[Emergency, K-Battery] Too Busy Competing in Technology... Political Risks Between US and China

Obstacles to K-Battery Growth

[Asia Economy Reporter Moon Chaeseok] The domestic battery industry is facing a complex equation that requires solving not only the technological competition to increase battery capacity but also political risks such as the US-China hegemony war. Taking advantage of the US actively attracting foreign investment on the condition of creating domestic jobs, the industry must increase local production capacity in the US ahead of China to gain an early lead, while also striving to diversify supply chains across the US, Europe, and China. Experts say that since it is difficult for individual companies to catch up amid strong support from the US and Chinese governments for their major competitors, strategic alliances with automakers are necessary for the Korean battery industry to find a breakthrough.

In fact, Tesla, the largest electric vehicle automaker (demand company) in the US, has formed partnerships with Chinese battery companies (supply companies).

According to the battery industry on the 14th, the current major challenges for K-battery include ▲ narrowing the gap in battery usage share with China ▲ improving the mass production speed of US factories ▲ securing supply chains for battery internalization and key materials such as cathode materials and enhancing technological levels ▲ preventing expert outflow ▲ securing cost competitiveness amid rising raw material prices.

According to energy market research firm SNE Research, of the total global electric vehicle battery energy of 296.8GWh last year, 149.2GWh, or 50.3%, belonged to China. There is also a forecast that China's share will rise to 67% by 2025. Because of this, the market share of the three domestic battery companies is failing to catch up with Chinese companies. The market share of the No. 1 CATL (96.7GWh) increased by 8 percentage points from 24.6% in 2020 to 32.6% last year, but No. 2 LG Energy Solution (60.2GWh) dropped by 3.1 percentage points from 23.4% to 20.3%. No. 5 SK On stagnated or slightly increased from 5.5% to 5.6%, and No. 6 Samsung SDI declined from 5.8% to 4.5%.

"Must Bet on Securing the US Market First"

Domestic companies unanimously agree that securing supply chains outside China, such as in the US and Europe, is a matter of life and death. The US remains the world's largest electric vehicle market and is actively participating in the technological hegemony war with China by implementing government-level policies for domestic job creation and resource security.

Experts advise paying attention to the fact that the US battery market growth rate averages 58% annually, higher than that of China and other countries. Securing the US market first could open opportunities to reduce dependence on China and manage geopolitical risks, achieving a 'two birds with one stone' effect.

Professor Kim Pilsoo of Daelim University’s Department of Automotive Engineering said, "Besides Tesla, the three automakers General Motors (GM), Ford, and Chrysler are restructuring their businesses around electric vehicles and prefer stable battery supply. Therefore, it is timely for domestic companies to establish joint ventures locally in the US with a ‘first US, then Europe’ strategy."

It is also favorable for domestic companies that the market is led by cell manufacturers in Korea and China, rather than foundries (contract manufacturers) or fabless (design and development specialists) like in the semiconductor industry. Looking at the number of giga factories, which are large facilities necessary for battery cell manufacturing, China has 93, while the US has 4. The strong desire of the US to overcome reliance on foreign supply chains for batteries by securing domestic supply chains, unlike semiconductors, is why there is a strong call to fully utilize this advantage.

Currently, LG Energy Solution is building a 'five-corner production system' in the US, Korea, China, Poland (Europe), and Indonesia; SK On is establishing a four-corner system in Korea, the US, China, and Europe; and Samsung SDI is constructing a three-corner system in Korea, Europe, and China. An industry insider said, "Securing technological competitiveness in NCMA cathode materials, silicon anode materials, etc., and maintaining market share in the US and European markets are key. Since China is expected to abolish its differentiated subsidy system from next year, investments will continue in the mid to long term."

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