[Inside Chodong] What New Battery CEOs Need Most

Oh Hyung-gil, Deputy Head of Industrial IT Department

Year-end personnel changes in the business world are being finalized one after another. Looking at those newly stepping to the forefront of management, we can glimpse the concerns and solutions each group has for overcoming the complex internal and external crisis situations.

The battery industry attracted the most attention in this year's personnel changes. Amid the global supply chain crisis continuing since last year, the wave of generational change was fierce even in domestic battery companies that have grown into next-generation strategic businesses.

The heads of LG Energy Solution and SK On have changed, and Samsung SDI, whose CEO was reappointed, replaced key executives in two of its three business divisions. With the end of internal combustion engines and the spread of electrification, this personnel reshuffle clearly marked the end of the "germination period" for the battery industry. With cumulative order backlogs exceeding 1,000 trillion won and trillion-won scale investments made over several years, the battery industry has entered a growth trajectory. However, there is still a long way to go. The crisis sensed in the battery industry is clearly reflected in the numbers.

The price of lithium, a core battery material, is on a downward curve. The price of lithium carbonate, which peaked at 581.5 yuan per kg in November last year, plunged to 88.5 yuan on the 15th, marking a drop in just one year and one month. Bloomberg recently estimated the price of lithium-ion battery packs at $139 per kWh, the lowest ever recorded. This is 14% lower than last year.

While lower battery prices mean cheaper electric vehicles, demand for EVs is stagnating. Governments around the world are reducing EV subsidy policies, and consumers are hesitant to make purchases amid high interest rates and inflation. There are even talks that those who wanted to buy have already done so. With EV sales sluggish, battery companies are struggling to find a solution.

Looking at the bigger picture, the three domestic battery companies are fiercely competing with Japanese and Chinese companies for global battery dominance. Chinese companies, backed by government support, are growing their size using lithium iron phosphate (LFP) batteries as a weapon. Japanese companies, despite their small market share, are striving to restore their status as the battery homeland with advanced technology.

Domestic battery companies have no time to catch their breath. They are struggling just to build and operate production facilities worldwide, including in North America, as planned, while also needing to secure breakthrough technologies for the future. They must catch both the rabbits of performance and research and development (R&D). This is the dilemma faced by the new CEOs.

With the financial burden from large-scale facility investments, increasing R&D expenses immediately reduces operating profit. This will not only hurt the company's performance but also clearly undermine their own achievements. While it is hoped that the new management will make decisions for the organization and company rather than their own safety, this is an excessive burden for CEOs with a 2-3 year term.

Back in 1996, when LG Group struggled with battery development, the late Honorary Chairman Koo Bon-moo encouraged related department employees by saying that losses from the battery business would be excluded from performance evaluations and urged them to "not give up, look long-term, invest, and focus more on R&D." This statement laid the foundation that sprouted the current Korean battery industry. The "management philosophy of that time," which believed in and pushed the business despite anticipating deficits, remains valid even as time has passed.

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