L&F's LFP push aims to break China's grip on battery supply chain

A calcining kiln is seen at L&F's high-nickel NCM manufacturing plant in Daegu in 2024. Courtesy of L&F

Lithium iron phosphate (LFP) may sound unfamiliar to those not in the rapidly growing field of the global secondary battery market. To L&F President and Chief Finance Officer Yu Sung-hun, the material has become a silver bullet for the company’s next-generation business of manufacturing key components for the batteries, as well as power-saving energy infrastructure that is now experiencing spiking demand worldwide.

L&F President and Chief Finance Officer Yu Sung-hun / Courtesy of L&F

L&F, based in Daegu with over 20 years of history, has completed everything it needs to start manufacturing LFP for battery cathodes and energy storage systems (ESS) by October. Yu said L&F will be Korea's only LFP manufacturer. In May, the company completed construction on an LFP production plant in Daegu through its wholly owned subsidiary, L&F Plus.

The facility will start with an annual production capacity of 30,000 tons, which Yu said will double in the first half of next year. He added that the expansion is a key step in advancing L&F's long-term growth strategy.

“LFP is rapidly expanding its application scope to include ESS, industrial mobility and robotics, establishing itself as a core material in the global battery industry,” Yu said in an interview with The Korea Times.

“The globally rising LFP demand now requires a significant shift in companies' growth strategies. As supply chain stability emerges as a new competitive edge beyond simple price competitiveness, the LFP market's growth is now accelerating.”

In the global electric vehicle (EV) market, premium models continue to rely on high-nickel ternary (NCM) cathode materials, which account for up to 50 percent of a battery's production cost. Demand, however, is shifting toward lithium iron phosphate (LFP) cathode materials for more affordable EVs and energy storage systems (ESS). According to Yu, LFP is gaining traction because it is both cheaper and safer than NCM. LFP costs about $8 or less per kilogram, compared with roughly $25 per kilogram for NCM.

Surging demand for LFP is also being fueled by the rapid growth of energy storage systems (ESS), which are essential for powering AI data centers being built at an unprecedented pace worldwide. The global transition toward renewable energy is further boosting demand for large-scale ESS, as more storage capacity is needed to stabilize electricity grids.

LFP, according to Yu, is a key material for ESS construction because of its thermal stability, long lifespan and cost advantage. He said the global ESS market will have to rely on this strategic material.

“With the proliferation of AI data centers driving a surge in electricity demand, the importance of large-scale energy storage facilities has grown. With the needs for renewable energy integration in power generation and rising energy security issues, ESS growth is accelerating rapidly,” Yu said.

L&F's planned LFP production is expected to strengthen Korea's domestic supply chain for secondary batteries. The move comes at an opportune time, as major economies are ramping up efforts to localize battery supply chains and reduce geopolitical and supply chain risks.

The United States has introduced regional sourcing requirements and Foreign Entity of Concern (FEOC) requirements under the Inflation Reduction Act. Europe is encouraging expansion of its regional production bases through measures such as the Critical Raw Materials Act.

LG Energy Solution's energy storage systems (ESS) for grids are lined up in California in this 2025 photo. Courtesy of LGES

Korea has so far been manufacturing up to 80,000 tons of NCM per year to supply to high-end EVs. Now, with L&F’s LFP production, the country’s domestic battery cathode materials supply could diversify further to more affordable EVs and ESS for power distribution and AI data centers.

“While EVs use both NCM and LFP, ESS doesn’t use NCM because the material is too expensive. Imagine a 40 foot-wide container filled with pricey NCM for each ESS. That’s too costly. And because NCM is particularly for high-performing output, it has higher risks of fire,” Yu said.

“ESS only needs a stable current of power running through, for which LFP is better than NCM. LFP is also capable of handling more frequent recharging than NCM, making it more suitable for ESS construction.”

Yu said LFP has so far been produced exclusively by China, posing difficulties to countries like the U.S. which has announced it will not import raw materials from China. L&F can now cater to all countries wishing to import non-Chinese LFP.

"China and Korea are the only countries capable of producing LFP cathode materials at scale," Yu said. "Korea has already established itself as a global leader in high-nickel ternary (NCM) cathode materials. By adding LFP to its portfolio, the country will be able to export both types of cathode materials, strengthening its battery supply chain and energy sovereignty."

In May, L&F Plus secured a 220 billion won ($146 million) loan from a state-run funding program, funneling the money to its LFP production. It recently signed a 1.6 trillion won-worth LFP supply contract with Samsung SDI. The material to supply will be L&F's latest third-generation LFP type with higher density, a feature that lacked in the material's previous types.

L&F posted sales of 740 billion won and an operating profit of 120 billion won for the first quarter, extending its streak of profitable quarters to three. Its NCM cathode material output reached a record high during the quarter, surging 124 percent from a year earlier.

“L&F is expanding its growth opportunities. We will use a two-track strategy involving NCM and LFP, introduce a mass production system for LFP, and domesticate the supply chains for our key materials,” Yu said.