Korea’s battery trio aims to outsmart Chinese rivals in US
Sungsu Bae
Oct 16, 2023 (Gmt+09:00)
EV battery system platform Ultium, jointly developed by LG Energy and GM
South Korea’s three major battery makers — LG Energy Solution Ltd., SK On Co. and Samsung SDI Co. — recently came under renewed pressure to protect their global market turf amid progress in Chinese rivals' efforts to step out beyond China.
China’s Contemporary Amperex Technology Co. Ltd., commonly known as CATL, is the world’s top battery player when China is included.
Outside China, Korea’s LG Energy has been the industry leader but is closely followed by the likes of CATL and BYD.
Industry data shows that LG controlled 28.5% of the global market ex-China in the first eight months of the year while CATL’s market share stood at 27.7%, narrowing the gap with LG to 0.7 percentage point.
Faced with an increasingly uphill battle, Korean players are now turning their sights toward the US, where Chinese battery makers are at a disadvantage due to the US government’s Inflation Reduction Act (IRA), which favors non-Chinese firms.
Korean companies are also converting their plants in the US into smart factories to boost productivity, which often yields sharper price competitiveness versus their rivals.
CATL's prismatic LFP batteries
SMART FACTORIES
SK On’s US corporation, SK Battery America (SKBA), operates two battery plants in Georgia, whose productivity stands at 1.6 gigawatt-hours (GWh) and 2 GWh, respectively.
Per-line productivity is up to four times greater than the 0.4 GWh and 0.9 GWh of the company’s two production lines in Korea.
SK On, the battery unit of SK Innovation Co., attributed its higher US productivity to its efforts to turn those plants into smart factories with advanced manufacturing technology and automation processes.
The company built its first Georgia plant with a 10 GWh annual production capacity in the first half of 2022, and the second plant with 12 GWh near the year’s end.
“Backed by advanced technology at our US smart factories, our global production yields are now hovering around 90%,” said an SK On official.
LG Energy is also stepping up efforts to turn its plants in Michigan and other parts of US into smart factories.
Samsung SDI, a latecomer to the US, is ramping up its moves to go smart with its two separate battery joint ventures with Stellantis N.V. and General Motors Co.
(Graphics by Sunny Park)
TAX BREAKS UNDER AMPC
The US government’s big tax breaks under the IRA are luring Korean battery makers into North America.
Last week, LG said its third-quarter operating profit soared to a record high, aided in part by an estimated 215 billion won ($159 million) in tax credits it expects to receive from the US for its US battery manufacturing facilities, under the Advanced Manufacturing Production Credit or AMPC program.
The IRA grants up to $7,500 per electric vehicle produced if it is assembled in the US and the battery's minerals are either mined or processed in the US or countries with free trade agreements with Washington.
Under the AMPC program, eligible battery makers can receive tax benefits, including a $35 tax credit per 1 kilowatt-hour produced by a battery cell and a $45 tax credit per 1 kWh battery module manufactured in North America.
LG is one of the major beneficiaries of the IRA because it has the largest battery manufacturing capacity among global battery players in the US.
In addition to another standalone battery plant in Holland, Michigan, LG also operates a battery joint venture, Ultium Cells LCC, with its US partner GM.
SK On is widely expected to turn to operating profit next year, buoyed by the US tax benefits under the AMPC program.
Samsung SDI will be eligible for AMPC benefits starting in 2025 when its No. 1 plant under a JV with Stellantis is expected to launch operations.
Industry officials said the three Korean battery makers’ combined annual production capacity in the US is expected to reach 451 GWh by 2025 — a tenfold increase from this year.