LG, Samsung and SK to Invest 40.6 Tril. Won in Batteries by 2030
The South Korean government announced a new plan on the development of the battery industry of South Korea on July 8. The purpose of the plan is to accelerate the growth of the industry so that it can become comparable to its semiconductor industry. However, experts point out that the government needs to face its limitations.
According to the plan, LG Energy Solution, Samsung SDI and SK Innovation will invest 40.6 trillion won in the industry by 2030 along with 30 or so other companies in the industry.
Specifically, LG Energy Solution will invest 12.4 trillion won for next-generation battery technology development and production line expansion. LG Chem will invest 15.1 trillion won for advanced battery material development and more positive electrode material production.
SK Innovation will invest 23 trillion won until 2025, which is divided into 18 trillion won in batteries and five trillion won in separators. Samsung SDI is going to concentrate on facility investment and R&D as well. The company invested approximately seven trillion won in the industry from 2018 to 2020 and the size will be maintained for a while.
The 40.6 trillion won investment is divided into 20.1 trillion won in next-generation battery R&D and the rest in facilities. Given that Samsung Electronics invested 38,496.9 billion won in facilities and 21,229.2 billion won in R&D in 2020 alone, the battery companies’ nine-year investment is just about two-thirds of Samsung Electronics’ annual investment.
In other words, the battery companies’ planned investment is pretty small in spite of expectations that the size of the global electric vehicle battery market will exceed that of the global memory chip market in 2025. This is because of the characteristics of the battery market.
In the battery industry, an operating profit ratio of more than 10 percent is a hard goal to reach unlike in the semiconductor industry. In the DRAM market, which accounts for two-thirds of the memory chip market, Samsung Electronics, SK Hynix and Micron Technology are currently acting as oligopolistic players with competitors eliminated. On the other hand, many companies are entering the battery market one after another these days and an overwhelming technological superiority is hard to attain in the four key market segments of positive electrode material, negative electrode material, separator and electrolyte.
In addition, semiconductor chips such as DRAM chips are already standardized and manufacturers do not have to produce different products for different clients. Also, those chips are transported by air and overseas plants do not have to be built. In contrast, electric vehicle manufacturers are currently requesting different types of battery packs and so on and electric vehicle battery manufacturers need to produce their products near their clients due to high logistics costs attributable to the weights of the batteries. Besides, an increasing number of global automakers are planning to produce batteries on their own.