Draining Batteries
Korea’s status as the world’s largest battery supplier and producer is being shaken. This is largely due to the fact that Chinese producers are rapidly growing, thanks to the world’s largest domestic market and the Chinese government’s policy support. This is happening not only in the battery industry but also across all eco-friendly industries, including light emitting diodes (LEDs) and solar energy.
According to the Financial Supervisory Service and industry sources on Aug. 31, battery-related sales of Samsung SDI and LG Chem, which maintain the number one and two positions in the world’s lithium ion secondary battery market, dropped 5.6 percent and 0.7 percent, respectively, from the same period last year. It is the first time for LG Chem to see a decrease in sales since 2010.
Industry sources say that the main reasons for the downturn in sales are the growth of Chinese battery producers in the mobile and IT device battery market, including smartphones, as well as currency problems. According to a report published by market researcher B3 early this year, the share of Chinese manufacturers such as ATL, Lishen, and Course Lite in the mobile and IT devices battery market will increase to 22.1 percent this year from 21.1 percent last year. By comparison, the figure of domestic battery producers, including Samsung SDI and LG Chem, is expected to increase 0.3 percent from last year.
An official from the industry said, “More and more fast-growing Chinese smartphone manufacturers are recently using locally-produced batteries. Since there is not much technical gap in small batteries between Korea, Japan, and China, the market share of Chinese battery producers will continue to increase.” In fact, three Chinese smartphone producers – Huawei, Xiaomi, and Lenovo – have a 19 percent share in the global smartphone market in the second quarter this year, chasing down Samsung Electronics, the industry’s number one at 21.7 percent.
They are rapidly expanding the share even in the medium and large batteries market, which still have technical gaps with Korea. As of 2012, Chinese battery manufacturers rarely produced electric vehicle batteries. However, they held 3.8 percent of the market in 2013, and quickly increased to 8.3 percent last year.
This is because China’s electric car market is growing fast. According to data from the China Association of Automotive Manufacturers, China has produced 76,000 eco-friendly cars in the first half of this year, up 250 percent from the same period. Also, sales stood at 72,000 units, up 240 percent from last year. In contrast, Korea sold only 3,000 electric vehicles as of the end of last year. With the Chinese market growing rapidly, domestic battery producers, including Samsung SDI, LG Chem, and SK Innovation, are gaining their production bases in China in the form of joint corporations.
Accordingly, some are raising concerns over technology leaks to China. It is already easy to hear the rumors that several technicians in the domestic battery industry are moving to Chinese firms. However, it is inevitable for domestic firms to secure production bases in China, as the Chinese market is growing rapidly.
It is a similar picture in the LED lighting and solar energy market. According to data from market research firm LEDinside, the Chinese LED packaging market was worth US$8.6 billion (10.17 trillion won) last year, up more than 19 percent from the previous year. Also, China’s LED producer MLS ranked third in the global market. On the other hand, there is no single domestic firm in the upper ranks of the market due to the government’s regulations on business categories suitable for only small and medium-sized firms. Although the government belatedly excluded the sector from the list early this year, industry sources say that it is too late to revive the market.
Moreover, China shows strong growth in the solar energy industry. The International Energy Agency (IEA) has forecasted that China will surpass the European solar power market around 2022, and record a 23 percent share of global installed solar power generation capacities in 2030. With the Chinese government’s supporting policies, Chinese solar power module makers, which completed the restructuring by decreasing the number from 200 in 2010 to 80, will take the leap again.
Industry sources say that the government and private firms need to create an ecosystem, as batteries and LED lighting are emerging as a key competitiveness in the new market in the future, just like eco-friendliness and Internet of Things technology.