Mid-to-Large Battery Turnaround... Samsung SDI Forecasts Joining the '1 Trillion Club' Next Year

On the 21st, visitors are touring the Samsung SDI exhibition hall at the battery industry exhibition "InterBattery 2020" held at COEX in Gangnam-gu, Seoul. Marking its 8th year, InterBattery showcases the core technologies of "K-Battery," including batteries and key materials for automobiles, smartphones, and energy storage systems (ESS). Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Park So-yeon] Samsung SDI is forecasting record-high performance this year, along with turning a profit in its medium-to-large battery segment in the fourth quarter. While LG Chem and SK Innovation have been engaged in a 'battery lawsuit battle,' Samsung SDI's battery business, which has been solely focused on its core operations, is now considered to have entered its main track. In particular, expectations are growing that next year, Samsung SDI will completely overhaul everything from electric vehicle battery materials to manufacturing processes and aggressively expand production facilities, ushering in an era of annual operating profit exceeding 1 trillion KRW.

◇Will Samsung SDI surpass its largest quarterly performance since 2003?= According to financial information firm FnGuide on the 28th, securities firms' consensus forecast for Samsung SDI's operating profit in the fourth quarter of this year is 318.1 billion KRW. If this forecast holds true, Samsung SDI will achieve quarterly operating profit exceeding the record high of 316 billion KRW set in the fourth quarter of 2003. This represents a 1,482.6% increase compared to the same quarter last year. Industry analysts suggest that Samsung SDI's battery business, which has been steadily pursued, has turned profitable and is now entering a phase of profit growth. Especially in the fourth quarter of this year, there is widespread anticipation that the medium-to-large battery segment will turn profitable, combining growth with profitability in a meaningful quarter. The industry estimates that Samsung SDI's electric vehicle (EV) battery segment operating profit increased by more than 40% compared to the previous quarter, and its energy storage system (ESS) segment grew by over 50%. The EV battery business in Europe has entered a full-fledged supply cycle, and the ESS market, centered in North America, is growing due to strengthened eco-friendly policies, causing the overall utilization rate of medium-to-large batteries to surge. Despite a decrease in electronic materials sales due to year-end inventory adjustments, profitability is expected to improve thanks to an increased proportion of high-value-added semiconductor and OLED materials. Internally, there is also high expectation for the 'cash cow' small battery segment, as sales of small batteries used in wireless power tools are rapidly increasing due to a boom in the U.S. construction market.

◇Forecast to join the 1 trillion KRW club next year... Completely revamping battery 'from materials to manufacturing processes'= In the electric vehicle battery sector, Samsung SDI has announced plans to launch the next-level GEN5 battery next year. This battery will apply high-nickel NCA cathode material with nickel content exceeding 88% to improve energy density, and the internal battery material production process will change from the existing winding method?where materials are rolled and inserted into the battery?to a stacking method, where layers are stacked one on top of another. Through this, energy density is expected to increase by more than 20% while reducing costs. Securities firms predict that Samsung SDI will join the annual operating profit 1 trillion KRW club next year. Samsung SDI, which has restrained aggressive expansion until now, has recently been significantly expanding its production facilities. By the end of this year, Samsung SDI plans to secure production capacity of 30GWh. The company is currently expanding its plant lines in G?d, Hungary. Four lines are currently operating at the Hungary plant, and four additional lines using the new manufacturing process will be added. Once all four new lines are completed, Samsung SDI's total EV battery production capacity will increase to approximately 40GWh. This production scale can supply batteries for about 640,000 electric vehicles. Samsung SDI has invested 619.7 billion KRW in research and development through the third quarter of this year, and it is expected to surpass a record-high 800 billion KRW for the full year. About 80% of this investment is said to be allocated to the battery sector. A competitor commented, "Looking at Samsung's battery business, it reminds me of Japanese companies that continuously develop technology behind the scenes, which is intimidating. Especially, Samsung SDI, which has focused on its core business while competitors were distracted by lawsuits, is expected to achieve remarkable growth next year."

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