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By Baek Byung-yeul
Samsung SDI forecast the automotive chip shortage issue won't disrupt its scheduled electric vehicle (EV) battery production, as carmakers are aggressively shifting their business strategies to sell more EVs to meet stricter environmental regulations, the battery-making arm of Samsung Group said Tuesday.
Ever since the outbreak of COVID-19 early last year, various industry sectors, especially the automotive industry, have struggled with semiconductor shortages and supply chain deterioration. The shortages come as chipmakers have given priority to chips for IT devices and home appliances, which have been in robust demand due to the pandemic.
However, Samsung SDI said the impact of the chip shortage issue on the company's performance will be limited in the second half of this year.
"Although EV production is affected partly by chip shortage issues, the chip supply will be improved in the second half of this year," a company official told investors during an earnings call upon announcing its second-quarter earnings report. "The chip shortage issue will have a limited impact on our performance as carmakers prioritize EV production to meet environmental regulations."
The company estimated its performance will be even better in the second half of 2021 as it is scheduled to supply new battery cells with higher profitability. "As the proportion of profitable products increases in the second half of the year, it is expected to improve not only in terms of sales but also profitability."
Son Michael, senior vice president of the company, also confirmed that it will establish a battery manufacturing plant in the United States as battery cell makers are urged to set up factories there to take advantage of tax benefits. Under the United States―Mexico―Canada Agreement (USMCA) that took effect in 2020, cars that have 75 percent North American components can avoid tariffs starting from 2025.
"The demand for EV batteries will grow higher than expected due to the Biden administration's eco-friendly policy," the executive said. "As the USMCA takes effect in 2025, we will go ahead with a plan to build a production base in the U.S. soon."
As part of its move to increase presence in the U.S. market, Son added the company is preparing for more partnerships with many carmakers including Rivian, an Amazon-backed EV startup producing electric trucks and delivery vehicles.
Speaking of its new Gen5 battery cell, the company confirmed it will begin supplying the high-performance batteries to German carmaker BMW starting from the third quarter.
"Currently we are preparing for the launch of the Gen5 batteries at the new manufacturing line in our Hungary plant. Starting from the third quarter, we will supply the Gen5 batteries to BMW and we expect the batteries will contribute to improvement of our earnings starting from the fourth quarter," the company official said.
The firm added it will diversify customers of the Gen5 products next year. "By expanding the supply volume, the Gen 5 will greatly contribute to increasing sales of automotive battery business," he said.
Samsung SDI, one of three big three battery cell makers here along with LG Energy Solution and SK Innovation, saw its second-quarter operating profit earnings jump nearly 190 percent from a year earlier. The company said its second quarter operating profit stood at 295.2 billion won ($257 million), up 184.4 percent year-on-year thanks to robust demand for EV batteries.
