Will domestic battery equipment, which has soared thanks to ‘IRA investment’, be able to keep up with the ‘hot pursuit’ of Chinese products?

Battery companies increase investment in North America through US IRA, equipment industry booming
Most companies’ performance is ‘green light’, expectations for this year’s performance are also high
Chinese equipment is gaining ground rapidly, but if you fail to differentiate yourself, you will be pushed out

It was confirmed that domestic battery equipment companies recorded remarkable growth last year, when a ‘cold spell’ hit the entire industry due to the economic downturn. On the 11th, financial information company FnGuide released an analysis showing that the majority of domestic battery equipment companies achieved their highest performance ever last year. While domestic battery companies’ investments in North America are rapidly increasing due to the influence of the U.S. Inflation Reduction Act (IRA), battery equipment companies are also seen to have enjoyed a benefit.

Performance of battery equipment companies last year showed continuous improvement

Domestic battery electrode and assembly companies recorded notable growth last year. Last year’s sales consensus (performance forecast) for electrode processing company ‘PNT’ reached 557.3 billion won. This is a 33% increase over the previous year and PNT’s highest annual sales. Last year’s sales of M Plus, an assembly process company, were estimated at around 300 billion won, about three times more than in 2022. Another assembly process company, Hana Technology, is expected to have sales of KRW 186.4 billion, up 63.7% from 2022.

Other equipment fields also showed marked growth. Apro, an activation process company, is estimated to have sales of 181.8 billion won last year. This is a sharp increase of about 129% compared to 2022. Last year’s sales of Cowin Tech, a logistics equipment manufacturer, are also expected to grow rapidly by 69.5% compared to the previous year (consensus of KRW 340.9 billion). SFA, which engages in a variety of businesses including secondary battery logistics equipment and electrode processing equipment, is estimated to have posted sales of KRW 1.7472 trillion last year.

While the majority of equipment companies are continuously breaking their maximum order backlogs, the industry is also placing high expectations on these companies’ performance this year. The analysis is that the balances that have not yet been reflected will drive performance improvement in earnest this year. In fact, in the case of CIS, an electrode processing company whose performance did not noticeably improve last year, its order backlog of over 800 billion won is expected to be reflected in sales from the second half of this year.

Accelerating growth by targeting overseas markets

What drove the performance increase of these companies was the expansion of investment by domestic battery manufacturers under the U.S. IRA. Domestic battery companies such as LG Energy Solution, SK On, and Samsung SDI have been scrambling to expand their investments in the U.S. market to benefit from IRA. Currently, Hyundai Motor Group is spending $5.5 billion (approximately KRW 7.2 trillion) to build an electric vehicle factory, Hyundai Motor Group Metaplant America (HMGMA), in Georgia, USA. LG Energy Solution is building a new joint venture plant with Hyundai Motor Company by jointly investing 5.7 trillion won to produce batteries to be supplied to local automobile factories in the United States such as HMGMA, Hyundai Motor Company, and Kia Motors.

SK On plans to invest a large amount of funds totaling 6.5 trillion won in the construction of a joint battery plant with Hyundai Motor Company. Samsung SDI is also investing approximately 12 trillion won in establishing a joint factory with Stellantis and GM. These battery companies are using IRA as an opportunity to enter the U.S. market in earnest and absorb local demand in earnest. They used IRA’s subsidy conditions, which state that ‘more than 50% of the parts must be manufactured and assembled in North America and key minerals and parts from China must not be used,’ as an opportunity to expand their business.

Domestic battery equipment is also standing out in the Japanese market. By outperforming Japanese and Chinese equipment companies in terms of performance and price competitiveness, they have succeeded in supplying Japanese battery cell manufacturers one after another. Numerous battery equipment companies, including △CIS, △PNT, △Inometry, △M Plus, and △Mintech, are exporting their products to local Japanese battery companies. As the use of Chinese equipment has been restricted due to the implementation of IRA, the industry is encouraged by the prediction that demand for domestically produced battery equipment in each country will increase further in the future.

Is competition with ‘Chinese products’ the key to growth ?

Despite the noticeable improvement in performance, the industry is raising concerns about the future prospects of these companies. This is because competition with the Chinese equipment market is becoming increasingly fierce. For example, Chinese battery equipment manufacturer Hang Kejji signed a contract for battery back-end process equipment worth $146 million (approximately KRW 180 billion) with Blue Oval SK, a SK On-Ford electric vehicle battery joint venture, early last year. He said he did.

Established in 2011, Hangkekeji is a company that focuses on activation equipment, which is the battery post-process. It has a history of supplying equipment to Chinese companies such as CATL, BYD, EVE Energy, and Guoxian, as well as global battery companies such as LG Energy Solution and Samsung SDI. They secured market influence with prices that are about 60% lower than those of Korean companies. Hang Ke Keji has now established Vitzro Co., Ltd. and HK Power and has penetrated the domestic market in earnest. In order to avoid the deepening conflict between the US and China, Korea was chosen as a kind of ‘export bypass’. By cooperating with Korean companies, equipment products can be recognized as Korean-made, making it easier to enter the European and North American markets.

Numerous Chinese equipment companies are establishing strategies to ‘enter Korea’ like Hang Ke Keji. China’s largest battery equipment company ‘Sundo Intelligent Equipment’, which manufactures all the equipment needed for battery manufacturing, including electrodes, assembly, and chemistry, has established a branch in Korea and is competing directly with domestic equipment companies. Another Chinese equipment company, Yinghe Keji and Lyric Robot, also established branches in Korea or formed joint ventures with domestic companies.

In this way, if companies backed by the support of the Chinese government use price competitiveness as a weapon to secure market share, the landscape of the domestic equipment industry could change in an instant. This means that if there is a failure to differentiate in this way, there is a risk that the current rapid growth will be halted in an instant. How far can the breathtaking ‘golden age’ of the battery equipment industry continue?