By Baek Byung-yeul
With LG Energy Solution and SK Innovation ending their dispute over battery technology for electric vehicles (EVs) last month, domestic makers of components, parts and materials in the industry have come under the spotlight with the expectation that large-scale orders will resume in the United States and Europe, analysts said Tuesday.
The intellectual property battle between the two Korean battery giants created negative sentiment on related companies here, but now that they have settled the dispute, they are expected to see increased orders, the analysts added.
They also said carmakers' efforts to develop their own in-house battery-making technologies to reduce their dependency on standalone makers has also made investors attach more value to these local firms in the EV business ecosystem.
Among the four main components for EV batteries ― cathodes, anodes, electrolytes and separators ― POSCO Chemical is enjoying soaring orders for cathodes.
The POSCO affiliate said it generated sales of roughly 550 billion won in battery materials including cathodes in 2020. As the company is expanding its production line, POSCO Chemical is targeting over 1 trillion won in sales this year.
SK IE Technology, a battery separator subsidiary of SK Innovation, is also attracting investors. In the start of a highly anticipated initial public offering process last Thursday and Friday, the company recorded the highest book-building competition ratio of 1,883:1 as 1,734 institutional and retail investors participated.
Dongwha Enterprise, a local wood materials manufacturer, has also been drawing investor attention for its expansion into the battery electrolyte business. The company entered the business in 2019, acquiring an 89.63 percent stake in Panax Etec for 117.9 billion won.
The company's battery materials arm Dongwha Electrolyte has been supplying electrolytes to Samsung SDI. Its factory expansion in Hungary and establishment of a new factory in the U.S. will also help the company fulfill its supply deal with SK Innovation.
YoulChon Chemical, a subsidiary of Korea's largest noodle manufacturer Nongshim, is also considered likely to benefit from battery makers' efforts to use more domestically produced materials.
The company is better known for supplying packaging products for Nongshim's foods, but has been trying to expand into battery packaging.
Based on its technological capability in product packaging, the chemical arm is strengthening its electronic materials business, seeking to supply film pouches, which are used as packaging for lithium-ion pouch batteries.
Currently, LG Energy Solution and SK Innovation are manufacturing battery pouches. Compared to prismatic and cylindrical batteries, pouch cells are known to have a higher energy density and require less space, enabling EV makers to produce more spacious vehicles.
While Korea's battery makers have succeeded in localizing most battery part technologies, they still have shown high dependence on battery pouches, which have been dominated by Japanese firms such as DNP and Showa Denko.
Industry sources said LG Energy Solution's research lab recently completed an evaluation of YoulChon Chemical's battery pouch products.
An industry official from a local battery firm said makers will choose to use pouches made by domestic firms given that there have been growing calls to use locally produced products.
"Local battery makers have used battery pouches from Japanese companies, which have produced products of consistent high quality. However, battery makers will likely diversify their supply chain to cut reliance on companies from a particular country," the official said on condition of anonymity.
Dongwha, YoulChon and other companies' efforts to expand into the electric car business seem reasonable given carmakers are actively seeking to produce more eco-friendly cars to keep up with stricter environmental regulations and respond to growing public awareness of climate change.
Backing up this trend, the International Energy Agency estimated recently that 145 million electric cars, buses, vans and trucks will be on the road by 2030. The agency noted if governments accelerate their efforts to meet international energy and climate goals, the figure could increase to 230 million by the end of the decade, adding that around 3 million new electric cars were registered in 2020, up 41 percent from 2019.