Why Are The Korean Battery Giants Fighting With Each Other?

- Sep 12, 2019-

The contradiction between the two major battery giants in Korea has further intensified.

Recently, SKInnovation (hereinafter referred to as "SKI"), a battery manufacturer under the Korean SK Group, said it plans to sue rival LG Chem in the US, accusing the latter of violating its electric vehicle patent. The new lawsuit filed by SKI was quickly condemned by LG Chem, saying the move was "unfounded" and said it would seek compensation. In fact, as early as April this year, LG Chem sued SKI in the United States, accusing it of stealing trade secrets through the way of LG Chemical employees. SKI denied it, and the two sides have followed suit.

Patent disputes start again

SKI said in a recent round of lawsuits that it is preparing to file a lawsuit against LG Chem Corporation and LG Chem USA Inc. through the US International Trade Commission (ITC), alleging that they infringe their lithium-ion battery patents. SKI also said it plans to file a US lawsuit against LG Electronics, another subsidiary of LG Group, accusing it of unauthorized use of SKI patents in electric vehicle battery production. Currently, LG Chem produces battery cells in Michigan, USA, and LG Electronics produces finished batteries in its vicinity.

"These litigations have nothing to do with LG Chem’s lawsuit against us for infringement of trade secrets. They are legitimate lawsuits that protect our intellectual property rights," said Yin Yongyuan, president of SKI Battery Business. SKI declined to give more details, including when to file a lawsuit, but said it would take immediate action. SKI said that a large number of battery products of LG Chem may be affected; if it wins, LG Chem will be banned from selling these products. In addition, SKI said it will disclose the details of LG's chemical infringement after filing a lawsuit and is willing to negotiate with LG Chem outside the court to resolve the issue.

In response, LG Chem quickly responded by saying that these lawsuits were “unfounded”, “very regrettable” and “not necessary”. LG Chem said in a statement: "If competitors admit their mistakes, sincerely apologize, and promise that such incidents will not happen again, we will agree to a dialogue when they are willing to seriously discuss compensation issues."

Digging angle? Business stealing?

This is not the first round of fighting between the two sides. As early as December 2017, LG Chem sued SKI in South Korea and asked the court to support the request to limit the departure of five core R&D personnel of the company. The Supreme Court of Korea finally supported the request of LG Chem and requested 5 staff members within 2 years. Do not leave.

At the end of April this year, LG Chemical filed a lawsuit in the US ITC and Delaware courts alleging that SKI had stolen its trade secrets. LG Chem mentioned in the indictment that in the past two years, SKI has digged 76 core R&D talents from the LG Chem industry, covering almost all areas of battery business such as R&D, production, quality control, etc. SKI requires these personnel to The core engineering and technical documents were submitted during the transfer, and the SKI violated the “business ethics”. After these personnel entered the company, they downloaded the core files they held at a high frequency.

"This litigation is an inevitable measure to protect our core technology and intellectual property from long-term research and huge investments," said Shen Xuezhe, CEO of LG Chem.

Regarding the allegations of LG Chem, SKI categorically denied that these people have entered the job through normal open recruitment channels, and that LG Chem and SKI's main push technologies and products are not the same, there is no need to steal core technology.

In addition, SKI believes that LG Chem's unwarranted accusation not only damages its corporate interests, but also reduces the country's overall industrial competitiveness and has a bad reputation impact on Korean products. To this end, in June this year, SKI announced that it would sue LG Chem in the Seoul District Court in South Korea, asking LG Chem to apologize for the unwarranted accusation of SKI and to compensate 1 billion won.

Strive for orders, grab the market

The so-called "peer is a family", LG chemistry and SKI's grudges, perhaps with SKI last year won the Volkswagen Group's battery big single is not unrelated. Compared with LG Chem, Samsung SDI, Panasonic and other Japanese and Korean power battery giants, SKI is a latecomer, but its development momentum is very strong. Since the mass production of batteries in 2012, SKI has won orders from a number of important customers, including Hyundai Kia, Daimler and Volkswagen Group. In particular, the Volkswagen Group, whose original major battery supplier was LG Chem, later developed the SKI into its battery supply chain system in mid-November in order to share the risks and ensure battery supply.

SKI took advantage of the Volkswagen Group's battery bill. In late November last year, SKI held a board meeting and decided to build a new power battery factory in Jackson County, Georgia, USA, with a total investment of 1.67 billion US dollars. The initial production target value is 9.8GWh at the initial stage of production, and the annual production capacity is expected to reach 55GWh up and down after additional investment. This is SKI's first battery factory in the United States. It broke ground in March this year and is expected to be put into production in 2022. The first batch of products will be fully supplied to the electric vehicles produced by the Volkswagen Group's Tennessee plant in the United States.

For LG Chem, this is obviously not good news, which means it will usher in a strong enemy in the US power battery market. Compared with SKI, LG Chem entered the US market earlier, and people familiar with the matter said that LG Chem is considering building a second battery plant in the US, with an estimated investment of US$1.7 billion. The alternative location for the plant is Kentucky. State or Tennessee. Once the new plant is completed, the target customers are expected to be Volvo, Fiat Chrysler (FCA), Hyundai, General Motors, Volkswagen and other car manufacturers. According to informed sources, the new plant is expected to be put into production as early as 2022, when LG Chem will face the SKI competitor in the US market.

In addition to the United States, in Europe, LG Chemical and SKI have built a battery factory, in the pursuit of European customers can be described as "tips to the wheat." In addition, Korean manufacturers such as LG Chem, SKI, and Samsung SDI are targeting the Chinese new energy vehicle market after the subsidy is cancelled. Currently, they are accelerating the layout of the Chinese power battery market.

The dispute between old and new forces

At present, the global power battery market is intensifying competition. As a latecomer, SKI is rapidly expanding in the United States, China, and Europe to break the existing market structure. Since 2017, SKI has begun to increase investment in the field of power batteries. In addition to the local battery factories in South Korea, SKI has invested heavily in the construction of large power battery plants in the United States, Hungary and China.

Just before the groundbreaking ceremony for the battery plant in Georgia, USA, in March this year, SKI announced the construction of a second battery plant in Europe, with an investment of about 860 million US dollars and a planned annual production capacity of 7.5 GWh. The new plant in Hungary is expected to be completed in 2021 and will be delivered to European car manufacturers on a large scale from 2022. The new factory is also partly to cater to the needs of the Volkswagen Group. According to SKI's capacity plan, by the end of this year, its battery capacity will increase from the current 5GWh to 20GWh, and in 2020 this figure will rise to 40GWh, and reach a total capacity of 100GWh in 2025.

While expanding the power battery plant to increase production capacity, SKI has not relaxed in diaphragm production. At present, SKI's Zengping plant in South Korea produces 360 million square meters of lithium battery separators per year. In October last year, SKI announced that it has invested in the construction of four lithium battery separator production lines and three ceramic coated diaphragm production lines in Changzhou City, Jiangsu Province, China, and strives to start mass production from the third quarter of 2020. The various diaphragm products produced by the factory will be Provided to battery manufacturers in electric vehicles and IT. In late March of this year, SKI announced that its new materials subsidiary will invest 335 million euros to build a membrane plant in the Silesia region of Poland to produce lithium battery separators and ceramic coated membranes. SKI said that once all three plants are put into operation, the company's lithium battery separator production capacity will reach 1.2 billion square meters.

At a press conference in May this year, SKI general manager Jin Jun said that the company will develop a high-performance battery that can support electric vehicles for up to 500 kilometers in the year. It is expected to be commercialized as early as 2021. This battery is called NCM91/21/2, and the specific gravity of nickel in the raw material used as the positive electrode material is 90%, and cobalt and manganese each account for 5%. In addition, SKI has set a goal of becoming the top three in the global electric vehicle battery market by 2025.

The expansion plan naturally requires the support of funds. In mid-August this year, SKI announced that it will borrow 800 billion won from financial institutions in the United States, Hungary, China and Poland in 2020 to invest in US and Hungarian battery factories, as well as lithium battery separator factories in China and Poland.

The radical expansion of SKI is breaking the existing pattern of the electric vehicle market, and it has made the industry's "first mover" LG Chem have an urgent sense of crisis, and in the view of LG Chem, the speed of development of SKI is not the same as that of R&D personnel from their own corners. Association. To this end, in a lawsuit against SKI, LG Chem asked ITC to ban SKI lithium-ion batteries and infrastructure technologies that infringe on its trade secrets from entering the US market. In addition, according to foreign media reports, after the partnership was reached, at the end of last year, Volkswagen Group and SKI discussed the establishment of a super battery factory in Germany, which angered LG Chem, which threatened to open the Volkswagen Group and establish it in Germany alone. The super battery factory, and claimed that once Volkswagen and SKI began to produce batteries, it will stop supplying batteries to the public, eventually leading to the indefinite delay of Volkswagen and SKI's super battery factory.

At present, the Korean government is vigorously cultivating the domestic electric vehicle battery industry, hoping that it can become an important export pillar industry like memory chips and display screens. A person familiar with the matter said that as global competition intensifies, the lawsuit may weaken the strength of local battery manufacturers, and the government may act as a mediator to ensure that problems are resolved quickly.