[Complete Battery Mastery](36) Market to Grow to 95 Trillion Won by 2035... What Battery Equipment Exists?

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Amid slowing demand for electric vehicles, domestic battery cell companies in South Korea, which posted poor results in the first quarter, are adjusting their investment pace this year.

LG Energy Solution recently stated in its 2024 Q1 earnings conference call, "Essential new and expansion investments will continue with selection and concentration, but we will thoroughly prioritize investments, adjust the scale and execution speed of investments, and reduce the scale of capital expenditures (CAPEX)." SK On also explained in its Q1 earnings conference call that "to respond to unfavorable market conditions, we will flexibly adjust the timing of facility expansions in Europe and China."

However, Samsung SDI said, "Although the growth of the electric vehicle market is temporarily slowing due to high interest rates and delayed global economic recovery, the medium- to long-term high growth potential remains valid," and added, "We will proceed without disruption with new construction investments in our factories in Hungary, Malaysia, and the U.S. joint venture." Samsung SDI expects a significant increase in investment scale compared to the previous year.

Among the three major battery cell companies, two?excluding Samsung SDI?have officially announced plans to reduce their investment scale this year. Accordingly, partner companies collaborating with these firms are also expected to be directly or indirectly affected. Changes in order volumes for battery equipment companies are also anticipated.

Battery equipment companies have benefited whenever cell companies announced large-scale expansion plans domestically and abroad. The order backlog of the three battery cell companies is estimated to have exceeded 1,000 trillion KRW as of the end of last year. The CAPEX of the three companies last year was about 20 trillion KRW. Approximately half of this funding went to related equipment companies.

Unlike semiconductors and displays, which heavily rely on foreign equipment such as from Japan, battery equipment has been significantly localized. The localization rate of battery equipment is estimated to be around 90%. Domestic equipment companies, having already proven their technological capabilities through collaboration with domestic battery cell companies, are also supplying products overseas. The anti-China sentiment emerging in the U.S. and Europe has also acted as a positive factor for domestic equipment companies.

However, domestic equipment companies now face a challenging period. Experts believe that the adjustment in investment pace by cell companies will inevitably impact domestic equipment companies. On the other hand, the fact that automakers are internalizing battery production and that next-generation batteries such as 46mm diameter cylindrical batteries and all-solid-state batteries are preparing for mass production could present new opportunities.

Junseo Park, an analyst at Mirae Asset Securities, explained, "As the expansion speed of battery cell companies slows, equipment companies inevitably will be affected," adding, "New overseas battery cell companies or automakers could become new opportunities."

Half of Investment Cost Goes to Equipment... 95 Trillion KRW Market by 2035

Like semiconductors and displays, batteries are large-scale equipment industries, so equipment accounts for a high proportion of facility investments. According to the battery industry, the unit CAPEX is typically around 70 billion KRW per 1 gigawatt-hour (GWh) domestically. Overseas (North America) is estimated to be higher, over 100 billion KRW.

Recently, due to rising logistics and labor costs, CAPEX has further increased to around 120 to 150 billion KRW. The investment for LG Energy Solution’s 53 GWh plant under construction in Arizona, USA, as of April, is 7.2 trillion KRW. Simple calculations suggest an investment of about 135.8 billion KRW per 1 GWh.

The proportion of equipment in total CAPEX varies by construction site but is generally understood to be 40-50%. The larger the plant, the higher the proportion of equipment in CAPEX. Market research firms and securities research centers estimate the equipment market at 50 to 60 billion KRW per 1 GWh.

Looking at equipment investment by process, the electrode process accounts for the highest share at 30%, followed by assembly at 17%, formation at 29%, and others at 24%.

Battery companies have recently expanded investments in smart factories and factory automation. A smart factory integrates all processes from product planning, design, production, to distribution using information technology (IT) to reduce costs and improve productivity.

One of the key tools to realize this is factory automation using robots. Battery and material companies are introducing AGVs (Automated Guided Vehicles) and AMRs (Autonomous Mobile Robots) within manufacturing facilities to enhance production efficiency.

Although battery companies have adjusted their pace this year, facility investments continue. Unlike LG Energy Solution and SK On, Samsung SDI has announced aggressive investment plans this year. Although the timing of investments has been delayed, the equipment market is expected to continue growing.

Energy-specialized market research firm SNE Research forecasts the battery equipment market to expand from $21.6 billion (about 29 trillion KRW) this year to $70 billion (about 95 trillion KRW) by 2035. By region, China is expected to account for 38% of the total battery equipment market in 2035, followed by Europe at 31% and the U.S. at 28%.

Localization Rate at 90%... What Are the Korean Equipment Companies?

Domestic battery cell companies initially used many Japanese equipment but have now largely replaced them with domestic equipment. When cell companies expand or build new overseas plants, they also use verified domestic equipment. The localization rate of battery cell companies is estimated to be around 90%.

Overseas battery companies initially considered Chinese equipment due to lower prices, but due to yield issues and other problems, they have shown interest in Korean equipment as well.

The electrode process is the most difficult and capital-intensive manufacturing process. It involves coating cathode and anode active materials onto aluminum and copper current collectors, respectively, and is subdivided into mixing, coating, drying, rolling (pressing), slitting, and notching processes. Equipment names include mixer, coater, slitter, etc.

The mixer’s technology lies in uniformly mixing various mixtures in precise quantities to create slurry. To improve productivity, mixers with higher mixing capacity per unit time are required. Recently, there is a trend toward continuous mixers. Domestic mixing equipment companies include TSI, Yoonsung F&C, and Jeil MNS, while Japanese companies include Inoue and Primix, and Chinese companies include Lead China (Seondo Intelligence).

Secondary Battery Electrode Mixing Process and Equipment. Image Source=TSI

Coaters require the capability to quickly and uniformly apply cathode and anode active materials onto current collectors. To improve productivity, wide-width coaters capable of coating 70-80 meters per minute are being introduced. Typically, coating and drying processes are connected in one piece of equipment.

Domestic coating & drying equipment companies include CIS, PNT, Hanwha Momentum, and Hana Technology. Chinese companies include Seondo Intelligence and Yinghe Technology, and Japanese companies include Toray and Hirano Tecseed.

Rollers use roll-to-roll equipment to reduce the thickness of electrodes, applying uniform pressure to achieve thicknesses below 1.3 micrometers (μm). Domestic companies include CIS and PNT. Japanese companies include Toray, Hitachi, and Canon, while Chinese companies include Yinghe Technology and Seondo Intelligence.

Secondary battery electrode roll press. Photo by CIS

Notching equipment refers to machines that cut the electrode plate, leaving only the tab attachment area at the uncoated part. Previously, press methods were widely used, but laser equipment is now being adopted. Related domestic equipment companies include Philoptics (Phil Energy), DENT, and Yuil Enertech.

Laser Notching Process and Equipment. Image Source=Phil Energy

The assembly process following the electrode process involves assembling cathode, anode, and separator into cell forms to create batteries. Equipment is divided by process such as winding (cylindrical and prismatic) and stacking (pouch and prismatic). Recently, stacking methods are increasingly adopted even in prismatic cells. Some companies classify the notching process as part of assembly rather than electrode process.

Domestic companies related to winding and stacking include Hana Technology, Phil Energy, DA Technology, Mplus, and Nine Tech. Lamination equipment specialized for LG Energy Solution is supplied by Nine Tech, DSK, and Shinjin M-Tech.

NineTech's Z-folding type stacking equipment. Image source=NineTech

After completing the electrode plates, tabs are welded and batteries are packaged into cans or pouch cases. Domestic companies involved in this packaging process include Mplus, Hana Technology, System R&D, and NS.

The formation process involves aging, where assembled batteries are stored under certain conditions to allow electrolyte to sufficiently permeate inside, and activation, where repeated charging and discharging impart electrical characteristics and stabilize battery performance. Pouch batteries also undergo a degassing process.

Secondary battery formation equipment. Image source=Wonik P&E

Activation equipment companies include Wonik PNE, A-Pro, Gapjin, DH, and NS (degassing). Chinese companies include Hangker. Inspection equipment companies include Nsys, V1Tech, Inometry, Cowin Technology, and SFA.

4680 Cylindrical and All-Solid-State Batteries Appear, Equipment Also Changes

With the commercialization of 46mm diameter cylindrical batteries such as 4680 and 4695, and all-solid-state batteries, new processes are being introduced, requiring changes in equipment.

For 46mm cylindrical batteries, dry electrodes, which are more environmentally friendly and energy-saving than current wet electrodes, are expected to be applied. Dry electrodes are being researched and developed by many battery cell companies including Tesla, LG Energy Solution, and Samsung SDI, but actual mass production is expected to take some time.

To mass-produce all-solid-state batteries, different equipment from existing ones must be introduced. Samsung SDI, preparing for the first domestic commercialization of all-solid-state batteries, is reportedly negotiating with various equipment companies to establish a mass production manufacturing line.

All-solid-state batteries use solid electrolytes instead of liquid electrolytes, eliminating the need for electrolyte injection during assembly. Also, since liquid electrolytes are not used, the activation process that forms the SEI (Solid Electrolyte Interphase) layer to impart electrical characteristics is expected to be simplified.

Instead, in the electrode process, a high-pressure pressing process is required to enhance adhesion between active materials, solid electrolytes, and current collectors and improve interface properties. Sulfide-based solid electrolytes emit toxic hydrogen sulfide (H2S) gas upon contact with moisture, making manufacturing process management for all-solid-state batteries much more demanding.

NewsPim, "K-Battery Big 3's Annual Operating Profit 5x 'Facility Investment'... Capturing Both Quantity and Quality," 2024.1.8
Mirae Asset Securities, "Battery Equipment: Upward Earnings Revision. Focus on Process Innovation and OEM In-House Production," 2024.3.5
Kiwoom Securities, "Investment Cycle in Full Swing: Time to Focus on Equipment Stocks," 2023.9.13
SNE Research, "Lithium-ion Secondary Battery Manufacturing Equipment Development Status and Mid- to Long-Term Outlook," 2023.5.31
Mirae Asset Securities, "Battery Equipment: No Equipment, No Battery," 2022.5.23