THAAD retaliation weighs on Samsung, LG
By Kim Tae-gyu
The nation’s top five conglomerates face growing uncertainties in their Chinese operations this year as Beijing is apparently intensifying its retaliatory steps against Korea’s decision to allow the deployment of a U.S. missile defense system here.
While announcing the list of electric vehicles (EVs) eligible for generous subsidies in late December, the Chinese government originally included five EVs equipped with batteries from Samsung SDI and LG Chem.
However, Beijing excluded the five cars from the list half a day later for unknown reasons, sparking suspicions that the flip-flop has something to do with the Terminal High Altitude Area Defense (THAAD) system.
Korea and the U.S. agreed to deploy the THAAD battery in 2017 in Seongju, North Gyeongsang Province, about 300 kilometers southeast of Seoul, to tackle North Korea’s missile threats. The move raised China’s ire because its radar can also monitor airborne objects in the world’s most populous country.
“China may claim Samsung SDI and LG Chem do not qualify for subsidies because their batteries have yet to get national certification there,” an industry insider said, declining to be named.
“However, around 50 EVs with batteries lacking Chinese certification made the list. That’s why many think it’s part of a series of retaliatory steps against the THAAD plan.”
Both Samsung SDI and LG Chem have sought to get Chinese certification after they failed in the test last July but Beijing has delayed the procedures for quite a long time.
LG Chem and Samsung SDI account for a combined 40 percent of the global market for energy storage system (ESS) batteries which are used for EVs.
However, they have struggled in China because of the failure to garner subsidies, which have been extended to their competitors.
Both companies refused to comment on the issue, only saying “We hope things will be resolved in a smooth way.”
Lotte Group, Korea’s fifth-largest conglomerate, is already feeling the heat in China after it provided its golf resort in Seongju to the government for use as the deployment site of the THAAD battery.
Lotte’s business focuses on distribution, tourism and hotels. Late last year, its 22 Chinese units underwent unprecedented tax audits and inspections for sanitary and fire risks.
Hyundai Motor Group and SK Group are also bracing for the possible aftermath of the soured Sino-Korean relations in consideration of their presence in China.
Hyundai Motor Group, Korea’s second-largest chaebol, has rapidly invested in China. SK Group’s lucrative unit SK hynix, the world’s second-largest maker of memory chips, has also funneled big money into Chinese factories.
SK Group, Korea’s third-largest chaebol, is a sprawling conglomerate in which founding family members exercise almost unchecked control despite having relatively small direct shareholdings.