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'Safety first' policy a challenge for Samsung SDI's battle in EV battery market?

World needs more batteries, but Samsung SDI remains conservative

By Kim Byung-wook

Published : Feb. 3, 2021 - 15:59

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Samsung SDI’s prismatic battery cells (Samsung SDI) Samsung SDI’s prismatic battery cells (Samsung SDI)


From Apple to General Motors, global tech giants and automakers are in a tight race to develop or utilize electric vehicles to catch up with market champion Tesla.

Against this backdrop, the size of the global EV battery market is set to reach 182 trillion won ($167.5 billion) in 2025 from last year’s 38.8 trillion won.

For Samsung SDI, the battery manufacturing affiliate of Samsung Group, its EV battery business road map is anticipated to take flight in the upcoming years, save for any minor hurdles along the way.

The company said on Jan. 28, upon unveiling its yearly and fourth quarterly business performances for 2020, that it had failed to turn profit in the EV battery sector, largely due to the recalls of BMW and Ford plug-in hybrid electric vehicles in the US and Europe.

Market watchers were not concerned about the latest figures and the profitability outlook, but some did point to the company’s apparent lack of ambition in the given area.

“At the Consumer Electronics Show 2021, new mobility was the key theme. All carmakers and big tech companies such as Baidu and Apple are showing interests in EVs,” said SK Securities analyst Kim Young-woo.

“Now, Samsung SDI must escape from its conservative investment policy and launch an aggressive production capacity expansion to secure (EV battery) market share.”

Despite calls for rapid expansion, Samsung SDI reaffirmed its conservative approach based on President Jun Young-hyun’s philosophy that “business without profitability is a house of cards.”

“Samsung SDI can respond to capital expenditures within the current operating cash flow and does not have plans for shoring up funds through issuing rights or liquidating stakes,” said Kim Yoon-tae, head of finance and business management support at Samsung SDI in the conference call.

Samsung SDI’s safety-first policy draws a stark contrast with SK Innovation, which aims to boost its battery production capacity from last year’s 19.7 gigawatt-hours to 85 GWh by 2023 and 125 GWh by 2025.

To accomplish this ambitious goal, SK Innovation in December issued green bonds worth 1.09 trillion won for two battery manufacturing plants under construction in Georgia, US. Last month, the company decided to inject 1.3 trillion won for its third battery plant in Hungary.

Samsung SDI, which manufactures batteries in Korea, China and Hungary, has never disclosed its official production capacity of batteries or a target capacity. Industry experts estimate that the unofficial figure stood slightly more than 20 GWh as of 2019. Once the company’s second battery plant in Hungary completes construction, the total capacity is expected to more than double to over 40 GWh. The exact completion date is unknown.

“Samsung SDI’s relatively conservative investment plans are still regrettable. If its market share continues to drop, the company’s value will drop as well,” analyst Kim said.

While it remains to be seen which of the two rivals‘ business approaches will lead them to come out on top in the end, Samsung SDI is moving full steam ahead to improve its profitability.

According to eBest Securities analyst Lee Wang-jin, Samsung SDI will begin the supply of its Gen5 NCA (nickel cobalt aluminum) batteries that contain 88 percent nickel starting in the second half of this year. Putting in more nickel inside batteries means putting in less cobalt, one of the most expensive raw materials.

By Kim Byung-wook (kbw@heraldcorp.com)