological competition to create safer and longer-lasting batteries. We aim to serve as an 'assistant' to readers and investors by enhancing and supporting their understanding of the battery industry. We will share battery stories that are easy to approach.

"This year, the battery industry's order backlog is expected to surpass 1,000 trillion won." (May 25, Lee Chang-yang, Minister of Trade, Industry and Energy)

One of the fastest-growing sectors among advanced industries is the battery field. Korean companies that have been preparing for the battery business for over 20 years are now finally reaping the fruits of their efforts. The 'love calls' from automakers to the three domestic battery giants?LG Energy Solution, SK On, and Samsung SDI?continue, pushing the order backlog close to 1,000 trillion won.

However, recently, winds of change are blowing across the battery industry landscape. Against the high-performance batteries based on nickel, iron-based batteries, once considered low-performance and low-cost, have emerged as strong contenders. Starting with Tesla, Mercedes-Benz, Volkswagen, Ford, Rivian, and Hyundai Motor have announced plans to produce electric vehicles equipped with lithium iron phosphate (LFP) batteries.

The rapid shift from internal combustion engines to batteries and motors has sparked expectations that an era of massive battery consumption will soon arrive. This change can be summarized by questioning whether the lithium-ion battery ecosystem, which has been dominant so far, is suitable for mass consumption.

Mirae Asset Securities Research Center forecasts that the order backlog of the three domestic battery companies?LG Energy Solution, SK On, and Samsung SDI?will exceed 1,000 trillion won by the end of the third quarter this year.

LG Energy Solution holds the largest order backlog, approximately 600 trillion won. Its standalone factory in Michigan and the first joint plant with GM in Ohio have started operations. Construction is underway for the second GM joint plant in Tennessee, the Honda joint plant in Ohio, the third GM joint plant in Michigan, the Stellantis joint plant in Ontario, Canada, and a standalone factory in Arizona.

[Image source=Yonhap News]

SK On's order backlog is expected to be around 340 trillion won. In May 2021, SK On announced the establishment of a joint venture (JV) with Ford called BlueOval and plans to build factories with a total capacity of 129GWh in Kentucky and Tennessee. Recently, it also formed a 35GWh North American JV with Hyundai Motor Group. Samsung SDI's order backlog is estimated at 160 trillion won. Last May, it announced the establishment of a North American JV with Stellantis and agreed to build a 30GWh joint factory with GM in the United States.

Hwang Kyung-in, a research fellow at the Korea Institute for Industrial Economics & Trade, said, "The domestic battery industry is ahead of China and Japan in markets excluding China," adding, "It is expected to occupy more than 70% of production capacity in the U.S. and significantly increase its market share to around 60% in Europe by 2025."

Despite the rosy outlook for the three domestic battery companies, some voices urge hastening preparations for the era of battery popularization. At the center of this is the LFP battery.

Market research firm EV Volume estimates that the global market share of LFP batteries grew from 5.5% in 2020 to 16.9% in 2021, reaching 27.2% last year, growing by more than 10% annually. In contrast, the market share of nickel-based NCM (Nickel-Cobalt-Manganese) batteries, mainly produced by Korean companies, declined to 61.3% last year, and NCA (Nickel-Cobalt-Aluminum) batteries fell to 8.5%.

The limitation of nickel-based batteries lies in the minerals. They are expensive and difficult to procure. Therefore, automakers, who consider price a key factor for the popularization of electric vehicles, are increasingly choosing cheaper batteries. Once the era of selling electric vehicles with government subsidies ends, automakers will inevitably have to focus on affordable electric vehicles.

The technology of LFP batteries is also evolving. According to a report published by the Korea Institute for International Economic Policy (KIEP), the average energy density per cell of Chinese LFP batteries in 2020 was 145?160Wh/kg. However, recent energy density is reported to have improved up to 210Wh/kg.

CATL has developed blending technology that mixes NCM and LMFP (Lithium-Manganese-Iron-Phosphate) to increase energy density, claiming it can extend driving range to about 400km on a single charge. This means there is little difference in performance compared to NCM batteries.

As automakers accelerate their search for affordable batteries, concerns are growing that Chinese companies will increase their market share by emphasizing the advantages of low cost and safety. Professor Park Cheol-wan of Seojeong University (Department of Smart Automotive) said, "As the battery market rapidly shifts to iron-based batteries, and with the era of mass battery consumption beginning that requires consideration of sodium-ion batteries following lithium-ion, domestic companies must thoroughly prepare to avoid falling behind in competition with China."