Three Korean Battery Makers to Invest up to KRW20tn This Year

The three major Korean battery makers -- LG Energy Solution, Samsung SDI, and SK On -- are expected to invest up to 20 trillion won in 2023 to ramp up their production capacities at home and abroad.

This year, the three battery makers are expanding their production capacities by 135 gigawatt hours (GWh) -- 100GWh for LG Energy Solution, 23GWh for Samsung SDI and 12GWh for SK On. This amount of batteries can power two million 65kwh electric vehicles (EVs).

The three companies’ total production capacity stood at 361GWh (200GWh for LG Energy Solution, 84GWh for Samsung SDI and 77GWh for SK On) in 2022. Their combined capacity is expected to reach about 500GWh at the end of this year (300GWh for LG Energy Solution, 107GWh for Samsung SDI and 89 GWh for SK On). SNE Research expects global demand for EV batteries to reach 790GWh and the global supply 1025GWh in 2023.

“Korean battery companies need to preoccupy the U.S. market, expand their presences in the European market, and penetrate the Chinese market this year,” said an industry analyst. “The three players are expected to wage an all-out war to boost their competitiveness.”

As of the third quarter of 2022, EV sales stood at 4.41 million units in China, 1.72 million units in Europe, and 790,000 units in North America. These three regions accounted for 95 percent of the total global sales (7.29 million units).

The United States is the fastest-growing EV market at the moment. According to SNE Research, the U.S. EV battery market will grow from 64GWh in 2021 to 143GWh in 2023 and 453GWh in 2025, recording an average annual growth rate of 63 percent. This explains why Korean companies are eager to invest in the U.S. market.

Europe has been called a stronghold of Korean battery makers. According to the Korea Battery Industry Association, the three Korean battery makers accounted for 71 percent of the European battery market last year.

However, China’s CATL, the world’s largest battery maker, has recently set up its first overseas production base in Germany and started full-scale operation, threatening Korean companies. CATL’s German plant is still small with an annual capacity of 8GWh, but the Chinese battery giant plans to build a second plant in Hungary to target Europe.

The second plant will have an annual production capacity of 100GWh and will be completed in 2027 with an investment of about 10 trillion won. This means that Korean battery makers will have to compete with the Chinese company in Europe. Moreover, the Chinese battery market is dominated by Chinese producers. But Korean battery makers must continue to expand their shares in the Chinese market to narrow their gaps with CATL in the world battery market.

LG Energy Solution plans to invest 10 trillion won in 2023. By region, its production capacity in the United States will rise from 15GWh in 2022 to 55GWh in 2023. The company's first joint venture plant with General Motors (GM) will expand its production capacity and its second joint venture plant will go into operation. LG Energy Solution is aiming to become the overwhelming No. 1 battery maker in the United States. Since it is still difficult for Chinese companies such as CATL to enter the United States, LG Energy Solution plans to boost its share of the North American market to 60 percent by 2030.

LG Energy Solution's production capacity in China will expand from 115GWh to 155GWh. This seems to be the result of an increase in supply to Tesla and others. Its Polish plant’s production capacity will also increase from 70GWh to 90GWh. Currently, the Polish plant produces batteries for Volkswagen, Renault, and Ford.

SK On's total production capacity will reach 89GWh in 2023, up 12GWh from 2022 due to the operation of the second Georgia plant in the United States. SK On’s Yancheng 2 plant in China and Ivancsa plant in Hungary are scheduled to start operation in 2024, followed by the BlueOval SK Plants 1 and 2 in the United States, a joint venture with Ford, in 2025. This year, SK On’s expansion is relatively small compared to other companies. But in 2025, factories in the United States, China, and Europe will go into operation altogether, boosting the company's production capacity to 220GWh. SK Innovation is scheduled to invest a total of 10 trillion won in facilities in 2023 and decided to spend a significant part of it, about seven trillion won, on dialing up its battery production capacity.

Unlike the two battery markers, Samsung SDI does not disclose its production capacity. But industry insiders predict that Samsung SDI's production capacity will increase by more than 20GWh in 2023. They expect that production facilities for prismatic batteries will account for a large portion of the increase mainly at the Hungary plant, Samsung SDI’s largest production subsidiary. Samsung SDI is expected to confirm the final specifications for next-generation 46-pi batteries (cylindrical shape with a diameter of 46mm) called a “game changer” in the first half of this year and make an investment in them.