Samsung SDI, Sluggish Q2 Earnings... No Retreat in Battery Investment (Comprehensive)

'Qualitative Growth with Profitability Advantage' Management Policy
Choi Yoon-ho, CEO of Samsung SDI
"The second half remains challenging
A very important opportunity for the future"

Samsung SDI Giheung Headquarters. Photo by Samsung SDI

Samsung SDI announced second-quarter earnings that fell short of market expectations amid the electric vehicle chasm (a temporary slowdown in demand in a growth industry). However, the company clearly stated its intention to continue investing in batteries, saying the industry is passing the bottom.

On the 30th, during the second-quarter earnings conference call, Samsung SDI said, "There is no change to the existing investment plan," and "As of the first half of this year, we have already executed more than twice the investment compared to the previous year." It added, "We will expand the supply of 'P6' batteries for the U.S. market and advance the mass production of StarPlus Energy within this year." StarPlus Energy is a joint venture established by Samsung SDI and Stellantis in North America.

Samsung SDI stated, "We are continuing investments to meet already secured demand, such as expanding the Hungary plant and constructing the first joint factory with Stellantis," and "We are also making essential investments for mid- to long-term growth, including solid-state batteries and 46-pie (46mm diameter cylindrical batteries)." It further mentioned, "For automotive batteries, we expect a gradual demand recovery in the fourth quarter."

Sales down 24%, operating profit down 38%... Demand slump even Samsung couldn't avoid

On this day, Samsung SDI announced second-quarter sales of 4.4501 trillion KRW and operating profit of 280.2 billion KRW.

According to Samsung SDI, the company's second-quarter sales fell by 1.3905 trillion KRW, or 24%, compared to the same period last year, and decreased by 13% compared to the previous quarter. Operating profit decreased by 170 billion KRW, or 38%, year-on-year but increased by 12.8 billion KRW (5%) quarter-on-quarter. These results were below the securities market consensus estimates of 5.1 trillion KRW in sales and 332 billion KRW in operating profit.

Battery division sales were 3.8729 trillion KRW, down 1.3972 trillion KRW year-on-year and 708.9 billion KRW quarter-on-quarter. Operating profit was 208 billion KRW, down 180.1 billion KRW year-on-year and 6.5 billion KRW quarter-on-quarter. The operating profit margin stood at 5.4%.

Among medium- and large-sized batteries, automotive batteries saw a decline in performance due to decreased sales caused by market demand slowdown. ESS (Energy Storage System) batteries experienced increased sales and operating profit as demand grew for power SBB and high-output UPS batteries, driven by the expansion of renewable energy generation and AI markets in data centers.

Among small batteries, cylindrical batteries saw sales decline due to customer inventory adjustments, but operating profit increased due to one-time compensation based on long-term supply contracts. Pouch-type batteries experienced a sales decline due to weakening front-end demand.

Sales in the electronic materials division were 577.2 billion KRW, up 6.7 billion KRW year-on-year and 28.1 billion KRW quarter-on-quarter. Operating profit was 72.2 billion KRW, increasing by 10.1 billion KRW year-on-year and 19.3 billion KRW quarter-on-quarter. The operating profit margin was 12.5%.

Polarizing film sales and operating profit increased due to expanded sales of high-value large-area TV products. Semiconductor materials improved performance due to expanded sales to major customers, and OLED materials minimized sales decline despite reduced demand by entering new IT products.

"The second half won't be easy either"... Seeking breakthroughs through additional long-term ESS supply negotiations

Samsung SDI plans to maintain its management policy of "qualitative growth with profitability superiority" despite difficult business conditions such as the electric vehicle chasm in the first half of this year.

Samsung SDI is preparing for the commercialization of solid-state batteries by expanding sample supply to five customers. To respond to demand in the volume market (mass consumer market) and entry-level electric vehicle market, it is establishing an LFP (Lithium Iron Phosphate) development line and accelerating preparations for mass production in 2026. In particular, the 46-pie cylindrical battery plans to begin mass production in early 2025, about a year earlier than planned, due to securing new customers for M-mobility.

Additionally, the company recently secured a large-scale power ESS project order from the largest power company in the U.S. and is in additional negotiations for long-term supply volumes with major customers based on SBB.

The company stated, "The second half of this year may see a later-than-expected full recovery, but the mid- to long-term high growth of the battery industry is expected to remain unchanged," adding, "Among medium- and large-sized batteries, automotive batteries are showing weak front-end demand, but gradual demand recovery is expected from the fourth quarter."

It also plans to mass-produce 46-pie (diameter) cylindrical batteries early next year for shipment to micro-mobility applications. A Samsung SDI official said, "Development and mass production preparations for the 46-pie battery are progressing smoothly. Recently, we secured the first project for micro-mobility and plan to start mass production early next year. Although this is not an electric vehicle project, advancing the mass production plan by more than a year compared to the original schedule is significant, and this will allow us to quickly demonstrate mass production capability and product competitiveness in the market."

Since the end of last year, Samsung SDI has expanded solid-state battery sample supply to five customers upon their request. Samsung SDI is promoting the commercialization of solid-state batteries, known as the "dream battery" for their superior energy density and stability, by 2027.

ESS batteries are expected to continue sales growth in the second half, driven by demand for power and high-output UPS (Uninterruptible Power Supply) applications. Samsung SDI plans to continuously improve profitability along with sales growth by securing additional new orders from major customers in the Americas.

Samsung SDI will also steadily prepare for future sustainable growth alongside second-half performance improvements. To this end, the company plans to focus on maximizing sales to overcome demand slowdown, innovating cost structures to improve profitability, and securing future technologies to lead the market.

Choi Yoon-ho, CEO of Samsung SDI, said, "Although the second half is expected to be challenging, how the company responds could become a very important opportunity for the future," and added, "We will secure differentiated competitiveness to seize new opportunities when the market turns around."

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