Three battery companies step on the accelerator for ‘big investment’

• allforyouclick
• 0
• on May 30, 2023

Korea’s top three battery makers – LG Energy Solutions, Samsung SDI, and SK energy – are significantly increasing their investment in R&D and facilities. Their strategy is to secure advanced technology and production capacity to become globally competitive.

According to their quarterly reports, the three companies invested a total of 619.5 billion won in R&D expenses in the first quarter of this year. In addition, they spent a total of KRW 4.57 trillion on facilities such as new and expanded factories during the same period. This represents a 26.5% and 177.6% year-on-year increase, respectively.

The industry’s aggressive investment is expected to continue throughout the year. The recent upturn in the battery industry has led to a spate of corporate bond issuances and investment industry funding. Market interest seems to be overriding concerns about a slowdown and higher interest rates.

Investment expenses of the three battery makers in the first quarter./graphic=Bizwatch
LG Ensol issues bonds to fund future investments

LG Energy Solutions Q1 investment expenses./graphic=Bizwatch
In the first quarter of this year, LG Energy Solutions spent 226.2 billion won on R&D. This is up 23.3% year-on-year. The company invested KRW 1.8104 trillion in new and expanded battery production lines, nearly double the amount of the same period last year.

With this, LG Energy Solutions plans to diversify its portfolio. Starting with polymer-based all-solid-state batteries in 2026, the company plans to commercialize lithium-sulfur batteries in 2027, high-capacity polymer-based all-solid-state batteries in 2028, and sulfide-based all-solid-state batteries in 2030.

Ramping up North American production. LG Energy Solutions, which has built and operated the most factories in North America among global battery companies, aims to increase its production capacity in the U.S. from 15 GWh (gigawatt hours) at the end of last year to 250 GWh by 2025 based on appropriate investments.

Specifically, the company plans to expand its capacity to 250 GWh, including the General Motors (GM) 1-2-3 plant (140 GWh), the Honda joint venture (40 GWh), the sole plant in Michigan (26 GWh), and the sole plant in Arizona (43 GWh).

In addition, the company plans to expand its cylindrical production base for electric vehicles in Arizona and mass-produce lithium iron phosphate (LFP) and energy storage system (ESS) products as new growth engines.

LG Energy Solutions is also busy preparing for this. It is promoting the issuance of corporate bonds worth about 500 billion won, including 2-year, 3-year, and 5-year bonds. It plans to raise up to 1 trillion won on June 29 after forecasting demand for the bonds on June 22. LG Energy Solutions is expected to make more aggressive investments with the funds raised.

The industry is expecting the bond issue to be a success. This is because LG Energy Solutions posted KRW 8.74 trillion in sales and KRW 633.2 billion in operating profit in the first quarter of this year, up 101.4 percent and 144.6 percent year-on-year, respectively.

Samsung SDI ‘more focused on research’

Samsung SDI’s investment expenses in the first quarter./graphic=Bizwatch
Samsung SDI (Energy Solutions) invested 308.8 billion won in R&D in the first quarter of this year, up 19.6% year-on-year, the largest among the three companies. The proportion of R&D expenses to sales was 5.8%, almost twice as high as LG Energy Solutions’ 2.6% and SK energy’s 2.5%.

In terms of facility investment, however, Samsung SDI was more conservative than its competitors. During the period, Samsung SDI invested KRW 60.34 billion in new and expanded batteries, up 7.2% from the same period last year. Both the scale of investment and the rate of increase in investment costs were small among the three companies.

In response, an official from Samsung SDI said, “We have fewer joint venture factories than other companies, so the scale and growth rate of facility investment costs were conservative. We aim to achieve technological advancement by actively investing in R&D, and we are cautious when it comes to orders.”

Through active R&D, Samsung SDI improved its performance in the first quarter of this year by securing technologies such as developing high-capacity positive and negative cathode materials and electrode design technologies to achieve next-generation high energy density, improving container energy density and securing long-life performance required by customers.

SK energy ‘sees the light of preemptive investment스포츠토토‘

SK energy’s investment expenses in the first quarter./graphic=Bizwatch
SK Telecom made the most aggressive investment decisions among the three companies in the first quarter of this year. Although the company is still in the black, it is understood that it has decided that it cannot lose out on economies of scale.

Industry analysts believe that the preemptive investment is likely to pay off as the company is expected to achieve the highest quarterly earnings in the first quarter and start to improve profitability in the second quarter as the reopening of China and improved battery yields begin to take effect.

In the first quarter of this year, SK innovation invested 84.5 billion won in R&D expenses and 2.15 trillion won in new and expanded production lines. This is a 77.5% and 1131.4% surge from the same period last year, respectively. Compared to other companies, the scale of research and development expenditure was smaller, but the growth rate was the highest, and the facility investment was the largest in both scale and growth rate.

SK energy is also focusing on production facilities in the United States. SK energy is building three battery production bases with Ford in the US states of Kentucky and Tennessee, and is planning to establish a joint venture plant for electric vehicle batteries in the US state of Georgia with Hyundai Motor Group, with a targeted start-up date of the second half of 2025.

The reason for SK energy’s aggressive investment is that it has been steadily raising funds since last year. The company has secured more than 10 trillion won in funding since last year. Recently, the company has also successfully signed a contract to attract new long-term financial investors, securing up to 1.2 trillion won in investment.

SK energy plans to continue its global expansion investments centered on its battery and battery material businesses. This is to achieve its goal of increasing its annual production capacity from 88 GWh in 2022 to at least 220 GWh in 2025. This year’s investment plan alone amounts to KRW 10 trillion. By 2025, we plan to invest a total of KRW 30 trillion in capex to accelerate outward growth and improve profitability.