Battery Chicken Starts

Beginning in 2025, a game of battery chicken is anticipated to kick off among South Korean firms like LG Energy Solution, SK on, and Samsung SDI, and Chinese companies such as CATL. This comes as a result of major companies' factory expansions that are projected to manufacture around 50% more batteries than the global demand for electric vehicles and Energy Storage Systems (ESS).

Mirroring the memory semiconductor market, which stabilized into a monopoly controlled by top-tier firms like Samsung Electronics, SK hynix, and Micron after enduring two games of chicken since the 2000s, a similar endurance battle is expected in the battery sector between Korean and Chinese companies starting as early as two years from now. Industry players are confronted with a situation wherein they must widen the technological gap with China within the next two years, emulating Samsung Electronics, which came out on top by leveraging its technological lead.

According to industry sources on May 22, by 2025, when the global factory expansions of the South Korean battery trio, including LG Energy Solution, become fully operational, the production volume based on capacity is forecast to reach approximately 1,100 GWh.

When consolidating each company's expansion plans, LG Energy Solution's annual production volume is projected to be at least 598 GWh, with SK on's expected to exceed 315 GWh. Samsung SDI has not disclosed its production volume, but estimates from the securities industry suggest it will be around 200 GWh. As per market research firm SNE Research, global secondary battery demand in 2025 is anticipated to hit 2,913 Wh. It's concluded that these three companies will be responsible for producing approximately 40% of total demand.

However, China poses a challenge. SNE Research estimates that by 2025, the production volume of electric vehicle batteries in China (including medium and large cylindrical cells) will reach 2,112 GWh. The volume produced by China alone is capable of meeting two-thirds of the global demand for electric vehicles and ESS. Furthering the intensity of the competition, Japanese, European, and other global companies are making movements to establish their own production lines.

There are already indications of a battery oversupply within China. Due to concerns over this battery surplus, the price of lithium carbonate had fallen by 52.85% within a year as of May 18, trading at 219.50 yuan per ton.

Kim Kyung-hoon, head of the Supply Chain Analysis Team at the Korea International Trade Association (KITA), commented, “Securing market share in Europe is crucial for achieving economies of scale in order to compete with China,” adding, “Considering the battery industry is contract-based, if we do not secure orders now and only focus on North America, we risk lagging in the competition with China, which is already shifting its attention to Europe. Our companies require institutional support to rapidly assemble large-scale investment resources.”