Samsung SDI posts its strongest results in three years as SK On continues improving underlying profitability
Surging AI data center electricity demand and restrictions on China emerge as new opportunities for South Korean batteries
South Korea’s three battery makers, LG Energy Solution, Samsung SDI and SK On, showed a recovery in third-quarter performance and improvements in their business fundamentals, supported by growth in energy storage system (ESS) demand and the restructuring of North American supply chains away from China. Surging electricity demand from the expansion of artificial intelligence (AI) data centers and tighter US restrictions on China appear to be creating new opportunities for South Korea’s battery industry.
Samsung SDI announced on October 29 that its consolidated third-quarter revenue this year was 4.6856 trillion won, with operating profit of 407.8 billion won. Revenue increased 52.6% from 3.0714 trillion won a year earlier and 20.9% from 3.8765 trillion won in the preceding quarter. Operating profit reversed an operating loss of 591.3 billion won a year earlier and was about twice the preceding quarter’s 203.8 billion won, marking its strongest performance in three years, since operating profit of 496 billion won in the third quarter of 2023.
The battery business was the main contributor to the improvement. Battery revenue surged 55.3% year on year to 4.4099 trillion won, while operating profit returned to positive territory at 361.9 billion won. The improvement is attributed to sharply higher ESS and battery backup unit (BBU) sales as the global AI data center market grew, alongside recovering demand for cylindrical batteries for power tools and electric vehicles.
Samsung SDI strengthened its position in the North American ESS market, securing orders exceeding 60 GWh this year alone. It is using its Synergy Cells plant in Indiana as an ESS production base and also began mass production of high-capacity prismatic lithium iron phosphate (LFP) cells at its US StarPlus Energy (SPE) plant in October.
Cho Yong-hwi, executive vice president and head of Samsung SDI’s ESS business team, said during the conference call that day: “The orders we have secured are sufficient to keep our plants running at full capacity through 2028. We are now securing orders for 2029 and beyond.” The company plans to maintain profitability in the fourth quarter by accelerating the conversion of US production lines to LFP and finalizing long-term supply contracts for utility-scale ESS and uninterruptible power supply (UPS) applications before the end of the year.
SK On reported third-quarter revenue of 1.5263 trillion won and an operating loss of 80.5 billion won. It returned to a modest loss as the one-time compensation benefit recognized in the preceding quarter fell away, although its underlying profitability is assessed to have continued improving.
SK On is seeking opportunities in changes to the North American ESS market. During its October 29 conference call, SK On said: “Since tighter restrictions on China and the shift in supply chains, inquiries about securing non-Chinese cells have indeed increased significantly, particularly from US ESS developers and system integrators that previously used Chinese cells. Uncertainty over tariffs and procurement regulations is prompting local customers to reassess project cost competitiveness and eligibility for tax benefits.”
In response, SK On is pursuing a strategy of converting existing electric vehicle (EV) lines to ESS production rather than adding new capacity, to maximize investment efficiency. The company said: “In the short term, we are giving priority consideration to converting and using existing EV production lines for ESS rather than adding new capacity. In the long term, we plan to respond proactively, taking order volumes and market conditions into account.”
LG Energy Solution also delivered an earnings surprise in its previously announced preliminary third-quarter results.
LG Energy Solution’s preliminary third-quarter revenue was 9.6434 trillion won and operating profit was 756 billion won, up 59.0% and 25.7%, respectively, year on year, setting new quarterly records. Compared with the preceding quarter, revenue rose 27.6% and operating profit increased 567.3%.
Even excluding 416.9 billion won in Advanced Manufacturing Production Credit (AMPC) benefits under the US Inflation Reduction Act (IRA), operating profit amounted to 339.1 billion won. The company attributed revenue growth to expanded North American ESS production, increased EV battery shipments to Europe and operations at its US joint-venture plants with General Motors (GM) and Hyundai Motor.
Original Korean article: Electric Times
English brief by Korea Wind Intelligence, koreawindintel.com
