J.P.摩根-亞太地區(qū)電動汽車行業(yè)-韓國電動汽車電池之旅的收獲：在原材料通脹中關(guān)注下一代技術(shù)的差異化

AsiaPacificEquityResearch

23June2022

EVBatteryandMaterials

KoreaEVbatterytourtakeaway:Focusonnext-gen

technologydifferentiationamidrawmaterialinflation

WehostedanEVbatterytourlastweek,andover30investorsattendedon/offline(seesummarytableonp.2anddetailsonpp.3-15).WhileoverallEVdemandappearssofter,suppliersremainedfirmonbothnear-andlong-termgrowthprospects,andtheirstancetowardthechipshortagehasturnedconstructive.WefindtheKoreanbatteryvaluechain’stechnologyinitiatives(onbothperformanceandcost)impressiveamidcontinuingrawmaterialinflation.Last,webelievetherecentrawmaterialpricingtrend(stabilizingnickelvs.upwardlithium–note)favorsthehigh-nickelbatterysupplychain(mainlyKoreansuppliers)andpointtotheU.S.policyupdateasthenextkeysectorcatalyst.Wemaintainoursecularlong-termgrowthandconstructivestanceonthesector.OrderofpreferencewithintheKoreabatterychain:upstreamcathode(L&F/EBM)>cell(LGES/SSDI/SKInno)=foil(SKC)>separator(SKIET).However,whenrawmaterialpricesstartsnormalizing,cellmakerscouldshowabetterperformancevs.therestofmaterialsuponmarginimprovement.

Softerdemandoutlook,robust2H22Erecovery,improvingchipshortage.SNEresearchguidedto43%EV/PHEVunitgrowthforCY22E(5%belowyear-beginningtarget),andwegenerallypickupslowerordertrendsfrompouch-typebatteriesrelativetocylindrical(L&F)andprismatic.MostvendorssharedthatOEMsareaccelerating2H22buildplanstotrytomeetoriginal2022businesstargetsandbelievethechipshortageisonanimprovingtrend(inlinewiththeJPMresearchpodcastpublishedon21JunebyJoseAsumendiandSandeepDeshpande).IntermsofbatteryproductionprogressfromEUsuppliersandautoOEMs,wehaven’tseenmeaningfulprogresstoconcernS-Ddynamics.

Greenflationandcostreductionchallenges.Batterypricesarecontinuouslyrisingduetorawmaterialpriceinflation(mainlymetals)andsuppliers’concernaboutshort-termmarginheadwinds(higheratcellvs.cathode/foil)duetomismatchesincostpass-throughtermsandduration.Toovercomesuchchallenges,batterymakersaredevelopingcheapersolutions(highlightedbySDI/Chunbo[NC])andfocusingonimprovingproductivityviaadvancedfactoryautomationandabigdataapproach(highlightedbyLGES/SKC).

Technologydifferentiationinitiatives.Twokeyinitiativesinclude4680formfactordevelopment(larger-diametercylindricalbatteries)andsolid-statebattery.LGESrecentlyannouncedaplantoinvestW580bninKoreatoinstall9GWhofnew4680cylindricalcapacitylinebyOct-23,andplanstorollitouttoglobalproductionsitesfrom2024(vs.SDIonsamplingprocessfrompilotlinenextyear,targetingmassproductionasearlyas2024).Asforsolid-statebatterydevelopment,SDIshowedconfidenceinsulfide-basedASSBtechnologybreakthroughandtargetspullinginthemassproductiontimelinepriorto2027.

Upsidetobatterycapexonnewcustomerorderwins,U.S.remainsnextkeygrowthspotformaterials.Mostbatterysuppliersseenomaterialchangestocapacitybuildoutplansthrough2025andhaveannouncedU.S.siteinvestmentplans.Instead,cellmakersseeahighpossibilitythat2023capexplansmoveuponnewcustomerorderwinsfor2026beyondproject,andVWremainsoneofthelargestinthepipeline.Asformaterialsuppliers,detailsonU.S.investmentplansarenotfinalized,andwebelieveprogressupdatescouldbethenextkeysharepricedrivers(L&FonRedwoodpartnership,POCHEM’sorderupdatepost-CanadaGMJV,capacityscaleandsiteupdateatSKIET/SKC).

Technology-EVBatteryand

BatteryMaterial

JayKwonAC

(82-2)758-5725

jay.h.kwon@

BloombergJPMAKWON<GO>

J.P.MorganSecurities(FarEast)Limited,SeoulBranch

AsiaOil,Chemical&EVbattery

ParsleyRuiHuaOngAC

(852)2800-8509

parsley.rh.ong@

BloombergJPMAONG<GO>

J.P.MorganSecurities(AsiaPacific)Limited/J.P.MorganBroking(HongKong)Limited

Seepage17foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.

J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

2

JayKwon

(82-2)758-5725

jay.h.kwon@

AsiaPacificEquityResearch

23June2022

Table1:Summaryofkeytakeawaysbycompany

Near-termbusiness

update

Rawmaterialinflation

Next-gentechnology

CompetitionCustomerupdate

Capacityplans

Samsung

SDI

Expectsasequentialincreaseinvolumethroughyear-end,whilecautiouslyestimatingthatthechip-shortage-relatedsupplybottleneckwillimproveinto

2H22.

Fullmetalcostpass-throughtermsforcathodemetals.However,stillnegotiatequarterlywithkeycustomersforgraphite,copper,lithiumsaltandothers

Gen6batterytobelaunchedlate2023.NMX(cobalt-free).Pilotlinefor46xxformfactorinstallin3Q22.MPdatenotprovided.ASSB(all-solid-state-battery)MPtargetbefore2027.

Intensifyingcompetition

acrossprismaticand

cylindricalbattery.Maintains

itsmarginguaranteedorder

winapproach.Multiple

OEMsswitchingto

prismatic,whichcouldhelp

orderwins.

SDI's2022EcapacityincreasewillbecenteredmostlyonEVbattery(noESSbatteryexpansion).Its2022capexplanstandsathigh-W2tn,withapossibilitytomoveupnextyear.

LGES

company’send

LGESguidedto>10%q/qcylindricalEVbatteryrevenuegrowthin2Q.LGESaimstocompleteESSbatteryreplacementwithintheyear,supportingareboundinESSsales/OPMin2023.ThecompanyexpectsOPMtroughin

2Q22.

TolaunchLFPESSin2024.Converting2170linesto4680,butwillmaintainadual-trackthrough2025,givenahighlevelofcostoverlap.Forpouchbatteries,expectsNCMAmixtoovertakeNCM622by2024/25,whichwouldsignificantlyimprovepouchprofitability(NCM622OPMisMSD%vs.HSD%forNCMAandneworders).

LGESisconsideringraisingthecathodematerialself-sufficiencytargetfrom30%to40%.

Teslashipmentstobenormalizedin2H,withlimitedimpactonfull-yearsales.

changeto

LGEShighlightedthattherearecurrentlylittlecylindricalbatterycapacityplansintheU.S.,andexportsfromChina/EuropetotheU.S.arelikelytobelimited.LGESnotedthatthereisidlelandattheArizonasite,implyingthepossibilityoffurthercylindricalexpansion.

SKIETech

customerswerehitharderbysupplydisruptionsthanthemarket,anditsproductionrampisbehindschedule.However,nomaterialimpacttoJiangsuoperation.

The

low

Notmaterial,given

materialcostportion

Wider/fasterprocess(e.g.,6-7meterwidthvs.4.5-meterwidthinthepast,whilemaximizinglinespeedto60-70m/minute).Alsointernalizingkeyequipmenttolowercapex.

Chinese

makersstartedcontinuestobe

penetratingmarketsoutside

China.For2022E,SKIET

expectspricedeclinestobenearMSD-HSD%,whilemostpricingimpacttookplacein1Q22.

SKOn

a

No

endcapacityexpansionplan(1.5bnsqm)and2025-endcapacityexpansionplan(4.0bnsqm).2022EcapexwillbenearW800bn.

2022year-

keycustomer,andthecompanytriestoincreasesharefromdomesticclients.SKIETalsoisspeakingtomultipleEUbatterymakers.

L&F

Noordercutfromendcustomer/batterycustomer,andshipmentsroseq/qfromthetighthigh-nickelcathodeS-Dsituation.L&Fexpectsvolumetoincrease+20%q/q.

Companypassesthroughallthemetalcostincreasetoitsbatterycustomereveryquarter,andpricesarere-negotiatedeveryfourtoeightweeks

NCMA96andsingle-

crystalline

NCMA93/NCMA96tobelaunchedin2022E.Cautiouslyexpectitsnext-generationproductstobeusedfor4680.

L&Fcurrentlyowns30%ofLGESmarketshareandexpectscompetitionfromLGin-housetointensifyincomingyears.Providedsharpdemandincreasefromendcustomer,L&FviewssupplierdiversificationasinevitableandexpectsLGChemtograduallytakesharewithinthekeyendcustomer.

Nochangetoofficialtarget(200ktbythebeginningof2024).Planstoupdatecapacityplanonce

RedwoodMaterial

partnershipisfinalized.

SKC

WhileAprilrevenuewasweak,May/Juneoperationwasslightlybetter.Nonetheless,margin/pricingismovingup.SKCexpectsvolumegrowthtoreboundheadinginto3Q22.

Fullcostpass-through

SiCanodeproductionwithNexeon,initialcapacitytargetof1.2ktby2024.Developingglasssubstrate,setting12ksqmcapacitywithMPtargetby2023,revenuetargetof$100mnby2027.

Market-leadingtitaniumdrumsourcingcapabilities,lockingupsupplyfromallmajorJapanesedrummakers,andsuperior

4μm

engineering,

commercializing

batteryfoils.

OrdersfromCATL,largelydiversifyingitscustomerbase.ThecompanyalsoimpliedcontinuousbuildingofbusinessrelationshipwithCATLthroughcontracts.

Maintainedfoilcapacityplans.WhilethecompanyneedsW4tnofcapexuntil2025,ithasalreadysecuredW1.6tnfromindustrialmaterialbusinesssalesandW1.5tnfromKEXIMloan.

POSCO

Chemical

Meaningful

shipment/capacitygrowthtounfoldfromnextyear,leadingtonormalized10-15%OPM.AlsobenefitsfromrecentKRWdepreciation.

Nocostpass-throughcontractforanode,buttryingtopassthroughgraphitepricefluctuationthroughnegotiation.Onthecathodeside,fullcostpass-through.

PreparingforbothSiC/SiOxsiliconanodes.Moreover,isinternalizinglithium,precursorproduction.AsforLFP,POCHEMtargetsMPby2025,withscaleof30kt.

POCHEMrecentlylostanodemarketsharetoChinesepeerswithinKoreanbatterycellmakers.Forcathode,thecompanytargets30-35%walletsharewithinLGESfromitscurrent15%level.

Maintained610kt

cathode/320ktanodecapacitytargetby2030,basedon20%globalmarketshare.Allinall,expects32-34ktcathodeshipmentsthisyearandtoreach80ktnextyear.

Solus

Advanced

Materials

to

CopperfoilordercutfromChinain1H,loweringannualrevenuetargetby~10%with4-5%OPM.BatteryfoiltocontinueOPloss(~W30bn)withpowercostsurging/slowramp.However,guidedto30%y/yOLEDmaterialrevenuegrowth.

through

Fullcostpass-throughforcopper/batteryfoil

Solus’sultra-thincopperfoilssupporthighperformance,highlyintegrated/compactchips,receivingapprovalfromSKHynixinNovember2021.ThecompanyexpectstobeginshippingtoSKHynixfrom2023.

major

CompetenttoEuropeanfabs.DominantinOLEDmaterial(a-ETL,HTL),andalsospreadingouttohigh-molecularEN,non-emittingmaterials,suchasQDfiller,TFEandQDInk.

baseof

SecuredW1.3tninbatteryfoilordersfromLGES,SKOn,ACCandTSLAthatwillbespreadoutfrom2021to2025.Ofnote,TSLAwillinitiallyshipfoilstoitsTexasfab.

tobbuiltin

Maintainedcapacityplans(20t/30tOLEDin

China/Koreaby2022,100kt/17ktbatteryfoilinHungary/Canadaby2026).WhileW1.5tnincapexwillbeneeded,thecompanysecuredoverW914bn.

Chunbo

ShipmentsChinadwindledtonearzeroinApril-May.However,thecompanyisseeingsomereboundinJune.Full-yearrevenueguidanceunchanged.

Costpass-

BuildingMaterialFcapacity,whilealsoloweringcostby50%withbreakthroughtech.ChunboalsoplanstorevampMaterialPproduction,targetingcostcutby30%.

Fourplayersproduce

MaterialF,andChunboholdsa~15%marketshare.Thecompanytargets30%by2026and60%by2030.ChunboseeslittlecompetitionforMaterialP,itholdsan80%marketshare.

Universalbatterycellmakers.Intermsofelectrolytemakers,Chunbohashighexposureto

Soulbrain,Shenzhen

CapchemandMitsubishi

Chemical.

CapacityeSaemangeum.MaterialF5kt,FEC/VC4ktby2023,andMaterialF15kt,

FEC/VC6ktby2026.OfthetotalW700bnincapex,thecompanysecuredtheW300bnforPhase1.

Source:Companydata,J.P.Morgan.Note:MSD=mid-single-digit.HSD=high-single-digit.MP=massproduction.

3

JayKwon

(82-2)758-5725

jay.h.kwon@

AsiaPacificEquityResearch

23June2022

SamsungSDI(006400.KS)

EVproductionandchipshortageview

SDIacknowledgestheindustryheadwindcontinuingfromsupplychaindisruptions,butcautiouslybelievesthechip-shortage-relatedsupplybottleneckcouldimproveinto2H22.Thecompanyexpectsasequentialincreaseinvolumethroughyear-end.

Rawmaterialinflationandcostpass-through

SDIhasmultiplegenerationsofcontractswithfullmetalcostpass-throughterms(e.g.,metalsusedforcathode).Therearecertainmetals/rawmaterialsstillinnegotiationswithkeycustomerseveryquarter(e.g.,graphite,copper,lithiumsalt,others).

Next-generationtechnologyupdate

SDIstartedproducingGen5EVbatterychemistry(NCA87grade)in4Q21,anditwillbecome20-30%oftotalproductionbyyear-end.From2024,Gen5batteryisestimatedtobemainstream,andthecompanyplanstorolloutGen6EVbatterybythelaterpartof2023.Themarginprofileshouldimproveovertheproject(fromonegenerationtothenext),andthecompanymaintainsitsmid-tolong-termEVbatterymarginatadouble-digit%,similartosmallcylindricalbatteryprofitability.

Alongsideitsfocustowardhigh-nickelchemistries,SDIisalsopreparingNMX(cobalt-freebatteries),targetingthemass-tierEVsegment.NMXisbasedonmanganese-richlithium-ionbatterychemistry,andtargetE/Disaround200-210Wh/kg,superiortothatofLFP(140-170Wh/kg).Underalithiumpricenormalizationscenario,SDIplanstoutilizeNMXsolutionstobroadenitstargetcustomerbaseandtargets2024MP.

Onthe4680formfactorforthecylindricalbatteryside,thecompanywillinstallapilotlinein3Q22andisindiscussionswithkeycustomersformassproductionscalecontracts.WhileSDI’sMPtimelinewasnotprovided,weexpectittobeginduring

2024.

AsforASSB(all-solid-state-battery)development,SDIhasreportedtheaccelerationoftheR&Dproductionlinesetupandtargetsbeginningmassproductionbefore2027.Thecompanyclaimstargetenergydensityat900Wh/Liter,basedonsulfidesolidelectrolyte,lithiummetalandhigh-nickelchemistry.

Competition(vertically–horizontally)

SDIviewsintensifyingcompetitionacrossbothprismaticandcylindricalbatteryplayersandmaintainsitstechnology-basedmarginguaranteeprojectorderwinapproach.ThecompanyhasseenmultipleOEMsswitchingbacktoprismaticbatteryformfactor,andthiscouldhelpwinthebacklogorderinthenextbidcompetition.

Capacityoutlookandinvestmentplan

Althoughthecompanydidnotspecifydetailsofitscapacityexpansionplans,SDI’s2022EcapacityincreasewillbecenteredmostlyonEVbattery(noESSbatterycapacityexpansion).Its2022capexplanstandsinthehigh-W2tnrange,andthereisapossibilityitwillmoveupnextyearuponnewbacklogorderwins.

4

JayKwon

(82-2)758-5725

jay.h.kwon@

AsiaPacificEquityResearch

23June2022

LGEnergySolutions(373220.KS)

ReiteratedcylindricalbatteryexpansionintheU.S.

LGEShighlightedtherearecurrentlylittlecylindricalbatterycapacityplansintheUS,andexportsfromChina/EuropetotheUSarelikelytobelimited.LGESnotedthatthereareidlelandattheArizonasite,implyingpossibilityforfurthercylindricalexpansion.

Cylindricalshipmentstoresumegrowthin2H

LGESguided>10%q/qcylindricalEVbatteryrevenuegrowthin2QandexpectsTeslashipmentstobenormalizedin2Hwithlimitedimpactonfullyearsales.

Near-termoutlookandcustomerupdate

LGESexpectssomelukewarmshipmentstoEuropecustomers,VWID5andRenault’snewmodels,forinstance,tocontinuein2Q22.ThecompanyalsoexpectsOPMtotroughin2Q22duetolaggedrawmaterialimpact.

ESStoresumegrowthin2024afterLFPchemistrylaunch

LGESaimstocompletetheESSbatteryreplacementwithintheyear,whichshouldsupportareboundinESSsales/OPMin2023.CompanyplanstolaunchLFPbatteriesforESSin2024,whichwillbeapositivecatalystforthestockashighlightedinourinitiationreport.

Updateontechnologyroadmap–maintaindualtracksof2170/4680,risingNCMAmixandcathodeinternalization

LGESisintheprocessofconverting2170cylindricalproductionlinesto4680,butwillmaintainadual-trackedstrategythrough2025givenahighlevelofcostoverlaps.However,LGESwillnotapplyalltechnologiesseenatTeslaBatteryDay(note),suchasdryelectrodecoatingprocess,aschallengestomassproductionremain.

Forpouchbatteries,companyexpectsNCMAmixtoovertakeNCM622by2024/25,whichwillsignificantlyimprovepouchprofitability(NCM622OPMisMSD%,vsHSD%forNCMAandneworders).LGESisconsideringtoraisethecathodematerialself-sufficiencytargetfrom30%to>40%.

5

JayKwon

(82-2)758-5725

jay.h.kwon@

AsiaPacificEquityResearch

23June2022

SKIETechnology(361610.KS)

EVproduction,chipshortage,Chinalockdownandnear-termbusinessupdate

Thecompanybelievesitsendcustomersareexperiencinggreatersupplydisruptionheadwindsthanthemarket,anditsproductionrampisbehindoriginalschedule.Thecompanyinstalled336mnsqmofnewbearfilmcapacityin4Q21.Thisrepresents22%oftotalcapacity–aslowerrampcouldnegativelyinfluencenear-termearnings.AsfortheChinalockdown,SKIEThadnotwitnessedamaterialimpactontheJiangsuoperation.

Rawmaterialinflationandcostpass-through

Therewasnomeaningfulinputcostincreasefromrawmaterials,anditmakesuponly10-15%oftotalcost.Instead,therewasabigutilitycost(15-20%oftotalcost)increase,givensharpLNGcostincreasesinEurope.Thiscouldbeatemporarymarginheadwind.

Next-generationtechnologyupdate

Thecompany’scurrentmainstreammachinerycapacityperlinestandsat84mnperyear,andthenext-generationtargetistoimproveitto108mn(from2H23newcapacityinstallations).Inordertomaintaintheprocesstechnologydifferentiation,SKIETplanstointroducenewlineswithwider/fasterprocess(e.g.,6-7meterwidthvs.4.5meterwidthinthepast,whilemaximizinglinespeedto60-70m/minute).Thesewillrequireoptimizingmachineryspecsandimplementingnewprocessestokeepthelinespeedfaster.Last,thecompanyisalsoworkingoninternalizingthekeyequipmenttolowercapex/sqm.

Competition(vertically–horizontally)

Thecompany’skeycompetitorshavetraditionallybeenJapanesevendors,anditcompetedwithsimilar-qualityproductstargetingdifferentcustomers.Chineseseparatormakershaverecentlystartedpenetratingoverseasclients(primarilythemass-tierbatterysegment).ThecompanyisnotcompetingwithChinesecompetitorsonthesameprojectsyet,butthereisapossibilitythatChinesecompetitorscouldimprovequalitytocompeteonthesameprojectsinthefuture.

Thus,SKIETfocusesonlocalizationandisthefirstseparatorsuppliertoproducelocallyintheEUmarket.ThecompanywillentertheNorthAmericanmarket,thoughdetailsarenotfinalizedyet.Intermsofpricing,industrypricingusuallyfallsbyaMSD%,andSKIEThadseenlessdeclineinthepastthankstomixchanges.For2022,SKIETexpectspricedeclinestobenearMSDtoHSD%,andmostofthepricingimpacttookplacein1Q22.

Customerupdate

SKOncontinuestobeakeycustomer,andthecompanytriestoincreasesharefromdomesticclients.Newcustomerdesignwinsarecriticalforcustomerdiversification,andSKIEThasbeenspeakingtomultipleEUbatterymakers.IncludingLTA,multiplestrategicoptionsareunderdiscussion,andthecompanyplanstoprovideanupdatewhendetailsarefinalized.

Capacityoutlookandinvestmentplan

Thereisnochangetothe2022year-endcapacityexpansionplan(1.5bnsqm).The2025-endcapacityexpansionplanis4.0bnsqm.2022EcapexwillbenearW800bn.

6

JayKwon

(82-2)758-5725

jay.h.kwon@

AsiaPacificEquityResearch

23June2022

L&F(066970.KQ)

EVproduction,chipshortageandChinalockdownimpact

L&Facknowledgesthemarketconcernaboutits2Q22shipmenttrend,givenlockdownsinChinaandtheconsequentkeyendcustomer’s(Tesla)factoryshutdown.Yettherewerenoordercutsfromtheendcustomerorbatterycustomer,andshipmentsindeedrose,whichthecompanyattributestoatighthigh-nickelcathodeS-Dsituation.L&Fexpectsitsvolumetoincreasebymorethan20%q/q,aheadofitsoriginalexpectation.

Rawmaterialinflationandcostpass-through

Thecompanypassesthroughallthemetalcostincreasestoitsbatterycustomereveryquarter,andpricesarere-negotiatedeveryfourtoeightweeks.Itsendcustomerhelpssourcethemajorityoflithiumconsumption,andthecompanyneedstosourceadditionalvolumefromthespotmarket,whichtypicallyresultsinahighermaterialsourcingcost.Precursorandlithiumpriceincreasesweresubstantiallyhighin1Q22,andthiswillimpactL&F’spricing/earningsmostlyin2Q22.Thus,ASPcouldbeupmorethan30%q/q,whilethereisahighchancemarginwilldropvs.~10%in1Q22.

AutoOEMdirectsupply(risksandopportunities)andnewcustomerupdate

L&Fmakes75%/20%oftotalsalesfromLGES/SKOn.Thecompanyplanstodiversifyitscustomerbaseinthenextthreeyears(ashighas30%fromnewcustomers),anditskeyfocusisonincreasingsupplyintoautoOEMs.Whiledetailsofcontractsandprojectsarenotdisclosed,L&Fviewsitsstrongtechnologyadvantage(high-nickelNCMAandsinglecrystallinecathode)ashelpingtomaintainprofitability.Thereare10-12additionalcustomersinthepipeline.

Next-generationtechnologyupdate

L&F’scurrentmainstreamcathodechemistryisNCMA90gradeforcylindricalbattery.From2022,L&FplanstorolloutNCMA96,followedbysingle-crystallineNCMA93andsingle-crystallineNCMA96.Duetoproductioncomplexity,L&Fwillmixthepolysiliconcathodeandsmall-particlesingle-crystallinecathodetodevelopthenewchemistry,andthiswillbeappliedtobothcylindricalandpouch-typebattery.

Asforthe4680batteryformfactor,cathodechemistryisnotconfirmed,butthecompanycautiouslyexpectsitsnext-generationproductstobeused.Forcobalt-free/LFPcathodeupfront,L&Fispartneringwithkeycustomersfordevelopment,buttakesarelativelyconservativestanceonproductrolloutintheforeseeablefuture.

Competition

L&Fcurrentlyowns30%oftheLGESmarketshareandexpectscompetitionfromLGin-housetointensifyincomingyears.Providedsharpdemandincreasesfromtheendcustomer,L&FviewssupplierdiversificationasinevitableandexpectsLGChemtograduallytakesharewithinthekeyendcustomer.L&Fplanstofocusonimprovingtheproductivityandprocessyieldfornext-generationcathodetomaintainitsposition.

Capacityoutlookandinvestmentplan

Thecompanywillinstall200ktonnesofcapacityperyearbythebeginningof2024E,andthereisnochangetoitsofficialtarget.Anewcapacityexpansionplanisunderway,andthecompanyplanstoupdateoncetheRedwoodMaterialpartnershipisfinalized.

7

JayKwon

(82-2)758-5725

jay.h.kwon@

AsiaPacificEquityResearch

23June2022

SNEResearch(third-partyresearchinstitution)

EVproduction,chipshortageandChinalockdownview

SNEResearchinitiallyforecastedEV/PHEV2022demandatnearly9.8mn,butsupplychaindisruptions(e.g.,alonger-than-expectedRussia-Ukraineconflict,COVID-19Chinalockdowns,andasluggishautosemiproductionrecovery)arelikelytoweighonenddemandby5%orso(totalEV/PHEVreviseddownto9.3mn,or+43%y/y,vs.JPMeof+51%y/y).ThisimpliesEV/PHEVadoptionnear12%,withChina/EUadoptionnear19%each,theU.S.at8%,andtherestoftheworld

near2%.

Rawmaterialinflationandcostpass-through

BEVbatterypricesmoveduptoUS$110/kWhlastyear(fromUS$103/kWhin2020),andSNEexpectsbatterypricestoincreasebymorethan10%y/yin2022,toUS$124/kWh,aboveJPMeof+8%y/y.Ifmetalpricesweretonotincreaseandstayunchangedfrom1H22levels,thenSNEexpectsthebatterypriceincreasetobelessthan5%thisyearandbelievesitcouldfallby4-6%perannum,basedonchemistry-drivenenergydensityupgrades.

AutoOEMs–batterystrategicpartnershipupdate

AutoOEMsareincreasinglyoptingforJVpartnershipsforsustainablesourcingagreements.Tesla,VWandToyotahaveshownintentionstomakebatteriesinternally,buttheinitiativesarenotdisruptivetothebatterysupplychainyet.Twoautobrandswithnoin-houseproductionorJVplansareBMWandDaimlergroup.Koreanbatterymakers’outside-Chinashipmentmarketsharewasnearthelow-tomid-50%rangeconsistentlyforthelastcoupleofyears.

Next-generationtechnologyupdate

Formfactormixoutlook

Prismaticwas59%oftheglobalbatterydemandmixduetohighconsumptioninChina(90%oftotal),followedbypouch(25%)andcylindrical(16%).SNEexpectsthepouch/cylindricalmixtogrowto31%/20%by2025,whileprismaticmixshouldfallto<50%.Beyond2025,SNEassumesacylindricalmixincreasethroughout2030,tothemid-20%range,vs.prismaticfallingbelow45%andpouchsteadyinthelow-30%range.

Cathodematerialmixoutlook

TheLFPEVbatterycathodemixhasbeenrisingbothinChina(from31%in2019to50%in2021)a