LG Chem's spinoff battery unit should mark first step
LG Chem decided to spin off its battery business in a board meeting last Thursday. The world's largest battery maker will seek to win approval of its plan at an extraordinary shareholders meeting in late October, and formally launch the tentatively named LG Energy Solution in December. LG Chem will wholly own the new company through a physical division, sparking an outcry among small individual investors.
These investors posted a petition on the Cheong Wa Dae website opposing the spinoff. However, some stock analysts say it will prove to be a market booster in the long run, citing LG Chem's high corporate value. Assuaging and persuading small shareholders to go along with the plan will likely be as important as the spinoff itself, however.
Often called the "second semiconductor" in Korea, electric vehicle (EV) batteries have emerged as the hottest industry in the Fourth Industrial Revolution. According to IHS Markit, the global battery market is estimated to grow 25 percent a year to exceed 180 trillion won ($155 billion) in 2025, surpassing the memory chip market at 150 trillion won.
LG Chem currently stands at the top of this astonishingly expanding market. The company accounted for 25.1 percent of accumulated worldwide sales of EV batteries in the first five months of the year, beating out China's CATL that has a market share of 23.8 percent. LG Chem also turned around in the second quarter, following a 131 percent jump in its operating profit from a year ago. The spinoff decision reflects the company's confidence based on such an improved performance.
To meet surging orders from global clients such as GM, Ford, Volkswagen and Renault, the company direly needs to invest into facilities and technology. The spun off company needs to prepare for the future with fresh funds to be secured by its initial public offering. Korea's battery industry has carved out a 35 percent global market share, laying the foundation to make the country a global battery powerhouse. However, it can ill afford to remain complacent because of the rapidly chasing Chinese makers that have government support. We want to cheer Corporate Korea's efforts to overcome such challenges.
LG Chem decided to spin off its battery business in a board meeting last Thursday. The world's largest battery maker will seek to win approval of its plan at an extraordinary shareholders meeting in late October, and formally launch the tentatively named LG Energy Solution in December. LG Chem will wholly own the new company through a physical division, sparking an outcry among small individual investors.
These investors posted a petition on the Cheong Wa Dae website opposing the spinoff. However, some stock analysts say it will prove to be a market booster in the long run, citing LG Chem's high corporate value. Assuaging and persuading small shareholders to go along with the plan will likely be as important as the spinoff itself, however.
Often called the "second semiconductor" in Korea, electric vehicle (EV) batteries have emerged as the hottest industry in the Fourth Industrial Revolution. According to IHS Markit, the global battery market is estimated to grow 25 percent a year to exceed 180 trillion won ($155 billion) in 2025, surpassing the memory chip market at 150 trillion won.
LG Chem currently stands at the top of this astonishingly expanding market. The company accounted for 25.1 percent of accumulated worldwide sales of EV batteries in the first five months of the year, beating out China's CATL that has a market share of 23.8 percent. LG Chem also turned around in the second quarter, following a 131 percent jump in its operating profit from a year ago. The spinoff decision reflects the company's confidence based on such an improved performance.
To meet surging orders from global clients such as GM, Ford, Volkswagen and Renault, the company direly needs to invest into facilities and technology. The spun off company needs to prepare for the future with fresh funds to be secured by its initial public offering. Korea's battery industry has carved out a 35 percent global market share, laying the foundation to make the country a global battery powerhouse. However, it can ill afford to remain complacent because of the rapidly chasing Chinese makers that have government support. We want to cheer Corporate Korea's efforts to overcome such challenges.
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