November 29, 2024

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A visual concept image of cylindrical batteries (123rf)

Three major South Korean battery cell makers -- LG Energy Solution, SK On and Samsung SDI -- are projected to see steady growth in revenue and profitability in the next few years as they race to meet the growing demand for secondary batteries to power electric vehicles in the United States, data showed Tuesday.

The three companies' combined revenue will reach $121 billion by 2025, up nearly fivefold from the $27 billion recorded in 2021, according to Korea-based battery market tracker SNE Research. This translates into a 48 percent growth annually over the course of five years beginning in 2021.

The profit margin of the three, excluding SK On, would sit at around 10 percent by 2025. The SK affiliate, the only Korean battery maker currently in the red, would reach a break-even point as of 2023 and achieve a 5 percent profit margin by 2025.

"LG Energy Solution and Samsung SDI are headed for a gradual increase in profit margin, whereas SK On, which is making losses, is faced with a problem in terms of profitability," Kenny Kim, CEO of SNE Research, said during the Korea Advanced Battery Conference 2022 in Seoul.

Korean makers' most profitable form factor of 80 percent nickel composition cylindrical batteries are estimated to boast a 10 percent profit margin. Meanwhile, that of prismatic and pouch-type batteries would stand at less than 4 percent.

The rosy outlook for Korean battery makers stem from the fact that they have the upper hand over Chinese rivals, including the world's largest battery maker CATL, given their ability to penetrate the EV markets in the US and Europe. Also, the US and Europe’s tendency to set up battery manufacturing plants on their home soil jointly with battery vendors give Korean battery makers an advantage.

The US and European market, where Korean battery cell makers have sought to join forces with local carmakers due to roadblocks and competitions in China, will have a combined 55 percent market share by 2030, up from 39 percent in 2022.

The explosive growth of electric car demand in the US, partly supported by the signing into law of the Inflation Reduction Act, will trigger a shortage of batteries that will persist through 2030, the data showed. Without battery capacity expansion in the wake of the new act, the US battery demand would have doubled that of the supply in 2030.

Korean battery makers are racing to increase production in North America and Europe, with the goal of having 4 out of 5 batteries produced in either of the two regions in about 10 years.

LG Energy Solution's actual EV battery output -- which takes into account production yield based on total production capacity -- is projected to reach 555 gigawatt-hours, up fourfold from that of 2022. Samsung SDI's output is estimated to reach 310 gigawatt-hours, up ninefold from 2022, while SK On's production will stand at 298 gigawatt-hours, up sixfold over the cited period.

The world's EV battery industry will change course as "the axis of battery production will move away from China to North America and Europe," Kim said.

By Son Ji-hyoung (consnow@heraldcorp.com)