Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Samsung takes different path from LG, SK to counteract battery industry slump
Samsung SDI CEO Choi Yoon-ho speaks during Tech & Career Forum 2024 in Boston, Saturday (local time). The company's own career fair invites people who hold master's or doctoral degrees, so they have a chance to engage with the company's key executives and explore career opportunities. Courtesy of Samsung SDI
By Park Jae-hyuk
Cathode materials producers decide to slow investments
Samsung SDI’s commitment to making large-scale investments as planned is differentiating the battery maker from its competitors — LG Energy Solution (LGES) and SK On — and Korean cathode materials producers, all of which have decided to slow down their investments amid decelerating global demand for electric vehicles (EVs), according to industry officials, Sunday.
The battery manufacturing unit of Samsung Group even announced that mass production of batteries at its North American joint venture with Stellantis, which had been slated for the first quarter of next year, will begin this year.
Although the Korean firm expects sluggish demand to linger during the second half of this year, it plans to finish the expansion of facilities at its plant in Hungary.
“We are carrying out necessary investments for our medium- to long-term growth,” Samsung SDI Vice President Kim Yoon-tae said during a conference call on its second-quarter earnings, Tuesday.
“As of the first half of this year, the size of our investments has doubled from a year earlier.”
This was in stark contrast to the strategies of LGES and SK On.
LGES Chief Financial Officer (CFO) Lee Chang-sil said during a conference call on July 25 that the company will make limited investments in strategically necessary sectors for a while.
Under the plan, LGES recently suspended the construction of its Arizona factory for the production of lithium ferrophosphate batteries for energy storage systems and a Michigan plant of Ultium Cells, its joint venture with General Motors.
In addition, LGES cut this year’s sales target, saying that its annual revenue would plunge more than 20 percent from a year earlier. In January, the company said its annual revenue would drop by mid-single percentage.
“We will prevent overinvestment by slowing down our production,” the LGES CFO said.
SK On CFO Kim Kyung-hun said during a conference call on Thursday that the company will focus more on reducing costs throughout this year to improve profitability.
BlueOval SK, a joint venture between SK On and Ford Motor, will become more flexible about its production plan, considering changes in the U.S. carmaker’s strategies toward its EV business.
“We will keep a close watch on whether we incurred unnecessary costs,” the SK On CFO said.
LG Chem, POSCO Future M and EcoPro BM decided to slow down their investments in the battery materials business.
At the time of the EV industry boom in 2022, Samsung SDI also differed from its rivals, as it remained passive about global expansion in comparison to LGES and SK On, in order to focus more on product quality and financial stability.
Samsung SDI’s conservative stance had once drawn American investment banks’ negative outlooks, but its strategy eventually enabled it to become the most profitable battery firm in Korea.
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During the second quarter, Samsung SDI posted 208 billion won ($153 million) in operating profit from its battery business. Even without 7.9 billion won worth of advanced manufacturing production credit (AMPC) in compliance with the U.S. Inflation Reduction Act, the company made a profit from its battery business.
In contrast, LGES managed to post 195.3 billion won in operating profit, thanks to 447.8 billion won worth of AMPC.
SK On suffered 460.1 billion won in operating loss despite 111.8 billion won worth of AMPC.