An Opportunity from Tesla
The scarcity of secondary cylindrical batteries set off by Tesla is marking them emerging as a new growth engine item for LG Chem and Samsung SDI. As US electric car maker Tesla's battery plant Giga Factory failed to properly play its role, and demand for cylindrical batteries for electric vehicles has increased sharply, making the two companies consider expanding their production facilities.
According to the battery industry on February 4, Samsung SDI is reported to be fully operating production facilities in Cheonan of Korea, Tianjin of China, and Seremban of Malaysia as demand for cylindrical batteries shot up.
“Samsung SDI has been fully operating its cylindrical battery plant since several months ago and is currently considering whether or not to expand it," said an industry observer familiar with Samsung SDI. "Currently, we are turning 18650 battery production facilities (18 mm in diameter, 65 mm in length) into 21700 production facilities (21 mm in diameter, 70 mm in height)."
Battery makers developed a 21700 battery by increasing the size and storage capacity of a cylindrical battery widely used in portable flashlights. 21700 batteries are attracting attention as a next-generation secondary battery standard.
LG Chem is also in a similar situation. The company is also ramping up production of 21700 batteries. It is said that the company is developing a market in non-IT areas such as power tools by developing technology that can stably work despite external shocks by wrapping a special tape on an electrode. This is because demand is rapidly increasing not only in non-IT areas such as for power tools and wireless vacuum cleaners but also in the electric car market.
According to market researcher B3, the market of cylindrical batteries shrank from 1.609 billion cells in 2010 to 1.568 billion cells in 2013, but rebounded in 2014 and hit 3.206 billion cells last year.
Under these circumstances, as Tesla's Giga Factory failed to work properly for the electric vehicle battery production, Samsung SDI and LG Chem are receiving unexpected windfalls. According to industry sources, it is said that Giga Factory which started operation from early last year is having difficulties in production due to the unstable supply of photovoltaic power which is the main power for the factory. Even though Tesla is striving to secure power from the outside, the factory’s location in a desert of the state of Nevada is hindering its normal operation.
Therefore, Panasonic which jointly invested in Giga Factory is unable to respond to orders from other customers by supplying Tesla with all of its cylindrical batteries produced in Japan. As a result, companies that need large batteries are turning their eyes to LG Chem and Samsung SDI as alternatives, giving the two Korean companies reflective benefits. Actually, Samsung SDI is supplying Tesla with cylindrical batteries for energy storage systems (ESSs). Samsung SDI under a contract to supply batteries to Lucid Motors, a latecomer of the electric car will also supply batteries for its high-end sports sedan to be produced this year. However, Faraday Future considered a big rival of Tesla reportedly decided to load LG Chem cylindrical batteries into its cars in 2016 although the company has been having trouble building its factory lately.