The Competition Getting Fierce

On December 9 2011, LG Chem filed a patent infringement lawsuit against SK Innovation, claiming that the oil company had infringed patented technology relating to a secondary battery for electric vehicles. A source from LG Chem argued, “After SK Innovation stole LG Chem’s battery technology, the company is supplying secondary battery products based on the technology to Hyundai Motor’s electric car model “BlueOn.” The controversial issue is the Safety Reinforced Separator (SRS) technology, which was patented by LG Chem in 2005. LG Chem argued, “We have raised questions about the patent infringement to SK Innovation many times, but no reply was returned.” SK Innovation refuted the argument, saying, “We have never infringed on LG Chem’s patented technology.” A source from SK Innovation said, “SK Innovation is producing electric vehicle batteries based on its independently developed separator coating technology, Ceramic Coated Separator (CCS). We are using totally different materials and manufacturing methods from those of LG Chem.”

Lawsuit War between LG Chem And SK Innovation

LG Chem is demanding only 100 million won in damages in the lawsuit. The dominant analysis is that it is a measure to hold back SK Innovation, a late-comer to the electric vehicle battery market, rather than to obtain tangible profits. In other words, competition between the nation’s electric vehicle secondary battery manufacturers is growing fiercer in the run-up to the agreement for a large-scale supply contract with global automakers. According to Solar & Energy and the Export Import Bank of Korea (KEXIM), a wide-range of electric cars, including hybrid vehicles, plug-in hybrid vehicles, and pure electric vehicles, are expected to be released one after another. Electric vehicle sales in the global market are forecasted to increase sharply from 1 million units in 2011 to 3.94 million units in 2013. Demand for electric vehicle batteries is also projected to increase more than seven-fold from 2.4GW to 17.7GW over the same period.

Accordingly, the fight for competitive advantage between the three major manufacturers of electric vehicle secondary batteries; LG Chem, SB LiMotive (a joint company of Bosch and Samsung SDI), and SK Innovation, is beginning in earnest. The reason behind this is that governments around the globe are implementing policies that foster the electric vehicle industry in order to reduce global greenhouse gas emissions and stimulate the economy, with batteries accounting for 30 to 40 percent of the total price of electric vehicles. The three major manufacturers have strengthened strategic partnerships with global carmakers, and at the same time began activities designed to dominate the electric vehicle battery market in advance, such as aggressive investment.

LG Chem, the first in the nation to produce electric vehicle secondary batteries, is producing secondary battery products after establishing the first factory for secondary batteries in Chungbuk Technopark last year. The factory has the capacity to produce enough batteries for 100,000 electric vehicles annually, and has established a production system to control the entire process, from assembly and activation to pack manufacturing. The chemical firm plans to invest an extra 2 trillion won to build second and third plants by 2013. At the same time, the Korean firm is also implementing construction of another factory for secondary batteries in Holland, Michigan, USA. Accordingly, LG Chem is expected to have production capacity for more than 350,000 electric vehicles by 2013. To achieve this, late last year, LG Chem reshuffled its organization, established the battery business headquarters in charge of the second battery business, and appointing Kwon Young-soo, chief executive officer of LG Display, to director. This was an appointment that highlighted LG Group chairman Koo Bon-moo’s determination to take a leap forward to the global number one position in the secondary battery market.

Samsung SDI is focusing its investments on the electric vehicle secondary battery business after launching a 50-50 joint venture, known as SB LiMotive, with Bosh in 2008. When returning to the management front line, Samsung Electronics chairman Lee Kun-hee supported the secondary battery business by declaring it one of the five major next generation promising businesses in March 2010. This clearly shows Chairman Lee’s high expectations for the electric vehicle battery business. Accordingly, SB LiMotive plans to expand its annual production to 180,000 batteries by 2015.

SK Innovation will form a partnership with Continental AG, a major global automotive parts manufacturer. The joint venture will be established in Q2 this year regarding the development and production of secondary batteries for electric vehicles. Continental AG is an automotive parts company that has been supplying auto parts such as sashes, powertrains, and tires to automakers for 140 years. The jointly owned enterprise will be supplied with battery cells from SK Innovation and battery management systems (BMS) from Continental AG. SK Innovation is determined not to be outcompeted by LG Chem and SB LiMotive. With the full support of SK Group chairman Choi Tae-won, the SK oil refiner plans to enhance its battery production capacity by completing the early construction of the battery factory in Seosan City.

Amid the full support promised by the chairmen of the three major companies, the fight for a competitive edge regarding the next generation growth engine is heating up.

Lagging behind Japan in Terms of Part Materials And Original Technologies

The three major manufacturers of secondary batteries have similar strategies, that of maximizing competitiveness through partnerships with global automakers. The purpose is to secure a stable demand through a supply agreement with global automakers. LG Chem has already secured approximately 10 automakers around the world as customers, including Hyundai Kia Automotive Group, General Motors, CT&T, China's Chang'an Motor, and Ford Motor.

Indeed, after being equipped with LG Chem’s lithium-ion battery, Hyundai's Avante hybrid car was released on July 7 2009, while GM's Chevrolet Volt plug-in hybrid electric car is also on sale. SB LiMotive has signed a supply agreement with BMW. Last November, the joint enterprise signed a HEV battery pack supply contract with India’s Mahindra & Mahindra. Starting this year, the company plans to supply its lithium-ion battery packs to Chrysler's electric vehicles released in the US. SK Innovation succeeded in developing the lithium-ion battery separator by using its own technology in late 2004, and at present, accounts for 14 percent of the global separator market. Thanks to this, SK Innovation was chosen as a battery supplier to Hyundai-Kia’s electric vehicles and Mercedes-AMG’s super electric cars.

According to the Korea Electronics Association (KEA), the lithium-ion battery technology of domestic companies is, along with that of Japan, world-class. However, part materials and original technologies are graded at 50 points and 30 points, respectively, on a scale of 100. The development and completion of home-grown technologies for four key materials; cathode materials, anode materials, electrolytes, and separators. Last year, Japan’s Toyota Motor and Tokyo Institute of Technology came under attention after unveiling a prototype of an electric vehicle secondary battery that can increase a vehicle’s consecutive mileage from the current 200 km to 1,000 km. This prototype is totally different from the lithium-ion battery mainly used in electric vehicles, yet Toyota plans to improve the model so that it can be commercialized by 2015 to 2020.

SB LiMotive and LG Chem are keeping an eye on Japan’s every move, as well as increasing battery mileage. As of now, the electric vehicle battery mileage of the two companies is 160 km to 200 km per full charge, yet they plan to produce batteries that enable a vehicle to run for up to 300 km per full charge within three years. South Korea is far behind Japan in terms of the economic feasibility of R&D and commercialization stages, but if technology development accelerates, the nation can make a bid to outcompete Japan.

SB LiMotive and LG Chem, who use different methods from each other in terms of the development of electric vehicle batteries, are competing to win acknowledgement that their battery is the world standard. While SB LiMotive has adopted a can-type lithium secondary battery, LG Chem has adopted a pouch-type lithium one. SB LiMotive’s can-type battery requires huge initial investments in production facilities, but mass-production can sharply reduce production costs. The can-type battery has also excellent durability. LG Chem’s pouch-type battery emits heat easily due to its wide surface area, has a relatively long lifespan, and has advantage in small quantity batch production. Which type of battery is better will be decided through a comprehensive evaluation of various aspects, such as efficiency and safety when the mass-production of electric vehicles starts.