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Korean Industrial Insight No. 3 of AI, Semiconductors, Batteries and Electric vehicles |
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2024-08-05 |
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Ⅰ. AI INDUSTRY TRENDS
1. “Our Future is AI” … Telecom Companies Partnering with AI Firms
- SK telecom establishes a global telecom AI alliance
- KT partners with Microsoft
- LG Uplus collaborates with AWS
South Korea's three major telecommunications companies—SK telecom, KT, and LG Uplus—are positioning artificial intelligence (AI) as a new growth driver. On this account, they are actively seeking partnerships with both domestic and international AI firms.
For years, these telecom companies have been striving to shed the label of merely being “telecom operators.” This is due to the fact that the mobile communications market, which holds a significant share in the telecommunications sector, has reached saturation and its limit in revenue generation. Given that the telecommunications industry is primarily a domestic market, expanding overseas poses significant challenges.
The primary focus of these companies has been AI. SK telecom, KT, and LG Uplus are aiming to transform into AI companies by developing their own large language model (LLM) and launching AI-driven services. Collaborations and partnerships with various domestic and international AI firms are also part of this strategic shift.
SK telecom is advancing collaborative development of LLM and AI business cooperation through “Global Telco AI Alliance.” Launched in November last year, this alliance includes global telecom giants such as Deutsche Telekom, e&, Singtel, and SoftBank. They plan to work together on the development of Telco LLM and AI-related business initiatives.
SKT Embarks Joint Development of LLM Through Global Alliance
SK telecom (hereinafter SKT) has recently signed a memorandum of understanding (MOU) with Singtel to collaborate on next-generation telecommunications network technologies. This partnership with Singapore’s leading telecom operator Singtel aims to lead the innovation of mobile communication network service and technology in the global market through various network technology cooperation.
As founding members of the Global Telco AI Alliance, SKT and Singtel have signed this MOU as part of their ongoing efforts to strengthen their AI capabilities and build a global AI ecosystem by combining telecommunications and AI.
The two companies aim to enhance customer experience as well as network stability and efficiency by leveraging their expertise and experience in 4G and 5G technologies. To achieve this, they plan to engage in technical discussions and personnel exchanges across various commercial network areas, including mobile network engineering, construction, operations, and solutions.
In June, SKT also launched the AI-based integrated advertising platform "ASUM 2.0” in collaboration with Moloco, a machine learning solutions company. Moloco, a Silicon Valley startup that provides customized advertising platforms for businesses, helps companies efficiently execute their advertisements utilizing advanced machine learning-based AI technology.
ASUM is a customized targeting advertising platform that leverages SKT's services, including T Phone, T Membership, and PASS, along with telecommunications data. SKT initially launched ASUM 1.0 in 2021. Through this collaboration, the two companies have integrated Moloco’s advertising technology into ASUM 2.0, enhancing customer targeting capabilities. The AI combines the two companies’ targeting technologies to deliver more relevant ads to users.
KT Establishes Strategic Partnership with MS
In June, KT has entered into a strategic partnership with Microsoft to foster close cooperation in the areas of AI, cloud, and IT. The signing ceremony was attended by KT CEO Kim Young-shub and Microsoft CEO and executive chairman Satya Nadella.
Under this agreement, KT and Microsoft will collaborate on ▲joint research and development projects in AI and cloud ▲the development of Korean-specific AI, cloud, and IT services ▲the establishment of an AI and cloud innovation center ▲AI and cloud talent cultivation.
In particular, the two companies plan to detail the areas of their extensive collaboration and support by September for the innovation and growth of the domestic AI and cloud industry. KT aims to lead the Korean market by utilizing Microsoft’s technology to develop “Sovereign Cloud’ and ‘Sovereign AI,’ which will enhance security measures to ensure data and AI sovereignty for public and financial sector clients.
LG Uplus Partners with AWS
LG Uplus has partnered with Amazon Web Services (AWS) in March strengthening its collaboration to enhance the utilization of AI.
During the Mobile World Congress (MWC) 2024 held in Barcelona, Spain, LG Uplus CEO Hwang Hyeon-sik met with Kathrin Renz, Vice President of AWS Business Development & Industries. The two companies agreed to collaborate on several initiatives, including ▲ providing differentiated customer experiences through AWS's latest generative AI capabilities ▲enhancing security for cloud platform services ▲modernizing core IT areas within the telecom sector.
LG Uplus is driving company-wide customer experience (CX) innovation and digital transformation (DX) to transition into a platform company through the digitalization of telecommunications. The partnership with AWS is expected to accelerate this transformation. Additionally, LG Uplus anticipates significant improvements in customer experiences through its upgraded next-generation integrated computing network "Ucube”.
The two companies also plan to collaborate on various customer experience innovations, elevating cloud security levels, and discovering use cases leveraging the latest AI technologies. LG Uplus aims to extend AWS’s advanced design capabilities to all areas of its business operations beyond its IT infrastructure, through this partnership.
2. Market Worth Trillions: AI Textbooks. Private Education Giants Join
- The Ministry of Education to begin full-scale verification next month
- Expansion to all subjects by 2028
With the full-scale introduction of AI digital textbooks set for next year, competition among developers aiming to dominate the market share is intensifying. The textbook market, which has been stagnating at around 500 billion won annually, is expected to expand into trillions of won industry with the advent of digital textbooks. Education companies, struggling to find a breakthrough amid declining school-age population, are putting all their efforts into developing AI digital textbooks.
According to the Ministry of Education on the 25th, the government plans to introduce AI digital textbooks for mathematics, English, and information technology for grades 3∙4, grade 1 in middle school, and grade 1 in high school students early next year, with an expansion to all subjects by 2028. Applications for participation in the AI digital textbook review will be accepted from December 12 to 16. After the first round of evaluation on September 24, the revisions will be made, and the final results are expected to be confirmed by the end of November. Companies that fail this year will have another opportunity for reevaluation next year.
Digital textbooks are expected to cost at least two to three times more expensive than traditional textbooks, which average around 10,000 won per copy. This is why the current 500 billion won textbook market is anticipated to grow into trillion-won scale. This expected growth in the textbook market prompted traditional private education giants, such as Woongjin ThinkBig, which has only developed supplementary educational materials, to enter the public education textbook development market. Woongjin ThinkBig has completed the prototype development of its mathematics textbook and is currently in the technology review phase. In addition to functionality-focused evaluations, it is also testing the technology by running class scenarios that simulate real classroom environments.
Existing textbook leaders are also struggling to maintain their market share. Chunjae Education has developed all textbooks for mathematics, English, and information technology set to be introduced next year. Its key feature is that the feedback from learners and teachers in the field using original services have been incorporated. A company official stated, “The key to AI textbooks is personalized learning, and we have a vast database of problems and big data on students accumulated through our MilkT service.”
Visang Education, which is developing all mathematics, English, and information technology textbooks, stated, “Our strength lies in effectively utilizing generative AI for developing hints and explanations for problems, correcting English compositions, and generating English passages.”
The development of AI digital textbooks is essentially a matter of survival for education companies. For traditional textbook publishing companies, failing to adapt to this new market could result in a loss of their primary source of revenue. There are also predictions that the market for supplementary workbooks related to textbooks may decline, heightening their sense of crisis. An industry insider explained, "Until now, we have been selling supplementary workbooks linked to school textbooks, but in the future, homework and applied learning will all be possible on electronic devices, making workbooks unnecessary."
3. CJ Logistics’ AI “The Unban” Sees 20-Fold Increase in Clients Within a Year, Solidifying its Position in Transport Industry
- Reaches 3,000 client companies within a year of its official launch
- Over 40,000 registered drivers
- Ensures transparency through direct matching between shippers and drivers
- Reduces transportation costs by 5-15% with AI-based optimal fare calculation
- Shippers’ experience 100% dispatch rate and improved management efficiency
- Promotes mutual growth by providing next-day payment to drivers
Innovative technology company CJ Logistics' AI-based transportation platform, "The Unban," is emerging as a leader of middle-mile transportation market by providing a transparent pricing system that directly links shippers and drivers, as well as enhancing convenience through advanced technology.
CJ Logistics reported that the number of client companies using its freight transportation brokerage platform "The Unban" has increased approximately 20-fold within just one year of its official launch.
Since its opening in July last year, the number of client companies using "The Unban" has surged from around 150 to approximately 3,000, with the number of truck drivers utilizing the service exceeding 40,000. Notably, in May, the platform attracted significant market attention by partnering with a leading steel company for middle-mile logistics of steel products, successfully bringing major corporate shippers on board.
By eliminating brokerage fees through a direct transaction platform between shippers and drivers, "The Unban" has enabled the shippers to achieve an average reduction of 5-15% in freight transportation costs.
The platform’s new driver-friendly policy has also contributed to its success. "The Unban" has introduced "next-day payment service" for the first time in the industry, reducing the freight payment period from the previous 30 to 60 days down to just one day. While the payment date for shippers to “The Urban” remains unchanged, drivers receive payments in advance, reducing financial burdens and promoting mutual growth.
The advanced technologies employed by "The Unban" have played a significant role in attracting both shippers and drivers. The platform continuously applies technologies such as ▲AI algorithm-based optimal pricing recommendations, ▲transportation optimization algorithm suggesting the best routes and methods ▲generative AI-based chatbot to increase satisfaction for both parties.
In addition to guaranteeing a 100% dispatch rate, "The Unban" has established a 24-hour operational system to respond in real time to any issues that arise during freight transportation. It also offers shippers a one-stop solution within the system for orders, dispatch, cargo tracking, and settlement, significantly enhancing the convenience for client companies.
Ⅱ. SEMICONDUCTOR INDUSTRY TRENDS
1. “Seizing AI Semiconductor Demand”: Samsung Electronics and SK Hynix Intensify HBM and CXL Competition
- SK Hynix leads HBM amid NVIDIA’s “love call”
- Samsung Electronics accelerates efforts to secure CXL standards
Amid the recent surge in demand for artificial intelligence (AI), the memory semiconductor market is experiencing a revival, with Samsung Electronics and SK Hynix intensifying their efforts to secure next-generation memory semiconductor technologies. Both companies are preparing for a leap forward in the AI era, engaging in a fierce competition to commercialize High Bandwidth Memory (HBM) and Compute eXpress Link (CXL) technologies.
Samsung Electronics and SK Hynix are currently focusing on the HBM market. HBM is a high-performance memory semiconductor created by stacking multiple DRAM chips vertically. Its computational performance is significantly superior compared to traditional DRAM. As one of the key components in graphic processing unit (GPU), it is gaining attention with the emergence of the AI era.
In the HBM competition, SK Hynix has gained the upper hand. The company was the world’s first to develop HBM in 2013 and has since solidified its market dominance by becoming the exclusive supplier of HBM to NVIDA, which has garnered attention as a prominent AI semiconductor. Following its near-exclusive supply of fourth-generation HBM to NVIDIA, SK Hynix began supplying fifth-generation HBM product, HBM3E with 8 layers, in March this year for the first time in the industry. The company also aims to deliver the fifth-generation HBM3E with 12 layers within this year and plans to release the sixth-generation product in the second half of next year.
Samsung Electronics has also recently passed NVIDIA's quality test with its fourth-generation HBM product, HBM3. According to Reuters on the 24th (local time), an anonymous source revealed that Samsung has successfully completed the qualification test for supplying HBM3 to NVIDA for the first time, while the fifth-generation HBM3E is still undergoing testing.
Currently, the HBM market share stands at 53% for SK Hynix, 35% for Samsung Electronics, and 9% for Micron.
Samsung Electronics is aiming to regain its pride through CXL, one of the next-generation memory semiconductors. CXL, which stands for "Compute eXpress Link," is based on a DRAM type known as "CMM-D." This technology allows for the connection of various processors, including central processing unit (CPU), GPU, and storage devices, into a single system, enabling the efficient processing of large volumes of data.
CXL’s key advantage lies in its outstanding scalability. While previously separate servers had to be added in data centers to increase storage capacity, CXL-based DRAM can increase the memory capacity of a single server by around 10 times. As a result, CXL is expected to garner significant attention in the AI era, where data processing demands are growing exponentially.
Samsung Electronics expects CXL to be fully commercialized by 2028, as CPU integrating CXL are already on the market, and all CPUs are expected to be CXL-compatible from 2027.
In 2021, Samsung Electronics successfully developed the industry's first CXL-based DRAM. This March, Samsung unveiled various CXL-based solutions, including the CMM-D, CMM-H (which combines DRAM and NAND), and the CMM-B memory pooling solution at the global semiconductor conference 'MemCon 2024'. Also, in the second quarter of this year, Samsung launched the 256GB CMM-D product supporting CXL 2.0 and is currently conducting verifications with major customers. Furthermore, in 2019, Samsung formed the CXL Consortium with 15 global tech giants to expand the CXL ecosystem.
SK Hynix is also actively securing its CXL related competitiveness. The company plans to target the CXL memory market with three solutions, which are the CXL 2.0 memory expansion solution, the CXL pooled memory solution, and the computational memory solution. Additionally, the company aims to commercialize them within this year after completing customer certification for its 96GB and 128GB CXL-based products.
Meanwhile, according to market research firm Yole Intelligence, the CXL market is projected to grow from around KRW 2.4 billion in 2022 to nearly KRW 20 trillion by 2028.
2. SK Hynix Forecasts 300% Increase in HBM Revenue this Year, Fueled by 'AI Supercycle'
- Q2 operating profit surpasses 5 trillion won for the first time in six years. Setting record quarterly revenue.
- Concerns over HBM oversupply are minimal as increased investments correlate with higher product orders.
- Supply of HBM3E 12-layer to exceed 8-layer in the first half of next year.
SK Hynix has surpassed 5 trillion won in operating profit for the first time in six years. The company's sales also exceeded16 trillion won, significantly surpassing its previous record for quarterly performance. The surge in demand for AI memory, particularly in high bandwidth memory (HBM), has significantly contributed to these strong results. Additionally, the rising demand for high-performance, high-capacity NAND products, such as enterprise SSD, along with the overall price increase of DRAM products, contributed to the company's profitability.
SK Hynix plans to continue its investments to maintain its leadership in the HBM sector. The company dismissed concerns about potential oversupply resulting from HBM investments, forecasting that demand in the AI memory market will continue to grow. SK Hynix intends to solidify its market leadership by supplying its fifth-generation HBM, HBM3E 12-layer product, to its customers in the fourth quarter of this year. The company expects HBM sales to increase by 300% compared to the previous year.
SK Hynix Records All-time High Quarterly Performance with HBM Boost
SK Hynix announced a consolidated operating profit of 5.4685 trillion won in 2Q24, marking a return to profitability year-on-year. This figure represents an 89% increase compared to the first quarter, which recorded an operating profit of 2.886 trillion won. The company's sales for the second quarter amounted to 16.4233 trillion won, reflecting a 125% increase year-on-year and a 32% increase compared to the first quarter, which had sales of 12.4296 trillion won. Additionally, SK Hynix reported a net profit of 4.12 trillion won.
This revenue marks the highest quarterly performance on record, significantly surpassing the previous record of 13.811 trillion won set in 2Q22. The operating profit also saw substantial growth, achieving over 5 trillion won for the first time in six years since the semiconductor super cycle in the 2Q18, which recorded 5.5739 trillion won, and the 3Q18, which reached 6.4724 trillion won.
The robust performance can be attributed to the rising demand for AI memory. The high demand for AI memory has contributed to profit improvements through high value products, such as HBM and eSSD. The prices of memory products, including DRAM and NAND, have increased, and inventory levels have improved. An SK Hynix official stated, "With the strong demand for AI memory products like HBM and eSSD, the overall price increase in DRAM and NAND has led to a 32% rise in revenue compared to the first quarter." They emphasized that the sales of premium products have increased, and combined with favorable exchange rates, the operating profit rate for Q2 reached 33%, a 10 % increase from the previous quarter.
AI Supercycle Underway: SK Hynix to Maintain HBM Leadership
During a conference call, SK Hynix outlined its plans to maintain its competitive advantage in the HBM market. The company has been the exclusive supplier of HBM3 to its largest AI semiconductor customer, NVIDIA. In March, SK Hynix became the first memory manufacturer to deliver the fifth-generation HBM, the HBM3E 8-layer product, to NVIDIA. The sixth generation, HBM4, is scheduled to be released in the second half of next year, starting with the 12-layer product. SK Hynix plans to incorporate advanced MR MUF technology for mass production of these products. A company official stated, "We plan to produce HBM3E 12-layer products within the third quarter, which we provided samples to major customers, and begin supplying as scheduled in the fourth quarter. The shipment of HBM3E is expected to account for half of SK Hynix's total HBM shipments this year."
The company forecasts that its HBM sales will grow by 300% compared to the previous year. Also, it expects that the volume of HBM shipments in the next year will be more than double compared to this year. It anticipates that the supply of HBM3E 12-layer products will surpass that of the 8-layer products in the first half of next year, with the supply of HBM3E 12-layer products expected to surpass that of the 8-layer products in the first half of next year. It aims to maintain its leadership position in the HBM market by having a comprehensive portfolio that includes all products from HBM2E to HBM3E 12-layer.
3. SK Hynix Board Approves 9.4 Trillion Won Investment for Yongin Semiconductor Cluster
SK Hynix has announced that its board of directors has approved a 9.4 trillion won investment to construct Fab (fabrication plant) and business buildings at the Yongin semiconductor cluster.
SK Hynix plans to begin construction of its first Fab at the Yongin cluster in March next year, with completion scheduled for May 2027. The Yongin cluster will be formed on a 4.15 million square meter site in the Wonsam-myeon area of Yongin City, where ground leveling and infrastructure development are currently underway.
The approved investment amount includes construction costs necessary for the initial operation of the cluster, such as facilities, office support buildings, and welfare facilities, in addition to the first Fab. The investment period is expected to run from August this year until the end of 2028, taking into account the design period and the construction timeline for the office support building, which is scheduled for completion in 2H28.
SK Hynix plans to sequentially complete three additional fabs after the construction of its first fab, aiming to develop the Yongin cluster into a global production hub for AI. The company also intends to establish a semiconductor collaboration complex with over 50 domestic and international materials, components, and equipment companies.
SK Hynix is to produce next-generation DRAM, including AI memory such as HBM (High Bandwidth Memory), at its first fab. The company explained that it will prepare the fab to utilize for the production of other products in alignment with market demand at the time of completion.
Additionally, a "mini-fab" will be established within the first fab to support the technology development, validation, and evaluation of its materials, components, and equipment partners. This mini-fab will be equipped with 300mm wafer processing equipment for semiconductor material and component validation.
Ⅲ. BATTERY INDUSTRY TREND
1. LG Energy Solution and Samsung SDI Accelerate Development of Solid-State Batteries, Aiming to Overcome the Chasm
- LG Energy Solution Vice President states at SNE Battery Day, "Everything will be achieved before 2030.”
- Samsung SDI Vice President Ko Joo-young announces, "We will begin mass production of solid-state batteries by 2027, and customer evaluations are positive.”
LG Energy Solution and Samsung SDI have announced plans to launch next-generation batteries within the next 3 to 6 years. The competition between the two companies is expected to intensify over solid-state batteries, often referred to as the "dream battery."
At the 'SNE Battery Day 2024,' Jung Geun-Chang, Vice President of LG Energy Solution, stated, "While it is difficult to specify the launch timeline for next-generation batteries such as lithium-sulfur, all-solid-state, and bipolar batteries, I can say that everything will be achieved before 2030."
Solid-state battery, known for its greatest advantage of safety, significantly reduces the risk of battery fires and explosions while increasing energy density.
The market outlook is also promising. According to market research firm SNE Research, the global market size for all-solid-state battery is expected to surge from $27.5 million (approximately KRW 37 billion) in 2022 to $40 billion (approximately KRW 53.37 trillion) by 2030.
In response to this trend, Japan and China are also accelerating their research and development efforts. China's CATL, the world's largest electric vehicle battery manufacturer, recently announced plans to begin solid-state battery production by 2027. Japan’s Nissan Motors is also constructing a 100 MW (megawatt) pilot line for all-solid-state batteries at its Yokohama plant, aiming to commence operations by March next year.
Domestic battery companies are also steadily progressing in solid-state battery development.
Samsung SDI, which has completed the establishment of its solid-state battery pilot line, aims for mass production by 2027. SK-on has set its mass production target for 2029, while LG Energy Solution has projected 2030 as its goal. LG Energy Solution plans to strengthen its portfolio by positioning all-solid-state battery in the high-performance segment, while utilizing lithium iron phosphate (LFP) and LMFP (LFP batteries with added manganese) products in the lower segments.
Vice President Jung stated, “Previously, we focused primarily on high-performance and standard segments, but recently we are expanding into more affordable segments and plan to aggressively launch products." He added, "In particular, we aim to enhance price competitiveness with bipolar batteries."
Samsung SDI, targeting mass production of solid-state batteries within three years, is currently conducting customer evaluations.
Vice President Ko Joo-young of Samsung SDI stated, "We supplied solid-state battery samples to customers last year and early this year. We are currently receiving feedback, and the customer evaluations are positive."
He further added, "In the volume and entry segments, we plan to develop 'ultra-fast charging' products that can be charged in just nine minutes by 2026, and by 2029, we aim to extend battery lifespan to 20 years."
2. K-Battery: LG Energy Solution Lowers Revenue Target for this Year
- LG Energy Solution's Q2 operating profit halved, “Only essential investments to be executed.”
- Samsung SDI sees decline in operating profit, while SK On continues to forecast operating losses.
- Strengthening fundamentals through portfolio diversification, preparing for market upturn
Due to the electric vehicle market’s “Chasm” effect, LG Energy Solution has significantly lowered its revenue target for this year, reflecting a clear trend of poor performance in the battery industry.
The three leading K-battery companies—LG Energy Solution, Samsung SDI, and SK On—are adjusting their investment speed in response to declining profitability, while ultimately expecting market conditions to improve through portfolio diversification.
◇ Weak Performance in H1 Due to Industry Slowdown
LG Energy Solution, South Korea's leading battery manufacturer, announced on the 25th that its consolidated operating profit for the second quarter of this year was KRW 195.3 billion, a 57.6% decrease compared to the same period last year.
Excluding the tax credit of KRW 447.8 billion under the U.S. Inflation Reduction Act (IRA) for advanced manufacturing production (AMPC), the company recorded an operating loss of KRW 252.5 billion.
The profitability has been affected as customers, such as automakers, have adjusted their strategies by lowering electric vehicle production volumes, and metal prices have weakened, resulting a decline in prices.
Samsung SDI and SK On, both set to announce their earnings next week, are also expected to report poor results.
According to market forecasts compiled by Yonhap Infomax, Samsung SDI's Q2 operating profit is anticipated to decrease by 24.8% year-on-year, while SK On is projected to face an operating loss of around 300 billion won.
In the previous quarter, LG Energy Solution's operating profit dropped by 75.2%, and SK On reported an operating loss of 331.5 billion won. Samsung SDI, which performed relatively better, saw a 29% drop in overall operating profit.
◇ Adjusting Investment Pace Amid Prolonged Chasm. Second Half Needs Monitoring
The battery industry is preparing for the possibility that the chasm may extend longer, optimizing capacity operations and adjusting new expansion projects accordingly. LG Energy Solution and General Motors' joint venture, Ultium Cells, has recently paused the construction of its third plant in Lansing, Michigan, which was aimed to be operational next year.
LG Energy Solution has also temporarily halted the construction of its lithium iron phosphate (LFP) battery production facility dedicated to energy storage systems (ESS) in Arizona, just two months after breaking ground.
SK On, which invested 11.5 trillion won last year, is expected to gradually decrease its capital expenditure to 7.5 trillion won this year and to a level of 2 to 3 trillion won next year.
Lee Chang Sil, CFO of LG Energy Solution, stated during the earnings conference call, "New expansion projects will be flexibly adjusted according to market demand, but we plan to control the ramp-up speed of expansions to prevent overinvestment," He added, "For the time being, we will only execute investments in strategically essential areas."
◇ Strengthening Portfolio with LFP and ESS. Accelerating the Development of “Dream Battery”
LG Energy Solution expects a significant improvement in ESS sales and profitability starting in the Q3, driven by an increase in supply for large-scale power grid projects.
Thus, the company has converted some production lines in Nanjing, China, for ESS LFP production and plans to expand supply primarily in North America and Europe this year.
LG Energy Solution has recently signed a supply contract for ESS batteries totaling 4.8GWh with Hanwha Q CELLS division in the U.S.
Samsung SDI is reportedly supplying ESS batteries worth over 1 trillion won to NextEra Energy, the largest energy company in the U.S.
LG Energy Solution has also secured a large-scale supply contract to equip Renault's next-generation electric vehicle models with LFP battery cells.
3. "LG Energy Solution in Talks with Three Chinese Cathode Material Companies for European Battery Production”
- Interview with LG Energy Solution Vice President Seo Won-Jun by Reuters
- “Discussions ongoing for LFP battery development and exports to Europe"
- "Partnerships expected to reduce manufacturing costs to levels comparable to Chinese competitors within three years"
- "Expansion plans delayed by up to two years due to slowing EV demand"
LG Energy Solution is currently in talks with three Chinese suppliers to produce low-cost electric vehicle batteries for the European market.
Seo Won-Jun, vice president and head of the automotive battery department from LG Energy Solution, stated in an interview with Reuters, "We are negotiating with Chinese companies to develop lithium iron phosphate (LFP) batteries for production aimed at European exports." However, he did not disclose the names of the specific companies involved.
He stated, "We are exploring various options, such as the establishing joint ventures and signing long-term supply contracts," adding, "Through these partnerships, we believe we can reduce LFP battery manufacturing costs to levels comparable to our Chinese competitors within three years."
Reuters analyzed that LG Energy Solution's push for partnerships indicates increasing pressure for price reductions. This partnership comes at a time when the global electric vehicle industry is facing significant challenges due to a sharp decline in demand. It reflects the growing pressure on battery manufacturers outside of China to lower prices to levels comparable to their Chinese competitors, as demanded by automakers.
French automaker Renault announced earlier this month that it will LFP battery technology in its plans for mass production of electric vehicles and has selected LG Energy Solution and China's CATL as partners for building its supply chain in Europe. This announcement has garnered attention amid increasing competition among electric vehicle manufacturers, following the European Union's decision in June to impose additional tariffs of up to 38% on Chinese electric vehicles.
Cathode materials are the most expensive single component in electric vehicle batteries, accounting for about one-third of the total cost of battery cells. According to market research firm SNE Research, China dominates the global supply of LFP cathode materials.
Seo stated that LG Energy Solution is exploring options to produce LFP cathode materials targeting the European market in collaboration with Chinese companies in three locations: Morocco, Finland, and Indonesia. He added that Europe has a stronger demand for affordable electric vehicle models, accounting for about half of the region's electric vehicle sales, which is higher than in the United States.
Ⅵ. ELECTRIC VEHICLE INDUSTRY TRENDS
1. Hyundai and Kia Excel Despite EV Chasm Recording Quarterly Sales of KRW 70 Trillion for the First Time
- Combined Q2 operating profit reaches 8 trillion won, marking an all-time high.
Hyundai Motor and Kia Motors' combined quarterly sales has surpassed KRW 70 trillion. Their operating profit also neared 8 trillion won, setting a new record, surpassing the previous all-time high from the second quarter of last year. In response to the electric vehicle "chasm" (a temporary slowdown in demand before widespread adoption), both companies have rapidly increased production of hybrid vehicles and adopted a sales strategy focused on high-profit models, such as SUV, which has been deemed effective.
Kia announced on the 26th that its consolidated sales for 2Q24 reached 27.5679 trillion won, with an operating profit of 3.6437 trillion won. Compared to the 2Q23, sales increased by 5% and operating profit rose by 7.1%.
The quarterly sales figure is approximately 1.3 trillion won higher than the previous record of 26.2442 trillion won set in the second quarter of last year, and the operating profit also surpassed the previous all-time high of 3.4257 trillion won from the previous quarter. The operating profit margin reached as much as 13.2%.
In the first half of this year, Kia recorded total sales of 53.7808 trillion won and an operating profit of 7.0694 trillion won. This marks the highest sales figures for the first half of the year, surpassing last year's first-half performance of 49.9349 trillion won. The operating profit also exceeded the previous record of 6.277 trillion won from the first half of last year by nearly 800 billion KRW.
Following Hyundai Motor's record-breaking performance the previous day, Kia also joined the trend, resulting in combined results for Hyundai and Kia reaching an all-time high. The combined sales for the second quarter of Hyundai and Kia amounted to 72.5885 trillion won, reflecting a 6% increase compared to the previous record of 68.4774 trillion won set in the second quarter of last year. The combined operating profit also rose to 7.9228 trillion won, up 3.5% from the previous high of 7.6513 trillion won in the second quarter of last year.
Kia Achieves Record Performance for Q2 Despite Lower Sales from EV9 Launch
Kia's achievement of record quarterly performance is largely attributed to strong sales in North America, particularly in the United States. Although overall sales volume decreased compared to last year, the increase in hybrid vehicle sales and the focus on high-value models, such as sports utility vehicles (SUV), have contributed to the growth in performance, similar to Hyundai, which achieved record performance. Notably, even amid a global electric vehicle chasm, the launch of the EV9, a large electric SUV, has helped boost electric vehicle sales by over 20%, serving as a significant positive factor.
A Kia representative stated, "The continued expansion of profitability is due to sales focused on high-profit vehicles, strong performance in advanced markets such as the U.S., improvements in our vehicle mix, low incentives, and favorable exchange rate effects."
Eco-friendly Vehicle Sales Reach 162,000 Units, Up 8.3% Year-on-Year
Kia's sales of eco-friendly vehicles in the second quarter increased by 8.3% year-on-year, reaching 162,000 units, despite a slowdown in global electric vehicle growth. This growth was driven by the new launch of EV9 and the continued expansion of hybrid model sales. The proportion of eco-friendly vehicle sales in total sales also rose by 2.5 % to 21.4%. By vehicle types, sales included 89,000 hybrids, 20,000 plug-in hybrids, and 54,000 electric vehicles.
2. Luxury Electric Vehicle Arrives in Korea: Mercedes-Maybach EQS SUV Launched
- Maybach's first electric vehicle focused on high-level luxury and comfort
- Limited edition “Night Series” showcased with two-tone color combination
The first electric vehicle of Mercedes-Benz's top-tier Maybach brand has officially arrived in South Korea. Mercedes-Benz Korea unveiled the "Mercedes-Maybach EQS SUV," marking the brand's first electrified model.
For over a decade, Mercedes-Benz has maintained its position as the top-selling imported car brand in South Korea, with the S-Class and Maybach models being particularly popular.
As of last year, South Korea ranked as the fourth largest market for Mercedes-Benz, but it stands as the second largest market specifically for Maybach vehicles.
Recognizing the importance of the South Korean market, Daniel Lescow, Head of Mercedes-Maybach at Mercedes-Benz Group AG, attended the event. Additionally, Mathias Vaitl, CEO of Mercedes-Benz Korea, and Kilian Thelen, Vice President, took part in the presentation.
The Maybach EQS SUV, which was first unveiled at the Shanghai Motor Show last year, aims for "Sophisticated Luxury" and has expressed its ambition to set new standards for premium electric vehicles.
The vehicle features the signature design elements of Mercedes-Benz electric cars, along with the Maybach brand emblem and lettering.
In the rear seats, amenities such as ventilation, massage, and heating functions are included, along with executive seats that can recline up to 43.5 degrees. Additionally, the Chauffeur Package allows for calf massages and the adjustment of the front passenger seat. Mercedes-Benz Korea described these features as comparable to those found in first-class airline cabins.
Additionally, two 11.6-inch HD touchscreen displays and a 7-inch MBUX tablet are positioned separately from the front seats. The vehicle is also equipped with the MBUX Interior Assistant, which allows for control via simple hand gestures.
3. Hyundai Motor Secures Dominance in Indonesia's Electric Vehicle Charging Market with Local Alliance of Six Companies"
Hyundai Motor announced that it has established the "Hyundai EV Charging Alliance" in collaboration with six local private charging operators at the " Gaikindo Indonesia International Auto Show 2024."
This Alliance allows Hyundai Motor's electric vehicle (EV) customers to easily access charging facilities from partner companies without the need for separate membership registration or payment method setup through the "MyHyundai" app.
Hyundai is the first to introduce a roaming system in Indonesia that allows users to freely use and pay for charging facilities from multiple operators through a single app.
The seven companies involved in the alliance operate a total of 696 EV charging infrastructures at 429 locations across Indonesia, accounting for approximately 97% of the country's private EV chargers.
Additionally, Hyundai will launch an "EV Charging Service Program" that provides new EV customers with 50 kWh of charging monthly for one year at charging stations belonging to members of the Hyundai EV Charging Alliance.
An official of Hyundai stated, "We signed a business agreement to provide the most convenient charging services for our EV customers," He added, "As a leader in Indonesia's electric vehicle market, Hyundai is committed to ensuring that customers have convenient access to products, services, and infrastructure."
Meanwhile, securing electric vehicle charging infrastructure has been a long-standing goal for automakers that sell electric vehicles. Last year, in the United States, Tesla captured about two-thirds of the country's charging stations, leading Hyundai to establish a joint venture for electric vehicle charging with the seven-member alliance.
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KIPO-CNIPA civil servants joined hands to protect the intellectual property (IP) rights of Korean companies entering China (News Letter No. 534)
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Korean Industrial Insight No. 5 of AI, Semiconductors, Batteries and Electric vehicles in Chinese
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