Korea Replacing Japan as Battery Power

LG Chem has consolidated its position as a global power in car batteries, in a deal with carmaker General Motors for its eco-friendly vehicle, Volt.

Samsung SDI is following up with its own major deal with BMW, a German premier carmaker.

The two firms' contracts are different in scope and size, but it is clear that they both understand where their next cash cows lie.

It is a foregone conclusion that electric cars are emerging as a replacement for fossil energy-powered combustible engines.

SDI and LG Chem are making "all-out" efforts to expand their client base and guarantee their production capability.

Analysts say Samsung SDI has secured a "bottom line" to better compete with LG Chem.

"The BMW deal is a lifesaver of sorts and, without it, Samsung's battery business could have been adrift," an analyst at Goodmorning Shinhan Securities said Wednesday.

BMW has chosen Samsung SDI's joint venture with Bosch to supply lithium-ion battery cells, for the carmaker's Megacity electric vehicle due by 2015. The joint venture will construct a lithium-ion battery plant in Korea.

Lee Hak-moo, an analyst at Mirae Asset Securities said SDI's acquisition of Cobasys, a U.S. battery technology company, aims to break LG Chem's stronghold.

GM will import lithium-ion battery cells from LG Chem and assemble the finished battery packs in Michigan, where the car will be assembled.

"LG is targeting mass production, while Samsung is trying to make up for it through a quality-oriented approach," a source told The Korea Times.

Irrespective of their rivalry, the combined force of the companies is set to break Japanese firms' hold on the battery business with their new technology.

Japanese battery makers currently capture 95 percent of the nickel-metal hybrid batteries market. Since the late 1990s, Japanese makers have used nickel-metal hybrid batteries mainly for cost reasons.

Toyota, Japan's largest carmaker, developed the Prius ― the world's first hybrid vehicle ― using a nickel hydrogen rechargeable battery.

Now, the new paradigm is lightweight lithium-ion batteries, which the two Korean firms are concentrating on.

"Integration of lithium-ion battery cells in a car requires higher standards in terms of durability, operational stability and safety," Lee of Mirae Asset said.

"Lithium-ion polymer batteries are expected to replace nickel hydrogen batteries this year, meaning there is more room for SDI and LG Chem to boost their global shares."

The quarterly reports supported the buoyant outlook. LG Chem posted a record operating profit in the second quarter, due to the soaring demand for batteries, while Samsung SDI reaped impressive quarterly results for similar reasons.

"Growing corporate spending and government support will significantly strengthen the Korean firms down the road," SDI spokesman Seo Hae-su said.

The global lithium-ion battery market is expected to grow to 10 trillion won in 2015 from 1 trillion won in 2010, with the number of hybrid vehicles rising to 4.6 million units from 950,000, according to market research firms.