ANALYSIS Korea aspiring to become battery business champion

Gov't to nurture local battery material, component, equipment ecosystem

By Baek Byung-yeul

With the global economy transitioning to clean energy to better respond to climate change, Korea is scurrying to foster local materials, components and equipment businesses for the secondary battery industry in a bid to make this a next-generation growth engine.

Secondary or rechargeable batteries grew into a $50 billion business in 2020, according to data from the Bank of Korea, and the figure is expected to triple to $150 billion by 2025 as more countries are encouraging consumers to buy electric vehicles (EVs). Also, increasing reliance on renewable energy around the world will lead to an eventual increase in the use of batteries in energy storage systems (ESS) that store electricity.

Korea is capitalizing on the changing trend as its three big battery makers ― LG Energy Solution (LGES), Samsung SDI and SK Innovation (SKI) ― occupied over 33 percent of the global market between January and May, according to data from market tracker SNE Research.

While Korean firms are competing with rival firms such as CATL and BYD of China, and Panasonic of Japan, the government has vowed to boost its support to help local players strengthen their competitiveness.

On July 8, President Moon Jae-in visited an LGES battery-manufacturing plant here and pledged robust support to upgrade the industry as a core growth engine along with semiconductors. The support measures include providing tax incentives for investments and fostering over 1,100 professionals in the industry every year.

The President added it is essential to improve the capabilities of local materials, components and equipment companies, as securing a supply chain for high-tech parts will help the country solidify its position amid ongoing geopolitical tension.

Local players in the battery industry said they are increasing investments in anticipation of large-scale orders from China, Europe and the United States.

With their battery-manufacturing capability being recognized, Korean battery companies are increasingly being courted by overseas countries that want to attract them to build battery-manufacturing facilities on their turf.

U.K. Prime Minister Boris Johnson expressed his wish to attract an LG factory during President Moon's visit to England in June. Also, it was reported that Spain will join the race to host battery factories built Korea firms, a senior government official said.

“We've noticed that local governments in some countries are trying to attract battery cell makers and components, materials and equipment makers. With European countries raising the number of EVs, their attempts to attract Korean battery companies will be increasing,” an official from a local battery company said.

Among local players strengthening their investments, POSCO Chemical said recently it will invest 600 billion won ($525 million) to build a new cathode material plant in Pohang, North Gyeongsang Province.

The POSCO affiliate said it generated sales of roughly 550 billion won in battery materials including cathodes in 2020. A cathode is one of the four main components in a battery cell along with the anode, electrolytes and separators.

“When the new cathode plant is completed, POSCO Chemical will have an annual production capacity of 160,000 tons, which will be enough to supply 1.8 million EVs with 60-kilowatt-hour battery packs,” a company official said.

Chunbo BLS, an affiliate of chemical company Chunbo, is investing 512.5 billion won to build a lithium bis(fluorosulfonyl)imide factory at the Saemangeum Development and Investment Agency's industrial zone, located in southwestern Korea. A company official of Chunbo BLS said it will be able to produce 20,000 tons of core materials for EV batteries.

With the government encouraging battery cell makers to use more parts from Korean firms, YoulChon Chemical is also expected to become one of the new players supplying its films for pouch batteries.

Based on its technological capability in product packaging, the subsidiary of local noodle maker Nongshim is strengthening its electronic materials business, seeking to supply film pouches, which are used as packaging for lithium-ion pouch batteries.

The company is reportedly awaiting approval to supply its battery films to LGES and Samsung SDI.

“YoulChon will be able to supply its battery films to the cell makers given those companies are trying to reduce their dependency on Japanese firms,” an official from a local battery company said.

Though the government has presented a blueprint to foster the sector as a next growth engine following the semiconductor industry, concerns are still lingering over the future of the business as there is the view that it could go the way of the display business, which has been overtaken by Chinese firms.

In the display business, Korea already had a painful experience in the early 2000s as Chinese maker BOE was able to grow into one of the global leading players after it took over HYDIS, an LCD business unit of Hynix Semiconductor ― now called SK hynix ― in 2002 and acquired the related technologies.

In this regard, Hana Financial Investment analyst Kim Hyun-soo said things will be different when it comes to the battery business as the industry has continued to see explosive growth while the display industry stagnated.

“We can say that the battery industry is comparable to the display industry as many Korean companies are competing with Chinese companies. The biggest difference at this point is that the display exists for TVs, smartphones and laptops, and the battery is for EVs and renewable energy.

“When LG Display listed itself on the stock market, the global sales volume of TVs was 200 million and the figure has not changed. Display makers could find new sources of demand in the smartphone business, but the growth of the phone business has stalled. However, when we look at the battery business, the global EV market penetration is only at around 4 percent and the figure will grow to 20 percent, 30 percent and so on. So the battery industry has a much higher ceiling than the display industry,” the analyst said.