The reversal of fortune has most benefited Samsung SDI, the underdog among the trio, with analysts expecting it to return to an operating profit for the first time in seven quarters. That would end a losing streak dating back to the third quarter of 2024.
The biggest catalyst has not been electric vehicles but energy storage systems (ESS), once considered the industry's backup engine, as AI-driven data center construction fuels surging demand for large-scale battery storage.
Samsung SDI's ESS production lines have been running at full capacity. In March, its U.S. subsidiary secured a 1.5 trillion won ($1 billion) contract to supply prismatic ESS batteries to a U.S. energy company through 2029, following an earlier award worth more than 2 trillion won for lithium iron phosphate (LFP) cells.
The company bills itself as North America's only non-Chinese producer of prismatic ESS batteries, a niche that has become increasingly valuable as customers seek to diversify supply chains.
Government policy has further brightened the outlook. Advanced manufacturing production credits tied to Samsung SDI's U.S. output are projected to reach about 97.7 billion won this quarter, up 21 percent from the previous three months.
"As promised earlier this year, we expect an earnings turnaround to be achievable this year," Samsung SDI Chief Executive Choi Joo-sun said at an event marking the company's 56th anniversary, citing new ESS projects and contracts with premium automakers.
An unlikely boost to EV demand came from the Middle East. Oil prices surged as conflict around the Strait of Hormuz threatened energy supplies, prompting more consumers to consider electric vehicles. Domestic EV registrations jumped about 140 percent from a year earlier in April as drivers sought relief from rising fuel costs.
The rebound has, at least temporarily, softened the industry's prolonged EV demand slowdown that followed reductions in government subsidies. Chinese manufacturers, however, continue to dominate the global EV battery market.
LG Energy Solution, the country's largest battery maker, presented a more mixed picture. It returned to net profit with operating income of 113.3 billion won, but the result relied heavily on 241 billion won in U.S. advanced manufacturing tax credits.
Excluding those incentives, its core business remained in the red, posting an underlying operating loss of roughly 127.7 billion won for a third consecutive quarter. Management nevertheless expects to achieve a subsidy-free turnaround by the fourth quarter.
Its order pipeline, however, suggests underlying demand remains solid. The company secured more than 100 gigawatt-hours of new orders for its 46-series cylindrical EV batteries in the first quarter, lifting its order backlog above 440 gigawatt-hours. It also plans to expand its North American ESS production capacity to more than 50 gigawatt-hours by year-end.
"The ESS ecosystem has kept expanding quietly, even as the market looked away," said Kim Hyun-soo, an analyst at Hana Securities.
"After LG Energy Solution won an Oracle order in May, a Google order was confirmed last week. The industry is at the threshold of a genuine surge in hyperscaler ESS demand."
SK On, the smallest of the three battery makers, is aiming to return to profitability in the second half. The company is relying on aggressive cost-cutting, including shutting excess production lines and integrating affiliates, alongside what it expects to be another wave of ESS orders from AI data centers and solar power projects.
The industry's brightest prospects now rest on that storage boom. Yet the same geopolitical tensions supporting EV demand have also created fresh supply-chain risks. Disruptions around Hormuz have constrained sulfur shipments, affecting production of sulfuric acid used to refine battery-grade nickel and lithium.
In the near term, however, the market is preparing for a sharp decline in U.S. EV sales.
"Because subsidies expired on Sept. 30, 2025, pull-forward demand concentrated sales between July and September, meaning this year's third quarter will face a much steeper year-on-year comparison," Kim said.
"But that has been anticipated since the beginning of the year. From October, the base effect eases, making a return to year-on-year growth likely."
Another question is whether CATL, the world's largest battery maker, can erode Korea's position as it rolls out its new sodium-ion battery brand, expands domestic sales and targets European customers. Some analysts expect only limited impact.
"The U.S. ESS market will be shaped by supply-chain de-risking requirements needed to qualify for tax credits, so CATL's expansion is unlikely to undermine the competitiveness of Korean manufacturers," said Chang Jung-hoon, an analyst at Samsung Securities.
For now, raw material constraints have yet to derail the sector's recovery. But with lithium markets already shifting from years of oversupply toward deficit, Korea's battery makers may ultimately find that restoring earnings is easier than securing the critical materials needed to sustain growth.
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