SEOUL, KOREA – Having surpassing Japan last year, Korea is expected to become the global leader in the secondary battery industry this year. The status of “Secondary Battery Korea” will rise even higher as LG Chemical(LG Chem) is expected to overtake second-place Panasonic (Panasonic took over Sanyo in 2008) in the third quarter.
Former secondary batteries powerhouse Japan has gradually lost its competitiveness due to strengthening of the yen and having seen its major powerhouse companies, Sony and Panasonic undergoing extensive restructuring. China has yet to increase its market share because it has not attained a trusted brand name, which is essential for success in the industry. Korea overtook Japan as the largest rechargeable batteries supplier, attaining 40% of the global market share. Samsung SDI is the unanimous number one global manufacturer of secondary batteries, and the third-largest manufacturer LG Chem is anticipated to surpass Panasonic and subsequently move into the number two slot shortly. Thus, market analysts are predicting that Korea will inevitably take over the secondary batteries market, similar to what occurred in the global semiconductor market.
Becoming Global Leaders, the “Secondary Battery Korea”
Japan’s research house Institute of Information Technology (IIT) recently released in its first quarter report stating that Korea is expected to hold 43.3% of the market share in secondary batteries, while Japan is likely to hold 31.6%, a difference of 11.7 percentage points. The difference is a further widening from last year’s 4.6% point margin. This loss in Japanese market share has been wholly absorbed as a gain by Korean manufacturers. The situation is not favorable to China either, which also saw its market share fall to 20.1% last year from 23.1% in 2008.
Samsung SDI estimates that it produced 75.5 million cells in the first quarter of this year. Panasonic is estimated to have produced 61.7 million cells, LG Chem 53 million, and Sony 29.8 million. Panasonic will still exceed LG Chem in the second quarter with the former producing 66 million cells while the latter 64.5 million. However, IIT forecast that LG Chem will overtake Panasonic and take over second place in the third quarter with LG Chem likely to produce 85 million cells while Panasonic produces 76.5 million. LG Chem is expected to be the major beneficiary of Panasonic’s loss of clients, with companies such as Acer, Lenovo and Toshiba predicted to transition to LG Chem. Market watchers say that Panasonic may even lose the mobile giant Nokia.
Difference Between Korea and Japan’s Market Share This Year to Widen by More Than 10% Points
An industry participant stated, “Secondary battery output in the domestic market will rise 17% year-on-year as helped by growth of the mobile device market, so constant expansion of production capacity will strengthen Korean firm’s competitiveness.“ Korean companies have an upper edge because they have anticipated the accelerated growth within the smart phone market and acted fast, ensuring that they have secured good client relations. This also confirms that the secondary battery is closely related to Korea’s IT market situation.
In 2011, Samsung SDI and LG Chem took hold of the global secondary batteries market with shares of 23.6% and 16.4%, respectively. Both companies add up to 40% of the market share. That substantially increases the comparison from 2008, during which Samsung SDI held 15.1% and LG Chem 6.8%, totaling 21.9% combined. The figure has doubled in only three years. Samsung SDI and LG Chem both supply their products to Apple to power the enormously popular iPhone and iPad.
Moreover, Samsung SDI also provides power to the Galaxy series. This has led to the widening gap between Korea and Japan in market share. The secondary battery industry benefitted greatly when Korean companies predicted the emergence of Apple’s iPhone and partnered with Apple to supply the power for these devices.
Secondary Batteries Performance Surprising the World
In 1999, Samsung SDI decided to produce a 2000mAh capacity lithium-ion battery as its first product, which was to be available the following year. At that time, the most current product had a capacity of 1600mAh and Japan was only in the initial phases of developing a 1800mAh battery, so the market was not expecting such an unprecedented increase in capacity. However, Samsung SDI had no alternative but to offer a revolutionary product in order to stake claim in the market which was firmly held by Japan prior to this point.
The path was not easy. Samsung SDI failed roughly 10,000 times during the development stage before introducing the world to the largest-capacity rechargeable lithium-ion battery in July 2000, subsequently becoming an international sensation. Some 10 years later, Samsung SDI remains the leading manufacturer of secondary batteries globally for the second consecutive year.
LG Chem joined the race in mid 1990s after having set secondary batteries as the company’s core business item. The company became the first Korean company to produce small rechargeable batteries in 1998, which was groundbreaking because Korea no longer relied on Japan for its secondary battery supply.
However, LG Chem experienced many obstacles at the onset due to the quality of its products and major competition in the international market. LG Chem then focused on improving its product quality and developing good client relations by concentrating on sales and marketing. Moreover, it increased production capacity to meet a vast array of client demands and worked diligently to build its competitive edge. In 2008, LG Chem finally achieved its goal by striking deals to supply its secondary batteries to the world’s largest mobile phone makers, Nokia and Motorola. The same year they struck deals with HP and Dell, major notebook manufacturers, to supply their products with secondary batteries for a long term basis. LG Chem also introduced high-capacity and ultra-thin batteries fit for smart phones and ultrabooks, and gained a strong grip in the world market.
The start of the “Secondary battery Korea” era holds great significance because Korea has lagged behind Japan for the past 10 years. Sony first manufactured secondary batteries for commercial use in 1991 whereas LG Chem introduced its initial product in 1999 and Samsung SDI in 2000. No one initially thought that Korea could overtake Japan, but Samsung SDI and LG Chem have proved otherwise in just a decade.
Product Differentiation Key to Success
Samsung SDI and LG Chem have marched in the “Secondary Battery Korea” era with product differentiation strategy.
An IIT report analyzed Samsung SDI’s success and how Korea overtook the secondary batteries market. It said that the key points which allowed Korean companies were to overtake their Japanese competitors were sales strategy, product development, battery performance and safety. IIT gave Samsung SDI and LG Chem high marks for placing Korea at the forefront of this industry by cooperating within the small rechargeable lithium-ion batteries market. IIT emphasized that Samsung SDI and LG Chem will further widen their gap against competitors through technological development and warned that Japanese firms will deteriorate more if they do not modernize their current business model.
Participants in the electronics industry say that the secondary batteries business is as crucial as semiconductor and LCD businesses, further heightening the importance of Korean companies staking the top claim in this market.
Center of Secondary Batteries, Foreign Firms Flocking to Korea
As Samsung SDI and LG Chem have claimed more than 40% of the global secondary batteries market, businesses from related parts and materials from abroad are coming to Korea to invest and build plants. With the rise of battery production, demands for related parts and materials have risen sharply.
Cheonan and Ulsan, where Samsung SDI manufactures secondary batteries, and Ochang, where LG Chem has its secondary batteries plant, have become the Mecca for secondary battery manufacturing.
In late 2011, the global materials technology group Umicore signed an agreement with South Chungcheong Province in Brussel. Umicore plans to invest USD 65 million by 2014 to build a 31,906 scale plant at Cheonan industrial complex and produce materials necessary for producing lithium-ion secondary batteries.
Lithium battery separator maker Celgard from the U.S. signed a MOU late last year with Gyeonggi Province to invest USD 200 million in order to construct a separator plant on 70,00㎡ of land at Pyeongtaek-Osung Complex and plans to start production as early as the end of this year. Celgard already operates a separator plant at Ochang Industrial Complex.
Germany’s Sud-Chemie and LG Chem have signed a MOU in December 2011 to establish a joint venture for production of lithium iron phosphate, which is a cathode material used in making rechargeable lithium-ion batteries. The plant, which will have a 2,500 tons/year capacity, is slated for completion by the end of 2014.
