November 25, 2024

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Samsung SDI’s premium PRiMX battery lineup (Samsung SDI)

Samsung SDI said Tuesday it posted an all-time high revenue last year with robust growth in sales of electric vehicle batteries.

In its earnings report, the company said annual sales revenue soared 12.8 percent to 22.7 trillion won ($17.1 billion). Its operating profit, on the other hand, dropped 9.7 percent to 1.6 trillion won due to sluggish sales of small batteries and electronics materials.

“Although we missed the profit target for last year, the EV battery business has seen 38 percent and 93 percent jump in sales and profit (compared to 2022), respectively, driven by the production ramp-up in the Hungary plant’s new assembly line and surge in sales of the premium prismatic battery product P5,” said Park Jong-sun, head of strategic marketing at Samsung SDI’s midsized and large battery division, during a conference call.

In the fourth quarter alone, revenue fell 7 percent on-year to 5.6 trillion won, while operating profit dipped 37 percent to 311.8 billion won, recording 5.6 percent in profit margin.

The battery division’s revenue and profit came to 5 trillion won and 226.1 billion won, respectively, drops of 6 percent and 37 percent from a year earlier. The electric materials business saw 566.9 billion won in revenue, which decreased 9 percent, while its profit dragged down 35 percent to 85.7 billion won in the same period.

Despite the EV demand slowdown projected this year, the battery manufacturer aims to increase revenue and improve profitability by boosting sales of premium batteries – the P5 and the new P6 -- where demand will likely remain solid.

P6, which will be supplied to carmakers operating in North America and Europe from January, is an upgraded version of P5 that boasts 10 percent higher energy density.

“Sales of P6 might not take up a large portion in the first quarter this year, but from the second quarter, beginning mass production, it will reach a double-digit share within the charismatic batteries’ annual revenue. It is likely to deliver similar profitability as P5 (did in 2022),” said Park.

Park added that concerns loom over an overall EV slump due to the "chasm phenomenon" where the growth rate of a high-tech industry such as the electric car market is expected to temporarily slow down after reaching a certain level of market penetration.

“But according to major research firms, North America, which has a relatively low market penetration of electric cars, is likely to show an annual growth rate of over 50 percent -- much higher than last year due to the Inflation Reduction Act,” said Park. “Europe, showing a relatively higher penetration rate, might experience a decrease in growth. However, stricter CO2 regulations will be introduced from 2025 and lead the rebound from at least the second half of this year.”

Preparing for 2025 and onward, when the EV demand is set to grow, Samsung SDI plans to ready the operation of the production bases in the US including the joint venture with General Motors and the second battery manufacturing plant with Stellantis.

It will also boost the production efficiency of its manufacturing bases such as the Hungary plant -- which is maintaining an operational rate in the mid-90 percent range -- and try to win new contracts in low-cost battery products.

When asked about countermeasures to the “Foreign Entity of Concern” requirement in the IRA that mainly prohibits battery makers from sourcing Chinese materials, it said it would share the business strategy on the supply chain after the US authorities respond to the company’s inquiries including a request for a grace period for graphite.

As for the next-generation all-solid-state battery, Samsung SDI expects to upgrade the product technology after analyzing test results on performance and life cycle from the carmakers that received the battery samples last year. Its newly set up ASB business team looks to acquire large-scale production capacity of the battery’s key materials and technology for high battery capacity to meet the mass production schedule that starts in 2027.

By Byun Hye-jin (hyejin2@heraldcorp.com)