People walk past CATL's logo at the Auto Shanghai show in China in this April 2023 photo. Reuters-Yonhap

The U.S. Department of Defense's addition of CATL to its list of companies supporting the Chinese military is expected to benefit Korean electric vehicle (EV) battery makers, which have been experiencing a steady decline in their global market shares.

Korean gaming firms, on the other hand, are keeping a close watch on the Pentagon's move to blacklist Tencent, considering their business partnerships with the Chinese IT company.

On Tuesday, the U.S. Defense Department announced updates to the names of Chinese military companies operating directly or indirectly in the United States. Although they will not face any immediate restrictions on their businesses in the private sector, the department will be banned from dealing with them starting in June next year.

"This could add to their reputational damage in the U.S., Europe and other parts of the world," said Douglas Kim, an analyst at SmartKarma, a Singapore-based investment research firm.

The analyst anticipated positive effects of Washington's recent decision on Korean rechargeable battery firms, mentioning a rise in their share prices amid a drop in CATL's stock price.

"This is a reflection of some investors increasing capital allocation to these beaten-down stocks, combined with positive sentiment on the department's adding of CATL as a military stock and increased optimism that Trump's tariffs on Korean companies may not be too excessive," he said.

CATL has maintained its lead in the global market, while LG Energy Solution, SK On and Samsung SDI have faced reductions in their respective market shares.

Hyundai Motor Group is also among the global carmakers using the Chinese company's batteries, along with Tesla, BMW, Mercedes-Benz and Volkswagen. Ford Motor has even sparked concerns among U.S. politicians over its construction of a lithium iron phosphate (LFP) battery plant in Michigan by licensing technologies from CATL.

Amid the growing possibility of global EV makers reducing their reliance on CATL's products, the company and Beijing are protesting the blacklisting, denying the battery maker's involvement in any military-related activities.

However, Kim said that it could be difficult for CATL to be removed from the list.

"Given the incoming Trump administration, which has openly touted high tariffs and other tough measures for Chinese companies, the higher probability scenario at this point is for Tencent and CATL to be officially included in the Chinese Military Industrial Complex list in the coming weeks," he said.

A man rides past Tencent headquarters in Beijing in this August 2020 photo. AP-Yonhap

Tencent also threatened to take legal action to correct its inclusion.

Although there exists a view that Korean gaming firms will benefit from the blacklisting of Tencent, they have maintained a cautious stance on the issue, as the Chinese firm holds large stakes in them and has handled marketing and distribution of their games in China, the world's second-largest gaming market.