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Korean Industrial Insight No. 6 of AI, Semiconductors, Batteries and Electric vehicles |
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2024-11-04 |
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Ⅰ. AI INDUSTRY TRENDS
1.The Personal Information Protection Commission Establishes Guidelines for Visual Data Capture by Autonomous Vehicles and AI Robots
To utilize data obtained from mobile image information processing devices, such as cameras on autonomous vehicles and delivery robots, for the development of artificial intelligence (AI), it is essential to clearly indicate the facts and specifics of the recording on the exterior of the device.
The Personal Information Protection Commission (PIPC) has announced the release of a guide titled "Guidelines for the Protection and Use of Personal Visual Information for Mobile Image Information Processing Devices" to assist AI companies in handling personal visual information.
The guideline includes specific application standards based on the provision regarding mobile image information processing devices, which was newly established in the Personal Information Protection Act in September of last year (Article 25-2), as well as cases of inquiries from the industry.
Visual data captured in public spaces such as roads and parks using mobile image information processing devices are essential for the development of autonomous AI. However, these visual data often contain identifiable information, such as facial images, which necessitates the establishment of clear usage guidelines. In response, the PIPC has formed a research group since March, comprising members from academia, the legal sector, and industry. This group has developed guidelines based on eight fundamental principles: proportionality, legality, transparency, safety, accountability, purpose limitation, protection of control rights, and privacy protection.
The guidelines incorporate essential details for relevant businesses and product・service developers, including a standardized method for indicating recording activity for each type of mobile image information processing device, criteria for assessing potential infringements of rights, and measures that must be taken to protect the rights of data subjects.
For instance, autonomous vehicles must indicate recording facts on their external front and both side panels, while robots should display this information on their front, rear, or side. Body cameras need to show this information through text or images on the device itself (including lights and sounds) and the operator's attire.
It is essential to show that the recording is in progress and to identify the recording entity. Additionally, it is recommended to provide a website address related to video processing, including a QR code. In the case of drones, it is required to announce recording activities on the PIPC’s website and provide additional notifications based on operational circumstances. Information regarding the recording entity, purpose, location, duration, and contact details of the person in charge must also be included.
In cases where videos featuring unspecified individuals captured by autonomous vehicles or delivery robots in public spaces are used for AI training, it is required to anonymize the footage, such as by face-masking, to ensure that specific individuals cannot be identified. However, if the use of original footage is unavoidable for achieving research objectives, it may be permissible to utilize the original videos for the development of autonomous AI, provided that all safety measures outlined by the PIPC are adhered to under the regulatory sandbox (regulatory exemption system) special system.
The guidelines address essential measures for the secure storage and management of personal visual information, detailed safety protocols to prevent data breaches or damage, as well as the methods and procedures for exercising the rights of data subjects. In cases where external contractors are involved in handling personal visual information, the guidelines emphasize the importance of designating a responsible person and conducting regular inspections・training to ensure that personal visual information is managed safely within the necessary scope for achieving business objectives.
The PIPC plans to continuously improve and enhance the guidelines in response to changes in relevant laws and the advancement of AI technologies. The Director of the PIPC’s Personal Information Policy Bureau stated, "We hope that developers of mobile image information processing device products and services will reference these guidelines to promote the safe industrial use of personal visual information while being mindful to prevent any infringement of data subject rights. This will help secure consumer trust and strengthen global competitiveness."
2. Telecom Giants Set AI Goals, Strengthen Collaboration with Global Tech Firms
- KT partners with MS to develop Korean AI model by next year
- SKT Unveils “AI Pyramid Strategy”
- LGU+ to Launch AI Assiant “ixi-O”
The three major telecom companies are targeting artificial intelligence (AI) as a new growth engine and are actively expanding their businesses in this area. To enhance their competitiveness, they are adopting strategies that involve partnerships with global tech giants to secure advanced technologies.
On the 27th of last month, KT entered into a strategic partnership agreement with Microsoft to collaborate in the fields of AI, cloud, and information technology (IT). They are currently working on commercialization efforts, planning to jointly invest 2.4 trillion won over the next five years to develop Korea-customized AI models and services, create Korean cloud services, and establish AX-specialized service company.
The first project between the two companies focuses on developing a Korea-customized AI. In the first half of next year, they plan to create a Korea-customized AI model based on GPT-4o and introduce industry-specific products based on Microsoft's small language model (SLM) Phi-3.5. The goal is to optimize data, laws, regulations, culture, and language to suit the domestic context, providing services that can be widely utilized by local businesses. Half of the 2.4 trillion won investment will be allocated to infrastructure, while the remainder will be invested in research and development (R&D) for Korea-customized AI development. The hyperscale AI model ‘Mi:dm,' developed last year, aims to enhance its focus on supplying customized SLMs for enterprises.
In the first quarter of next year, KT is to create a new company specializing in AX (AI conversion), composed of experts in AI and cloud sectors. It will primarily provide consulting, architecture, and design services related to AX for businesses, actively targeting the early stages of the domestic market. Additionally, in the first quarter of next year, KT and Microsoft will jointly develop cloud services for the public and financial sectors, considering domestic regulations and security environments. The aim is to strengthen B2B operations by supporting companies and institutions in establishing a stable cloud environment.
SK Telecom has set its vision as a "Global AI Company" and is implementing an "AI Pyramid Strategy" to strengthen three key areas: AI semiconductors, AI infrastructure, and AI services. In addition to developing its own large language model (LLM), "A.X," the company is collaborating with OpenAI and Anthrophic to prepare a telecom-exclusive LLM. Furthermore, SK Telecom has invested $10 million (approximately KRW 13.5 billion) in the promising generative AI search company, Perplexity, and is pursuing business collaboration.
LG Uplus is set to officially unveil its AI personal assistant service, "ixi-O," soon. It was developed based on “ixi-Gen,” specifically tailored for the telecommunications sector, trained with its LG Group's hyperscale AI, "Exaone." The service prominently features AI-powered call recording, which not only records and summarizes call content but also includes functionalities for filtering spam calls and telephone scam attempts. In the B2C sector, the company plans to focus on AI agents, while in the B2B sector, it aims to commercialize AI Contact Centers (AICC). LG Uplus CEO Hyeon Sik Hwang has also been in discussions for collaboration with major firms such as Amazon Web Services, Google, and Meta in Silicon Valley this year.
3. Education Minister Announces Plans to Adjust Subjects for AI Digital Textbooks Post-2026
On October 24th, Deputy Prime Minister and Minister of Education Lee Ju-Ho stated, "We will develop a revised plan to the subjects for the introduction of AI digital textbooks after 2026, following expert reviews and consultations with the provincial education offices."
His comments came during the National Assembly Education Committee audit, in response to concerns raised by Rep. Kim Dae-sik of the People Power Party regarding the AI digital textbooks set to be implemented in schools next year.
The Ministry of Education previously announced a phased implementation of AI digital textbooks next year, starting with grades 3 and 4 in elementary school, grade 1 in middle school, and grade 1 in high school. By early 2026, the plan includes grades 5 and 6, and grade 2 in middle school, with grade 3 in middle school set for 2027.
By subjects, AI digital textbooks are planned to be introduced for mathematics, English, and information in 2025; Korean language, social studies, science, and home economics in 2026; history in 2027; and Korean language, integrated social studies, Korean history, and integrated science for high school in 2028.
Some school superintendents believe that the introduction of AI digital textbooks should be approached with caution due to concerns from parents and teachers regarding students' excessive use of digital devices, as well as budgetary issues.
In this regard, the Deputy Minister stated, "We will provide sufficient information about AI digital textbooks, and enhance our communication in the field to alleviate the concerns of teachers and parents."
He further added, "To ensure a stable implementation, we will closely examine financial support, privacy protection, and teacher training."
The Deputy Minister announced that the AI digital textbooks will be implemented next year as scheduled.
He noted, "The publishers for English, mathematics, and information subjects will be confirmed by the end of November through the inspection and approval system, and there will be no changes to this." He emphasized, "The effectiveness of digital textbooks in English, mathematics, and information has already been validated globally, and I am confident that we can implement them without any issues next year."
However, he also added, "There are many proposals regarding adjustments to the number of subjects or the methods of implementation for AI digital textbooks after 2026, and some of these proposals are quite reasonable. We are keeping our options open and refining our plans accordingly."
Ⅱ. SEMICONDUCTOR INDUSTRY TRENDS
1. SK Hynix Surpasses Samsung Semiconductor in Operating Profit
- Record quarterly performance driven by HBM. Steady AI demand despite legacy memory struggles
- "Team NVIDIA": Hynix and TSMC Thrive While Samsung Faces Relative Weakness
Amid the surge of artificial intelligence (AI), the semiconductor market is experiencing notable performance polarization, with SK Hynix achieving its highest-ever results in the third quarter of this year.
SK Hynix has strategically aligned itself with NVIDIA's supply chain, which leads the AI chip ecosystem, thereby maintaining its technological leadership and reaping significant benefits from the ongoing AI boom.
◇ SK Hynix's operating profit exceeds 7 trillion won, while Samsung DS estimated around 4 trillion won
On the 24th, SK Hynix reported a preliminary consolidated operating profit of 7.03 trillion won for the third quarter, marking a 28.6% increase from the previous quarter's 5.4685 trillion won.
The operating profit significantly exceeded the market forecast of around 6.8 trillion won, setting a new record for quarterly performance.
Notably, this operating profit likely surpassed that of competitor Samsung Electronics' Device Solutions (DS) division, the world's leading memory manufacturer.
This marks the second time in which SK Hynix's operating profit has surpassed that of Samsung Electronics' DS division, following the first quarter of this year, where SK Hynix reported 2.886 trillion won and Samsung Electronics reported 1.910 trillion won.
For the third quarter, Samsung's preliminary operating profit is estimated at 9.1 trillion won, with analysts projecting that the DS division's operating profit has declined to around 4 trillion won, down more than 1 trillion won from the previous quarter's 6.45 trillion won.
SK Hynix explained its strong performance by stating, "Sales have increased, driven by high-value, high-margin products, resulting in average selling prices (ASP) for both DRAM and NAND rising by mid-10% range compared to the previous quarter, leading to record operating profit."
Due to the prolonged global economic downturn, the recovery of demand in information technology (IT) sectors such as smartphones and PCs has been delayed, leading to a recent decline in legacy memory prices.
Despite this market slowdown, SK Hynix has managed to differentiate its profitability and defend its performance by taking a leading position in high-performance DRAM, specifically High Bandwidth Memory (HBM), which is experiencing a surge in demand driven by the AI boom.
SK Hynix has solidified its position as a leader in HBM by virtually monopolizing the supply of HBM used in NVIDIA's graphics processing unit (GPU) for AI training and inference.
Following its industry-first delivery of the HBM fifth generation, 8-layer HBM3E in March, the company has recently commenced mass production of the world’s first 12-layer HBM3E product, planning to supply.
Lee Euijin, an analyst at Heungkuk Securities, stated, "While demand for HBM, DDR, and LPDDR5 in DRAM remains robust, B2C demand and general server demand are currently weak. SK Hynix is experiencing an upcycle driven by ASP as AI-centered high-value demand continues to grow, which is confirmed each quarter."
He further projected that "SK Hynix has a lower exposure to market downturns due to its high proportion of DDR5 and HBM products, and starting in the fourth quarter, the performance of 12-layer HBM3E product will be reflected."
◇ The AI wave widens the polarization of the semiconductor industry
As evidenced by SK Hynix's strong performance, recent performances of the global semiconductor sector are largely influenced by AI.
The key is whether the company has joined the supply chain of NVIDIA, which currently dominates the demand for AI chips.
Taiwan's TSMC, the world's leading foundry company that virtually monopolizes the production of NVIDIA's AI chips, also achieved record results in the third quarter.
TSMC's 3Q net profit reached NT $325.26 billion Taiwanese dollars (approximately 13.8 trillion won), 54.2% surge from the same period last year, exceeding market expectations of NT $ 300 billion.
In the earnings conference call, TSMC CEO C.C. Wei emphasized that "The demand for AI is real," stating, "We have continuously observed strong AI demand from our customers throughout the second half of this year."
On the other hand, as semiconductor demand shifts toward AI and the existing IT demand downturn prolongs, companies that have missed to take the lead in AI semiconductors are struggling to stand out.
A notable example is Samsung Electronics, which mostly concentrates on legacy DRAM, where demand is declining, and has ceded leadership in the rapidly growing HBM market to SK Hynix, becoming a latecomer in this segment.
Its Q3 performance also fell short of expectations. In the memory segment, HBM has not yet constituted a significant portion of its portfolio, preventing a meaningful rebound in performance.
Due to sluggish smartphone and PC sales, the inventory levels of memory module companies have increased to 12 to 16 weeks, leading to lower-than-expected growth in memory shipments and price increases.
As a latecomer, Samsung Electronics is aggressively focusing on the development and commercialization of HBM technology. However, it has not yet entered NVIDIA's supply chain.
Currently, Samsung is conducting qualification tests for its 8-layer HBM3E and 12-layer products to supply to NVIDIA, but the testing process is taking longer than expected.
In an unusual move, Samsung Electronics provided explanation materials along with its preliminary earnings announcement, stating, "In the case of HBM3E, the commercialization for key customers has been delayed compared to expectations."
Furthermore, Samsung Electronics is experiencing prolonged performance issues in its foundry division, where it competes directly with TSMC.
Samsung's non-memory division, including foundry and system LSI, is estimated to have incurred losses exceeding 1 trillion won in the third quarter due to poor order intake and low utilization.
2. Semiconductor Exhibition 2024
The 26th Semiconductor Exhibition (SEDEX 2024), showcasing AI semiconductors and cutting-edge packaging technology, took place from Oct. 23-25 at COEX in Gangnam-gu, Seoul.
The Korea Semiconductor Industry Association announced on Oct. 22 that this year’s event will feature 700 booths from 280 companies, including leading domestic semiconductor manufacturers such as Samsung Electronics and SK Hynix, as well as companies related to semiconductor design, materials, parts, and equipment that make up the domestic semiconductor ecosystem.
The exhibition will include a variety of lectures and seminars designed to provide an overview of the latest technology trends.
SK Vice President Lee Kang-wook will deliver a keynote speech on “The Role of Semiconductor Packaging in the AI Era,” while Park Kwang-sun, CEO of Applied Materials Korea (AMK), the global leader in semiconductor and display materials, will present on “The Future of the Semiconductor Industry, Energy-efficient Computing, and Accelerating Innovation.”
An exhibition has been organized where visitors can directly check the technological capabilities of leading domestic semiconductor companies.
Samsung Electronics is set to unveil memory and storage solutions that will lead the AI era, including HBM3E, LPDDR5X, and CMM-D/H, as well as a range of cutting-edge technologies including ISOCELL flagship image sensors and foundry AI turnkey solutions.
SK Hynix plans to exhibit next-generation AI memory products, including 12- layer HBM3E, CMM-DDR5, and GDDR6-AiM, along with the latest server DDR5 and eSSD. Also, a separate zone will be set up to introduce the future of the Yongin Semiconductor Cluster, which aims to realize SK Hynix’s AI vision.
Leading domestic equipment companies, including Wonik IPS, PSK, Exicon, and Jusung Engineering, are participating. Dongjin Semichem and FST, advanced semiconductor suppliers, have also set up booths. Visitors will have the opportunity to meet various key players in the semiconductor ecosystem, such as key material companies like Miko and KSM.
In addition to the exhibitions, various semiconductor-related events will be held, including the "Semiconductor Market Outlook Seminar," which will review the semiconductor market and technology as well as the semiconductor policies of major countries. There will also be a "Semiconductor Industry-Academia-Research Exchange Workshop" focusing on the latest trends in semiconductor design and foundry technology, including AI semiconductors, memory, and packaging technology advancements.
Additionally, a job fair featuring over 20 domestic semiconductor-related companies will be held from the 24th to 25th, in line with the fall recruitment season.
The 19th annual Semiconductor Scholarship Award Ceremony will also be held. Both large corporations, such as Samsung Electronics and SK Hynix, as well as domestic SMEs will participate to provide scholarships of 10 million won per person to 19 students majoring in semiconductor-related science and engineering fields.
3. Samsung Electronics Semiconductor Division Signals Major Restructuring
- Vice Chairman Jun Young-hyun takes action on underperforming divisions
- Following apology, company begins restructuring with exit from LED business
- Organizational changes expected as overstaffed executive team faces cuts
Samsung Electronics has recently halted construction and equipment orders for its P4 and P5 factories at the Pyeongtaek campus, and has decided to withdraw from the non-core business, light-emitting diodes (LEDs). Industry analysts speculate that Vice Chairman Jun Young-hyun, head of Samsung's Device Solutions division, has initiated organizational restructuring and downsizing in response to the performance shock reported in the third quarter of this year.
According to industry on the 11th, Samsung Electronics' DS division is in the process of restructuring its LED business team. A company representative refrained from providing specific details but confirmed, "We will no longer pursue this business." The LED team has been involved in the production of LED for TVs, camera flashes, and automotive headlights. Personnel from the LED business team will be reassigned to areas such as power semiconductors, micro LED, memory, and foundry.
◇ Restructuring hits LED business following foundry
On the 8th, Vice Chairman Jun issued an apology alongside the announcement of Samsung Electronics' third-quarter preliminary results. He stated, "Entire responsibility lies on us leading the business, and we will come to the fore to overcome the challenges." This marks the first instance of Samsung's leadership releasing a separate message in relation to the performance announcement.
The decision to withdraw from the LED business immediately following the apology statement indicates that Vice Chairman Jun is beginning to implement significant changes across all business divisions. As he stepped in as a “rescuer” for Samsung's struggling semiconductor sector, he is reportedly reviewing measures such as reducing over-investment and improving operational efficiency across all divisions since his appointment.
The foundry division, which has been unable to overcome the cycle of losses, has become the primary target of this initiative. Elevated to a standalone division in 2017, the foundry unit has made significant investments with the ambition to surpass Taiwan's TSMC. It has rapidly expanded its production lines by implementing extreme ultraviolet (EUV) lithography equipment, with a unit price reaching up to 200 billion won.
Ultimately, these investments have proven to be unsuccessful. Following the 5-nanometer and 4-nanometer processes, the eagerly anticipated 3-nanometer gate-all-around (GAA) process also fell short, failing to attract major clients and losing ground to TSMC. Consequently, foundry factory utilization began to decline consistently, with losses escalating into the trillions of won each quarter.
Recently, Samsung Electronics has reportedly shut down approximately 30% of the equipment on its 4nm, 5nm, and 7nm foundry lines at the P2 and P3 factories in the Pyeongtaek campus. Additionally, the acquisition of equipment for the P4 and P5 factories, which were under construction, has been postponed, effectively halting any further capital investment in new facilities.
Industry analysts suggest that Vice Chairman Jun Young-hyun is systematically restructuring underperforming business units one by one.
As a result, both the System LSI division and the Memory division, which is crucial for revenue, are likely to undergo organizational changes. There is a strong possibility that the R&D teams and marketing organizations central to the DRAM segment will be restructured. Additionally, changes may also be implemented in the development processes and personnel for High Bandwidth Memory (HBM), in which Samsung has fallen behind SK Hynix.
◇ Restructuring Signals: Potential Cuts to Overstaffed Executive Team
Given the disappointing third-quarter performance result, there is a high possibility that organizational restructuring and downsizing will be implemented. Major international media outlets have reported that Samsung Electronics is laying off employees in Southeast Asia, Australia, and New Zealand as part of a plan to reduce its global workforce by thousands.
Samsung Electronics has recently reduced its workforce by 10% in certain regions of India and South America, indicating the possibility of further cuts amounting to less than 10% of its total overseas workforce of approximately 147,000 employees. Additionally, another media report stated that Samsung has instructed its global subsidiaries to reduce sales and marketing staff by 15% and administrative personnel by up to 30%.
An official related to Samsung Electronics stated, "The semiconductor sector unexpectedly entered a supercycle in 2018, achieving record-high performance, which led to a missed opportunity for workforce adjustments and organizational restructuring." He added, "As a result, we are experiencing an overabundance of executives that hinder flexible organizational operations." In fact, the number of promoted executives at Samsung Electronics in 2018 reached 221, a significant increase from the 96 in the previous year.
A major organizational restructuring is anticipated in the year-end personnel changes. Vice Chairman Jun, who was appointed in May, has already implemented some restructuring by moving the R&D divisions for memory chips, such as DRAM and NAND flash, under the development office of the business unit. To enhance inter-departmental collaboration within the DS division, he is expected to integrate existing teams into a project-based structure, addressing issues arising from the previously fragmented departmental operations.
Ⅲ. BATTERY INDUSTRY TREND
1. U.S. Finalizes IRA Details: Benefits Batteries and Battery Materials
The United States has finalized the details of the Inflation Reduction Act (IRA) set to take effect on December 27. Compared to the provisional guidance, tax credit benefits for batteries and battery materials are expected to increase.
According to the Ministry of Trade, Industry and Energy, the U.S. Treasury Department announced the final guidance for the Advanced Manufacturing Production Tax Credit (45X) on the 24th (local time). This follows the release of provisional guidance last December, marking a 10-month interval.
This program provides tax credits for products manufactured and sold within the United States using advanced manufacturing technologies. It applies to products that are completed and sold after December 31, 2022, and is set to take effect on December 27.
The tax credit provisions will be applicable from last year until 2032, incentivizing items such as battery components, solar and wind energy, and critical minerals.
Similar to provisional guidance, the tax credit includes $35 per kWh for secondary battery cells and $10 per kWh for modules.
Additionally, solar modules, cells, wafers, and polysilicon are eligible for tax credits of 7 cents per W, 4 cents per W, $12 per ㎡, and $3 per kg, respectively. Wind power blades and towers can receive tax credits of 2 cents per W and 3 cents per W, respectively.
Critical minerals used as raw materials for batteries will receive tax credits covering 10% of total production costs, including labor costs, electricity costs, storage costs, direct and indirect material costs, and raw material extraction costs.
The Ministry of Trade, Industry and Energy of South Korea highlighted that the final guidance has somewhat eased the requirements for battery companies to receive the module tax credit ($10 per kWh). This adjustment expanded the scope of tax credit recipients.
Moreover, for battery materials (active electrode materials) and critical minerals, the final guidance states that direct and indirect material costs, as well as raw material extraction costs, will be included in production costs, provided that benefits do not overlap. Domestic battery material companies are also expected to benefit from this announcement.
Furthermore, as long as there is no overlap in benefits for battery materials (electrode active materials) and critical minerals, the direct and indirect material costs and raw material extraction costs, will be included to production costs. It is anticipated to further benefit South Korean battery material companies.
The Ministry of Trade, Industry and Energy plans to hold a meeting with the battery industry today to review the impact of this guidance on the industry and to discuss response measures in preparation for the global trade environment.
The Minister of Trade, Industry and Energy stated, "With the finalization of the Advanced Manufacturing Production Tax Credit guidance following the commercial electric vehicle (including lease and rent cars) and eco-friendly vehicle tax credit guidance, additional institutional measures have been added to benefit our industry from the IRA tax credits." He emphasized that this is the result of close communication with the industry and multiple discussions with the U.S. government over the past two years to maximize our companies' benefits and ensure stable operations.
2. SK On Tops South Korea's EV Battery Market with 50.6% Share
- Ministry of Land, Infrastructure and Transport reveals registration numbers by battery manufacturer for the first time
- LG Energy Solution takes second place with 20.1% share, Korean firms capture 78% of market
- Chinese company CATL, Japanese company Panasonic, and Samsung SDI Rank Third to Fifth
- Chinese Company Farasis Holds 0.7% After Incheon Fire Incident
SK On has emerged as the leading player in South Korea's electric vehicle (EV) battery market.
As of the 22nd, out of a total of 598,650 registered electric vehicles in the country, 50.6% (303,107 vehicles) are equipped with SK On batteries, surpassing the majority share. This is the first time the Ministry of Land, Infrastructure and Transport has conducted a survey and publicly released data on the battery manufacturers and registration numbers of electric vehicles sold in the country.
LG Energy Solution ranked second with a market share of 20.1% (120,532 vehicles). Samsung SDI placed fifth with a share of 2.74% (16,381 vehicles). When combined, the batteries from domestic companies including SK On, LG Energy Solution, and Samsung SDI accounted for a total of 78.2% (467,849 vehicles) of the electric vehicles registered in South Korea.
Chinese company CATL secured the third position in the domestic market with a share of 15.21% (91,028 vehicles). Panasonic from Japan ranked fourth with a share of 3.97% (23,765 vehicles).
In total, the market share of Chinese battery manufacturers, including BYD at 1.0% (6,002 vehicles), amounted to 17.48% (104,654 vehicles). Japanese EV battery manufacturers accounted for 4.12% (24,674 vehicles), while the U.S. companies held 0.2% (1,199 vehicles) of the market.
Given the high market share of domestic battery manufacturers, the incidence of fire accidents has also been significant.
According to data from the Korea Transportation Safety Authority's Automotive Safety Research Institute, out of 139 EV fire incidents reported from 2018 to August of this year, 126 cases (90.6%) involved batteries produced by domestic companies. The Chinese company Farasis, which was linked to the recent fire incident involving a Mercedes-Benz electric vehicle in Incheon, holds a market share of 0.7% (4,274 vehicles) in South Korea.
3. LG Energy Solution Aims to Open Battery Subscription Economy, Plans to Double Revenue by 2028
- First corporate vision announcement since launch: CEO Kim Dong-myung shares long-term strategic plans
"We will no longer limit ourselves to manufacturing and selling batteries. Instead, we will leverage our battery diagnostics and management technologies to establish a battery subscription economy paradigm. Within the next five years, by 2028, we aim to more than double our revenue and achieve a mid-10% EBITDA margin, excluding the U.S. IRA tax credits, thereby securing stable profitability and cash generation capabilities.”
LG Energy Solution CEO Kim Dong-myung announced the company's vision and mid-to-long-term strategies at a vision sharing session for its members at LG Science Park in Magok, Seoul.
LG Energy Solution announced its new corporate vision, 'Empower Every Possibility,' for the first time since its official launch in 2020.
The session, which was broadcast online, saw participation from over 300 individuals, including CEO Kim Dong-myung, executives, and employees.
The meaning of this vision reflects that the essence of LG Energy Solution's business goes beyond merely manufacturing batteries. It encompasses the entire 'energy cycle' of storing and transferring energy. This statement signifies our commitment to unlock new business opportunities at the center of this energy ecosystem.
The company also emphasizes its ambition to evolve its business structure beyond hardware by expanding into software and service sectors, thereby building a sustainable energy ecosystem. This vision underscores the company’s commitment to leading the market as a “total solution provider”.
CEO Kim Dong-myung stated, “Our vision encapsulates the ultimate direction of LG Energy Solution, enabling sustained growth. The meaning of this vision is to awaken all latent potential with energy, expanding our business so that the company and its members can realize infinite growth possibilities." He further added, “Building on our success DNA, which has driven us to achieve remarkable results while embracing numerous possibilities, we will create more business opportunities and establish overwhelming technological leadership in the market.”
◇ The company has outlined four major mid-to-long-term strategies. Aims to more than double the company's revenue by 2028.
LG Energy Solution plans to more than double its sales compared to 2023 (33.7455 trillion won) by 2028. It has decided to achieve a 10% operating margin (EBITDA) before amortization to secure stable profitability and cash generation capabilities. This is excluding the U.S. IRA tax credit.
As part of its mid- to long-term strategy for achieving its goals, the company outlined several key initiatives: ▲Building a balanced business portfolio by expanding non-EV businesses such as energy storage systems (ESS) and urban air mobility (UAM) ▲Diversifying product and customer portfolios with lithium iron phosphate (LFP), high-voltage mid-nickel (Mid-Ni), and 46-series products ▲Securing a business foundation in software and services, including Battery-as-a-Service (BaaS) and Energy-as-a-Service (EaaS), and ▲Strengthening next-generation battery technology leadership with solid-state and dry electrode processes.
First, the company plans to actively expand its non-electric vehicle business to establish a balanced portfolio. This includes reducing reliance on the electric vehicle sector while continuously increasing the share of its ESS business. Additionally, the company aims to enhance its capabilities in new applications with high growth potential, such as urban air mobility (UAM), marine, and robotics. This strategy is designed to create a robust business structure that remains resilient to market fluctuations.
Secondly, the company will focus on diversifying its products and customer portfolio within the electric vehicle sector. Beyond premium batteries centered on high-nickel, the company aims to enhance its competitiveness in the mid- to low-cost market with offerings such as LFP, LMFP, and high-voltage mid-nickel batteries. In the cylindrical battery segment, the introduction of the 46-series will expand the customer portfolio to include traditional automakers, while also actively considering new form factors tailored to customer requirements.
Thirdly, the company plans to strengthen its revenue structure by expanding its software and service offerings. Building on its established leadership in BMS, the company will enhance its BaaS ecosystem to broaden service offerings such as battery leasing, rental, and recycling. Additionally, it aims to increase the share of its EaaS business, creating a business model that contributes to energy stabilization and the energy cycle as a total solution provider.
Lastly, the company is fully committed to securing leadership in next-generation battery technologies that will innovate the market. For solid-state batteries, it plans to lead the market with "no anode" products that exclude lithium anodes, as well as "graphite-based" anode products. The company also aims to accelerate the mass production of bipolar semi-solid batteries and low-cost, high-output products utilizing sulfur and sodium, as well as lightweight aviation products leveraging lithium metal. Additionally, it intends to achieve rapid cost competitiveness compared to competitors through its unique dry electrode manufacturing process, while also ensuring advantages in energy density and mass production capabilities.
◇ Detailed market strategies for each core business unit, such as automotive, small battery, and ESS were also announced
The company also presented detailed mid- to long-term market strategies for its core business units, including automotive, small battery, and ESS divisions.
The automotive battery division unveiled a growth roadmap with the goal of establishing a solid number one position in the North American market while strengthening its presence in the European market through enhanced fundamental competitiveness.
The Automotive Battery Business Unit plans to focus on overcoming the electric vehicle chasm by optimizing global production facilities by 2026. By 2028, the company aims to solidify its competitive edge in materials, processes, and products with high-voltage mid-nickel pouch products and LFP products utilizing dry electrode processes. By 2030, it plans to secure market leadership in the electric vehicle battery market with overwhelming technology and customized strategies for each region and customer.
The Small Battery Business Unit aims to firmly establish itself as the global market leader by 2028. For this, it plans to successfully mass-produce the 46-series optimized for mobility environments, to secure competitiveness across a variety of vehicle types. It will also actively pursue new customers in high-power products such as power tools, cleaners, and BBU (Battery Backup Units), as well as AI data servers. Additionally, the company plans to enhance cost competitiveness by securing new technologies and processes, while implementing a strategy to expand key global production sites to achieve logistical advantages.
The ESS Battery Business Unit also aims to achieve the No. 1 market share in the U.S. ESS battery market by 2028, and becoming a top 3 global ESS system integrator (SI), with a goal of achieving fivefold revenue growth.
The company aims to spearhead its entry into the North American market by starting full-scale production of ESS cells in the U.S. by 2025. This will be complemented by the launch of new high-capacity, long-life products and the enhancement of SI capabilities through LGES Vertech. In the long term, the company plans to accelerate the development of next-generation innovative products and establish a robust power trading business to proactively respond to rapidly changing market dynamics and secure high-margin businesses.
◇ Promoting four core values: Growth, Challenge, Action, and Collaboration
To achieve their vision and strategies, LG Energy Solution announced that it will actively promote four core values: Power of Growth, Power of Challenge, Power of Action, and Power of Collaboration.
The four core values emphasize that all members should realize their potential and grow alongside the company. They encourage us to "challenge" ourselves with goals that exceed customer expectations, to harness the "execution" power to achieve our objectives, and to foster "collaboration" to achieve our common goals together, rather than as individuals.
Ⅵ. ELECTRIC VEHICLE INDUSTRY TRENDS
1. Mercedes-Benz Surpasses 7,000 Free Inspections for Electric Vehicles, Prioritizing Customer Satisfaction
- 35% of total EV sales inspected
- Dedicated hotline and free pickup and delivery services offered
- Inspections available at 75 service centers nationwide
Mercedes-Benz Korea (hereinafter referred to as Benz Korea) is successfully implementing a large-scale complimentary inspection service for electric vehicle customers to ensure their peace of mind.
Starting from August 14, Benz Korea has been conducting free inspections for EVs at 75 official service centers nationwide. To this date, an average of approximately 172 vehicles (excluding weekends and holidays) have been inspected daily. The dedicated call center receives an average of over 122 inquiries per day.
Through the complimentary inspection service, Benz EV customers can receive a comprehensive diagnostic that includes ▲verification of physical damage to the battery ▲inspection of the Battery Management System (BMS) ▲assessment of the operational status of the battery's electrical components and any stored diagnostic codes.
To minimize any inconvenience for customers regarding vehicle inspections and maintenance, Benz Korea offers a wide range of services. A dedicated EV care hotline operates 24/7, allowing customers to make reservations quickly and conveniently at any time. Additionally, for the first appointment for a complimentary inspection, the company provides free vehicle pickup and delivery services.
Benz Korea is equipped with dedicated EV technicians and the latest specialized equipment at service centers nationwide, ensuring professional and reliable maintenance services. The company also runs the Automotive Electric Technician (AET) program to train specialized personnel in electric vehicle maintenance.
In addition, the Mercedes-Benz Training Academy in Yongin, South Korea, is being operated as the third facility of its kind globally, dedicated to training automotive professionals and enhancing service quality.
A representative from Benz Korea stated, "We plan to strengthen our leadership in the EV market while providing customers with an enhanced driving experience and differentiated services. We are committed to delivering top-tier service based on customer trust, while also offering environmentally friendly vehicles for a sustainable future."
2. Hyundai to Launch First China-exclusive EV Model Next Year
- Five models planned over next three years
- Development of strategic EV platform for China underway
- To be launched under 'Beijing Hyundai' brand
- Yang Feng, R&D Center Head, Emphasizes "Complete Localization"
Hyundai Motor Company is set to launch a customized electric vehicle aimed at China next year. This initiative aims to overcome challenges in the world's largest electric vehicle market by introducing locally tailored models.
According to Yang Feng on the 25th, Vice President of Hyundai Motor Group and the general manager of Hyundai China’s advanced tech R&D center, the electric vehicle will be released under the 'Beijing Hyundai' brand, with plans to introduce five models over the next three years.
Hyundai previously established a joint venture, 'Beijing Hyundai Motor Company,' with the state-owned Beijing Automotive Industry Holding Co. (BAIC).
The company has faced declining sales in China due to the impact of the 'Anti Korean Wave,' which began amid the THAAD controversy in 2016. Sales in China plummeted from 1.14 million units in 2016 to 260,000 units last year.
Hyundai is intensifying its localization efforts in response to Chinese consumers' preference for domestically produced electric vehicles.
As the world's largest EV market, China saw sales of 1.29 million electric vehicles last month alone, marking a 42% increase year-on-year. Notably, over half of all vehicles sold last month 51.8% were electric.
To enhance localization, Hyundai has elevated its Advanced Technology R&D Center in Shanghai to 'Hyundai Advanced Automotive Technology Development Co., Ltd.' this month. As this will be the company’s first EV dedicated to the Chinese market, Hyundai is committed to localizing the entire development and production process.
Hyundai plans to collaborate with local suppliers, including Thundersoft for infotainment systems and Jianzhi Robotics for autonomous driving components.
Established in 2021, the Advanced Technology R&D Center in China employs over 200 local research and development personnel who focus on areas such as autonomous driving and intelligent cockpit technologies.
3. Hyundai Motor Group Executive Chair Euisun Chung Emphasizes Commitment to Innovation and Sustainable Growth Amid Electric Vehicle Demand Slowdown
- Visits Hyundai’s Nošovice plant in the Czech Republic to encourage local employees and discuss key issues in European market
- Hyundai and Kia to response quickly and flexibly to changes in EV demand, exploring diverse growth solutions
"While we are facing challenges due to recent shifts in the electric vehicle market, our unwavering commitment to innovation and sustainable growth must be further strengthened."
Hyundai Motor Group announced on the 22nd that Chairman Euisun Chung made these remarks during his visit to the Hyundai Motor Czech plant in Nošovice, near Ostrava, on the 19th (local time).
On this day, Chairman Euisun Chung reviewed the status of European operations and explored future growth strategies, while also expressing gratitude to local employees over a shared meal.
Europe, being the second-largest EV market in the world, is facing increasing uncertainty due to recent adjustments in electrification efforts by major automotive companies, coupled with economic downturns in key countries such as Germany and the UK.
According to the European Automobile Manufacturers’ Association (ACEA), total vehicle sales reached 7,906,916 units from January to July this year, marking just 3.9% increase compared to 7,611,988 units during same period last year.
The slowdown in electric vehicle demand is even more noticeable.
From January to July this year, EV sales in Europe totaled 1,093,808 units, reflecting a mere 0.6% increase compared to 1,087,118 units in the same period last year.
Chairman Euisun Chung is closely monitoring the rapidly changing conditions in the European automotive market. During his visit to the Hyundai Motor Czech plant, the sole EV production facility for Hyundai Motor Group in Europe, he assessed key local business issues and sought new solutions for future growth.
He also toured the production lines at the Czech plant, which is accelerating the establishment of a smart manufacturing platform in preparation for the era of electrification, and took the opportunity to encourage the employees.
Chairman Chung expressed his gratitude for the dedication, expertise, and strong support of the Czech's staff, stating, "The Czech plant serves as a critical hub for our future investments in green mobility vision and technology. Despite uncertainties in the global market, it plays a vital role in the continued success of Hyundai Motor Group.”
In fact, the Hyundai Motor Czech plant is a symbolic overseas production hub for Hyundai Motor Group's strategy in the European market. It is recognized for making a positive impact locally through a variety of activities across economic, industrial, and social domains.
Hyundai Motor Group recently donated 10 million korunas (approximately 600 million won) to support recovery efforts following the flooding caused by Storm Boris in Central and Eastern Europe.
Chairman Chung stated, "We will continue to invest in quality and safety." He emphasized the importance of maintaining the Czech plant's excellent productivity and profitability through quality, service, and securing top talent.
He also urged, "While we are currently facing challenges due to shifts in the EV market, we must further strengthen our unwavering efforts to innovation and sustainable growth."
Hyundai Motor Group aims to solidify its position as a first mover in Europe, the world's largest eco-friendly vehicle market, by responding flexibly and agilely to changes in the automotive market environment. The group is determined to establish new pathways for future growth.
To achieve this, in terms of production and sales, Hyundai will implement flexible manufacturing and provide Europe-specific product mix that includes internal combustion engines, hybrids, and electric vehicles. This approach will allow the company to adapt to market conditions while simultaneously pursuing a long-term strategy to enhance its electrification capabilities.
For this, Hyundai will leverage the popular Tucson Hybrid as a leading competitive SUV hybrid model to fill the sales gap resulting from the slowdown in demand for EVs.
Additionally, the company will focus on restoring its leadership in EV with the second-generation Kona Electric produced at the Czech plant and the IONIQ 5, a flagship EV model exported from Korea. This strategy will be further supported by the launch of the Casper Electric (known locally as the INSTER) in Europe in the second half of this year.
Kia is enhancing its EV lineup by introducing an improved model of the EV6 and adding a more affordable trim of the EV9. Additionally, the company plans to launch the EV3, which is anticipated to drive the popularization of EV, in Europe this coming fall, marking its overseas debut.
It plans to respond flexibly to changes in demand within the European market by operating special editions of its core hybrid and plug-in hybrid models.
In preparation for the anticipated recovery of the European EV market, Hyundai will gradually increase local production of EVs in alignment with industrial demand, following its long-term roadmap. Meanwhile, Kia is accelerating the establishment of its local EV production at its Autoland Slovakia plant, aiming to start operation by the second half of 2025.
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KIPO published a 「countermeasure plan to technology leaks, to strengthen global industrial competitiveness.(News Letter No. 540)
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Korean Industrial Insight No. 8 of AI, Semiconductors, Batteries and Electric vehicles in Chinese
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