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LG, SK should play fair to lead market together
LG Energy Solution and SK Innovation agreed Sunday to settle a dispute over the theft of trade secrets, ending the two-year-long legal battle. The agreement is welcome, though belated. It will benefit all relevant parties, including the respective Korean companies. It is also a win for the U.S. administration of President Joe Biden.
The two firms have decided to drop all lawsuits here and abroad and not to file other suits for the next 10 years. According to the deal, SK will pay a settlement of 2 trillion won ($1.78 billion) ― 1 trillion won over the next two years and 1 trillion won via royalties ― to LG. In return, SK will be able to go ahead with its battery business in Georgia, the U.S. The settlement is seen as a "win-win" compromise. It will also help the Biden administration avoid losing jobs and disrupting battery supply chains, while protecting intellectual property rights for firms active in the U.S.
The deal came after the U.S. International Trade Commission (ITC) ruled in favor of LG in February, saying SK stole LG's business secrets by poaching its employees. The two firms compromised at the last minute just before the Sunday night deadline for Biden's possible exercise of a veto on the ITC ruling. Both the U.S. and Korean governments had been urging the firms to settle the case at as early a date as possible.
The electric vehicle battery business ― along with the semiconductor business ― is a representative model for Korea in which domestic enterprises lead the global market. Last year, LG was the world's second largest electric car battery maker, accounting for 29.6 percent of the market, while SK ranked sixth with a 5.9 percent share. Combined with Samsung SDI's 6.5 percent, these Korean firms took 42 percent of the entire global supply.
The world's auto market is rapidly shifting from conventional vehicles with fossil fuel engines to electric vehicles, prompted by the need to cope with climate change; and the global competition in the EV battery market is increasingly intensifying.
Global companies are throwing their hats into the ring. For instance, Volkswagen of Germany announced a plan to transform itself into an electric carmaker, through a business alliance with China's Contemporary Amperex Technology Co., Limited (CATL), the world's No. 1 EV battery maker. Volkswagen plans to apply the "unified cell" battery to 80 percent of its EVs by the year 2030. This move will likely deal a blow to LG and SK, as both are focusing on the production of "pouch-style batteries."
Tesla also unveiled its own new battery last December with multiple capacity and power, after announcing it had decided to increase the production of its own batteries. Apple is also poised to enter the battery market with a focus on producing more reasonably priced and safer goods. These developments and others pose growing challenges to domestic battery makers. After reaching the deal, LG and SK should engage in fair competition in order to jointly lead the global battery market.
