To Secure Management Control
Samsung SDI will acquire an additional 15% stake in Samsung-ARN (Xian) Battery Group (Samsung-ARN), an electric vehicle battery production company in Xian, China. Samsung SDI is also planning to secure management control of the joint venture as Korean battery makers are increasing their investment in production facilities in preparation for the abolition of China's electric vehicle subsidies in 2020.
Samsung SDI has been negotiating with the Xian Gaoke Group, a real estate investment company, to acquire a 15% stake in the production subsidiary in Xian, China since August. Samsung SDI owns a 50% stake in Samsung-ARN with the remaining half held by Xian Gaoke Group and Anqing Ring New Group. At the time of incorporation, the foreign ownership of a Chinese company was limited to 50%, but last year, such a limit in an electric car battery plant was abolished.
The value of the 15% stake is reportedly worth 251 million yuan (US$36.40 million). Recently, Samsung SDI raised funds by issuing corporate bonds. The company decided to issue 400 billion won (US$356 million) worth of corporate bonds in September, but raised its amount to 590 billion won as investors wanted to purchase 1,250 billion won worth of them.
However, a Samsung SDI official said, "The acquisition of the additional stake has not been confirmed yet."
Samsung SDI's acquisition of the stake in the Xian subsidiary is in line with the company’s push to build a second battery plant. Samsung SDI wants to strengthen its management control of the Xian subsidiary as its production and sales are on the rise. According to Chinese media outlets, Samsung SDI is considering investing about one trillion won in building a second battery plant in Xian. Once the investment is decided, the Xian plant’s battery production capacity will soar from the current 30,000 batteries to about 400,000.
Samsung SDI is concentrating on expanding its presence in the Chinese market while securing an additional stake in its Tianjin subsidiary as well. According to public disclosures by the Financial Supervisory Commission, Samsung SDI invested about 231.3 billion won in Tianjin in the third quarter, raising its stake from 50% to 80%. The Tianjin subsidiary produces cylindrical batteries of the 21700 standard for power tools and smartphones. Recently, demand for cylindrical batteries is on the rise. In particular, electric vehicles and energy storage systems (ESSs) are fueling demand for cylindrical batteries.
As Korean battery makers have recently increased their investment in China, Samsung SDI is also expanding investment not to fall behind. The Chinese government’s decision in February to limit subsidy provision to long-distance electric vehicles also encouraged Korean battery makers to expand facilities as they have competitiveness in high-density batteries used for long-distance electric vehicles. Moreover, in 2020, the subsidy program will be completely abolished, allowing Korean companies to compete fairly with their Chinese counterparts.
LG Chem recently decided to build its second factory in Nanjing, China. SK Innovation is building a battery plant with a production capacity of 150,000 units in Changzhou, China, too. Last month, SK Corp. acquired about 30% equities of Watson, which is the number one copper foil maker in China. Copper foils are essential part of electric car batteries.