Battery (secondary battery) shares, which had been sluggish due to a prolonged downturn in the electric vehicle industry, have rebounded noticeably in recent days. The global electric vehicle market remains mired in a slump, but funds are flowing in on expectations that secondary battery companies, which handle energy infrastructure, will play a bigger role thanks to the explosive growth of artificial intelligence (AI) data centers.
In particular, as the U.S. administration has designated batteries as a security asset, the potential for Korean corporations to benefit in the North American market has come to the fore. After the domestic stock market entered a sharp correction starting in July, the KOSPI index fell 18.5% over roughly two months (July 1–Sept. 11), but Samsung SDI rose 11.6% and SK Innovation jumped 50.2%. LG Energy Solution(373220) fell 1.25%.
A rotation of funds that had been concentrated in semiconductors into the battery sector during the correction is also working in favor of secondary batteries.
◇ U.S.: "Batteries are security assets… sever ties with China" urged
The United States is suffering a severe power shortage due to the construction of AI data centers. The fastest and cheapest way for the U.S. to supply power to gigawatt (GW)-scale data centers is to combine renewable energy such as solar and wind with battery-based energy storage systems (BESS).
China is the country where renewable power generation and BESS can be built at the lowest cost, but the likelihood that the United States will place large orders with China solely for cost reasons is low. That is because the United States and China are fiercely competing to secure leadership in the AI industry.
On the 9th, shortly after the report came out, the U.S. Department of Transportation urged automaker Ford to sever ties with Chinese companies, a case that clearly shows this situation.
U.S. Transportation Secretary Sean Duffy, in a letter sent on the 8th to Ford CEO Jim Farley, said he was "seriously concerned" about Ford dealing with Chinese battery maker CATL and Chinese automakers Geely and BYD, and called for severing ties. He particularly pointed out that CATL is a corporation placed on the U.S. Department of Defense blacklist over alleged links with the Chinese military.
On the 9th, immediately after the report, shares of the three domestic battery companies rose by a relatively large margin. Expectations grew that domestic companies would gain ground in the vast North American energy market.
Kim Hyun-su, a Hana Securities analyst, said, "There was speculation that the United States might partially allow Chinese batteries ahead of the U.S.-China summit to be held in Washington on the 24th of this month, but given that the U.S. transportation secretary took concrete action, we judge the likelihood that the U.S. market will open to Chinese battery companies to be extremely low."
Earlier, on Aug. 26, the U.S. administration also declared a "national emergency to protect the U.S. bulk-power system." Citing concerns that "digital backdoors (security vulnerabilities)" embedded in foreign-made equipment could be used to attack the U.S. power grid, it moved to restrict the import, purchase, and installation of foreign products with national security risks in power facilities, including BESS.
◇ Three battery makers to produce batteries for ESS instead of EVs
As the United States directly targets Chinese products, the three domestic battery makers with large-scale production facilities in the U.S. can expect to benefit.
Domestic battery companies built production facilities in the United States years ago to make EV batteries, and recently some processes are being converted into ESS production lines. SK On, the battery subsidiary of SK Innovation(096770), is converting some domestic and overseas EV battery plants into production lines for lithium iron phosphate (LFP) batteries for ESS. It has converted the Seosan plant at home into an LFP line for ESS and plans to convert some lines at its Georgia plant in the United States.
Samsung SDI(006400) decided to operate as a standalone plant a joint factory it had been promoting with General Motors (GM) in the United States. The original plan was to produce EV batteries at this plant, but as GM's mass-production schedule for EVs was delayed, the plan changed. Samsung SDI plans to produce ESS batteries at part of this plant.
On top of that, some stock investment funds that had concentrated on semiconductors are moving into the battery sector. Investors are focused on whether the long-sluggish battery sector can rebound further.
Jeon Woo-je, a KB Securities analyst, noted, "Due to changes in U.S. policy, the share of Chinese products, which have a 79% share of the U.S. ESS market, will be replaced by domestic corporations that have already expanded large-scale plants in the United States," and projected, "In addition to LG Energy Solution and Samsung SDI, which are already increasing their U.S. market share, SK Innovation's chances of new orders are also rising."