Key Points
- Samsung SDI continues large-scale investments, contrasting with LGES and SK On’s slowdown.
- Samsung SDI will begin mass production at its North American joint venture with Stellantis ahead of schedule.
- Samsung SDI focuses on long-term growth, doubling investment size compared to last year.
- LGES and SK On slow down investments and focus on cost reduction amid EV market slowdown.
Samsung SDI is distinguishing itself from competitors LG Energy Solution (LGES) and SK On, as well as Korean cathode materials producers, by continuing to make large-scale investments despite a slowdown in global demand for electric vehicles (EVs). Industry officials highlighted this strategic move on Sunday.
Contrary to its rivals, Samsung SDI has announced that mass production of batteries at its North American joint venture with Stellantis will commence this year, ahead of the initially planned first quarter of next year. Despite expectations of sluggish demand in the second half of the year, Samsung SDI remains committed to expanding its facilities in Hungary.
Samsung SDI Vice President Kim Yoon-tae emphasized the company’s focus on long-term growth during a conference call discussing the second-quarter earnings. “As of the first half of this year, the size of our investments has doubled from a year earlier,” he stated. This approach contrasts sharply with the strategies of LGES and SK On, both of which have opted to curtail their investments.
LGES CFO Lee Chang-sil, during a conference call on July 25, mentioned that the company would make limited investments in strategically necessary sectors. Consequently, LGES has halted construction of its Arizona factory for lithium ferrophosphate batteries and a Michigan plant of Ultium Cells, its joint venture with General Motors. Furthermore, LGES revised its annual sales target, projecting a more than 20 percent drop in revenue from the previous year.
“We will prevent overinvestment by slowing down our production,” said Lee. Similarly, SK On CFO Kim Kyung-hun announced a shift towards cost reduction to enhance profitability. The joint venture BlueOval SK, between SK On and Ford Motor, will adjust its production plans to fit Ford’s evolving EV strategies. “We will keep a close watch on whether we incurred unnecessary costs,” Kim stated. Other companies, including LG Chem, POSCO Future M, and EcoPro BM, have also decided to decelerate their investments in the battery materials sector.
Samsung SDI’s conservative stance during the EV industry boom in 2022, focusing on product quality and financial stability over aggressive expansion, initially drew negative outlooks from American investment banks. However, this strategy has now positioned Samsung SDI as Korea’s most profitable battery firm.
In the second quarter, Samsung SDI reported an operating profit of 208 billion ($153 million) from its battery business, excluding 7.9 billion won in advanced manufacturing production credits (AMPC) under the U.S. Inflation Reduction Act. In contrast, LGES posted an operating profit of 195.3 billion won, largely due to 447.8 billion won in AMPC. At the same time, SK On reported a 460.1 billion won operating loss despite 111.8 billion won in AMPC.
