[Column] Korea Cutting Battery Investment Must Not Retreat

The first-quarter performance reports of domestic secondary battery companies reflected a common keyword: "speed adjustment." Lee Chang-sil, CFO of LG Energy Solution, stated, "We will prioritize and adjust the scale and speed of investments." This is the first time LG Energy Solution has officially declared a reduction in investment. SK On and POSCO Future M also announced operational strategies to flexibly adjust production and investment plans starting from the second quarter.

The mention of speed adjustment was expected due to the poor first-quarter results. SK On recorded an operating loss of 335.1 billion KRW, and LG Energy Solution posted a deficit of 31.6 billion KRW excluding the Advanced Manufacturing Tax Credit (AMPC). Samsung SDI was the only one among the three battery companies to turn a profit, but its operating profit fell by about 30% compared to the same period last year. The deterioration in corporate performance was somewhat anticipated amid the electric vehicle chasm (demand slump before mass adoption) that has continued since the end of last year.

Given the worsening performance, it is natural for secondary battery companies to adjust their investment pace. While they have focused on expanding facilities and factories by trillions of won until now, it seems to be time to establish an efficient production system through selection and concentration.

However, looking at China, which is running solo despite the global chasm, it is also true to be concerned whether it is right for our companies to slow down. China, which holds 95% of the lithium iron phosphate (LFP) battery market, not only ensures stable supply through vertical integration but also leads in technological advancement speed. CATL recently surprised the world by unveiling a new LFP battery with a maximum driving range of 1,000 km on a single charge. Even while domestic companies catch their breath, China can swiftly dominate the market.

There are not many options for domestic companies to avoid losing the initiative. Time is also tight. They must leverage their strength in differentiated technology from China and focus on securing next-generation growth engines. Research and development must also be accelerated to meet market demands for existing lithium-ion batteries. Amid the crisis of US-China supply chain conflicts, there are ample opportunities unique to us. It is worth reconsidering whether we are overly fixated on the crisis narrative of "deficits" and "speed adjustment."