K-Battery Sets to ‘Take Off’ in Second Half with IRA Boost

LG Energy Solution, Samsung SDI, and SK On, the three major battery manufacturers in South Korea, have achieved remarkable performance in the second quarter of this year, marking a historic milestone in quarterly revenue driven by a surge in electric vehicle sales.

According to the Financial Supervisory Service’s electronic disclosure system on July 31, LG Energy Solution reported consolidated revenue of 8.7735 trillion won (US$6.86 billion) and an operating profit of 460.6 billion won in the second quarter on a connected basis, representing year-on-year increases of 73.0 percent and 135.5 percent, respectively.

In the first half, the company recorded sales growth of 86.1 percent year-on-year, reaching 17.5206 trillion won in revenue, and its operating profit surged by 140.7 percent, totaling 1.0938 trillion won. The driving force behind this growth was the rapid expansion of global electric vehicle demand, particularly in the United States and Europe.

During the first half of this year, LG Energy Solution also received substantial support from the Inflation Reduction Act (IRA) for the Advanced Manufacturing Production Credit (AMPC), amounting to 211.2 billion won. This amount accounted for 19.3 percent of the first-half operating profit. As battery sales are expected to increase further, the company foresees continuous benefits from the AMPC in the upcoming periods.

Considering the challenging external environment in the second half, LG Energy Solution plans to adopt an aggressive strategy by expanding investments in the United States, including the construction of a joint manufacturing plant with Hyundai Motor Group. Additionally, the company will actively pursue supply chain localization to ensure a stable supply of raw materials.

Furthermore, LG Energy Solution aims to broaden its product portfolio, including lithium iron phosphate (LFP) batteries, mid-nickel (mid-Ni), and manganese-rich (Mn-rich) batteries, to meet the diverse demands of various customers. The company is also planning to establish a 4,680 cylindrical battery production line at the Ochang Energy Plant by the end of this year.

At the same time, Samsung SDI has also reported remarkable results in the second quarter of consolidated revenue of 5.8406 trillion won and operating profit of 450.2 billion won, marking year-on-year increases of 23.2 percent and 4.9 percent, respectively. Unlike its competitors, Samsung SDI achieved record-breaking sales and operating profit without reflecting the benefits from the AMPC.

In the second half, Samsung SDI is planning to embark on a more aggressive approach. The company intends to construct a 34 gigawatt-hour (GWh) capacity factory in collaboration with US-based Stellantis, scheduled to be operational by 2027. Moreover, its ongoing construction of the Kokomo 1 plant in Indiana, with a capacity of 33 GWh, is set to commence full-scale operations from 2025.

Samsung SDI aims to achieve 60 percent of its production in the U.S. and other countries by 2025, gradually expanding the ratio by 10 percent annually thereafter. Additionally, the company is considering the construction of a full-scale solid-state battery production facility in North America, which will start mass production by 2027.

SK on recorded its highest-ever quarterly revenue of 3.6961 trillion won in the second quarter, driven by the increased productivity and sales volume of newly launched factories last year. The operating loss was reduced to 1.315 trillion won, marking a significant improvement of 2.132 trillion won compared to the previous quarter.

The effect of SK on’s first-half AMPC benefits amounted to 167 billion won. In the second half, with improvements in yield and an increase in battery sales, particularly in the North American market, the scope of AMPC benefits is likely to expand. As a result, there is a high possibility of achieving a quarterly profit turnaround.

According to the securities industry, SK on is expected to experience a rapid surge in performance due to various factors, including blocking the possibility of sharing AMPC benefits, enhancements in yield and increased shipment volume, resolution of uncertainties regarding funding for large-scale investments, and diversification of form factors driven by the development of prismatic batteries.