Long-term War of Attrition vs. 'Silri War'... Efforts Likely to Focus on Behind-the-Scenes Agreement

LG Seizes Victory in the 'Battery War'... SK Reaches Out

Final verdict to take 2 years

Both companies judge "no practical benefit"

SK Innovation at a disadvantage

Pressure to defend U.S. battery plant

LG Chem gains favorable ground

Focus on battery production expansion amid COVID-19 shutdowns in China

[Asia Economy Reporters So-yeon Park, Yoon-joo Hwang] SK Innovation’s strategy to seek a swift settlement stems from the judgment that the litigation with LG Chem, which will take about two years until the final verdict, could end as a costly war of attrition leaving both companies wounded in the fierce global electric vehicle battery competition. From LG Chem’s perspective, the company is also in no position to endure a prolonged lawsuit amid tough circumstances such as the rise of competitors in China and Japan and the spread of COVID-19.

◇ SK Innovation must defend its U.S. electric vehicle battery plant = From SK’s standpoint, the early unfavorable ruling has put it at a disadvantage in the lawsuit, making a settlement before the final verdict urgent. There is also significant pressure to defend the U.S. market, a key base for global business expansion.

The U.S. International Trade Commission (ITC) is expected to soon disclose the basis for its decision, and industry insiders believe the commission accepted the administrative law judge’s opinion recognizing SK Innovation’s evidence destruction in the unfair import investigation. Looking at ITC decisions over the past 25 years, in all trade secret cases where the administrative law judge found infringement (including early loss rulings), the ITC commission’s final decision upheld those findings. The court schedule following the ITC’s final decision is also expected to be challenging. The industry estimates that the court’s final ruling will take about two years.

If SK Innovation loses again at the Delaware federal court after the ITC’s final ruling, the situation will worsen. The business risks that have lasted over two years will be compounded by monetary damages, and production, distribution, and sales of SK Innovation products could be banned across the United States. SK Innovation is currently constructing an electric vehicle battery plant supplying Volkswagen’s U.S. factory, investing $1.6 billion (about 1.9 trillion KRW) with a goal of mass production in 2022. If battery component materials cannot be imported into the U.S., operating the U.S. plant will be virtually impossible, and combined with damages, the scale of losses is expected to be astronomical.

◇ LG Chem faces burden of prolonged litigation amid global challenges like COVID-19 = LG Chem is also reluctant to prolong the lawsuit amid intensifying competition with Chinese and Japanese battery manufacturers. Especially, due to recent infectious diseases like COVID-19, LG Chem’s electric vehicle battery plant in China temporarily halted production, causing setbacks, and the petrochemical market remains unstable. Meanwhile, global electric vehicle companies are demanding increased battery supply, requiring the company to focus its full capacity on expanding production.

Criticism that the long-term dispute between domestic companies in the electric vehicle battery market, dubbed the "second semiconductor," weakens the competitiveness of Korea’s battery industry also weighs on LG Chem. Given the favorable position gained from the ITC’s early loss ruling, it is widely expected that LG Chem will also seek a practical resolution.

Relations with the governments of both Korea and the U.S. are another factor LG Chem must consider. The U.S. administration cannot ignore the impact of this lawsuit on domestic jobs and production bases, and the Korean government also hopes for a swift resolution of the dispute between major companies in the future-oriented electric vehicle battery sector.

An industry insider said, "Since both companies need to focus on the battery business, they do not want to waste costs and time on litigation," adding, "It is believed that they have already entered behind-the-scenes negotiations, and a new battle will begin to reach an agreement under mutually favorable conditions."

This content was produced with the assistance of AI translation services.