LG Chem to Exit Separator Business... Signal of Group Restructuring

Withdrawal of New Production Facility in Paju
Considering Suspension of Investment in Cheongju Line
Personnel Reallocation Planned

LG Chem has withdrawn its plan to establish a joint venture (JV) for separator production in Paju, Gyeonggi Province. Separators are a key material that separates the cathode and anode within lithium-ion batteries to prevent short circuits and enhance safety. The plan was to produce separators domestically in a joint venture with a Chinese specialized company to comply with the battery material localization requirements under the U.S. Inflation Reduction Act (IRA), but the project was halted due to a downturn in the industry. Recently, after LG Group Chairman Koo Kwang-mo emphasized "selection and concentration" at a meeting with executives, the separator business became the first case of restructuring.

According to industry sources on the 3rd, LG Chem decided to stop the establishment of the joint venture with a Chinese separator manufacturer. Besides the separator production line currently operating in Cheongju, Chungbuk, LG Chem had planned to install new production facilities in Paju, Gyeonggi Province, including clean rooms, but judged that it was no longer feasible due to the deteriorating business environment. The Chinese joint venture partner’s repeated delays in responding were also cited as a reason for the withdrawal.

An LG Chem official said, "The business environment itself is trending toward reducing capacity," adding, "It is not a situation where additional investment can be considered." Shin Hak-cheol, Vice Chairman of LG Chem, previously stated at the regular shareholders' meeting that "this year, we plan to reduce capital expenditures by more than 1 trillion won and operate tightly," making the separator investment a target for restructuring.

LG Chem is also considering halting investments in the Cheongju production line in addition to the new facility in Paju. Lee Sang-hyeop, head of LG Chem’s separator business division, reportedly responded with "nothing has been decided" when asked about the continuation of the business at an employee briefing held at the Cheongju plant late last month. When questioned about the possibility of business withdrawal, he reportedly mentioned that it would be difficult to guarantee business continuity if the current situation persists. In this regard, there are also forecasts that personnel reallocation will take place at LG Chem’s Cheongju plant during the first half of this year.

LG Chem acquired the separator business from LG Electronics in 2021. However, growth has slowed due to a slowdown in electric vehicle demand and oversupply from China. Operating profit in the advanced materials division fell from 906.7 billion won in 2022 to 510.2 billion won last year. LG Chem had predicted that the global separator market would reach 11 trillion won by 2025, but according to SNE Research, the market size last year was in the 8 trillion won range and is expected to see only limited growth this year.