According to guidance from FnGuide on June 22, LG Energy Solution is projected to record an operating profit of 207.5 billion won for the second quarter of this year, marking a return to profitability after two quarters of losses since the third quarter of last year. Samsung SDI and SK On are also expected to reduce their losses. Samsung SDI, which reported an operating loss of 397.8 billion won in the second quarter of last year, is expected to see its loss shrink to 73.4 billion won this quarter. SK On, which peaked at a 440.8 billion won loss in the fourth quarter of last year, is projected to report losses of 349.2 billion won in the first quarter and 215.6 billion won in the second quarter, continuing its trend of loss reduction.
The battery industry is enhancing its responsiveness to ESS demands, driven by the expansion of artificial intelligence data centers, increased renewable energy adoption, and the need for grid stabilization. LG Energy Solution is currently operating five North American ESS production bases, including its Lansing plant in Michigan, the Ultium Cells facility in Tennessee, and a joint venture plant with Honda in Ohio. Samsung SDI is boosting its ESS production capacity in the U.S. by leveraging its non-Chinese prismatic battery supply capabilities. SK On has established stable local production capacity through four plants, including its standalone facility in Tennessee.
The expansion of local production in the U.S. aligns with benefits from the Advanced Manufacturing Production Credit (AMPC), which provides tax credits to companies producing battery cells and modules domestically under the U.S. Inflation Reduction Act (IRA). As production increases, the amount received also grows, directly impacting the operating profit defense of battery companies.
Industry analysts expect LG Energy Solution's AMPC receipts to rise from 1.4 trillion won this year to approximately 3.9 trillion won next year. Samsung SDI is anticipated to increase its receipts from 600 billion won to 1.6 trillion won, while SK On's receipts are expected to grow from 500 billion won to 1.27 trillion won. The potential for tariff refunds following a ruling against U.S. tariffs is another variable. LG Energy Solution is expected to receive around 100 billion won in refunds, and if Samsung SDI and SK On pursue refund procedures, it could also contribute to improving the profitability of the three battery companies.
However, it remains uncertain whether the expansion of the ESS market will lead directly to improved profitability. The domestic ESS central contract market has seen repeated low-bid competition, raising concerns about profitability within the battery industry. The bidding price per kWh, which was in the 30 won range during the first round of bidding, reportedly dropped to the 20 won range in the second round this year. Although the government adjusted the weight of price and non-price evaluations to 50% each in the second round, assessments indicate that price competition has intensified.
As a result, in the third ESS central contract market bidding scheduled for the second half of this year, battery companies are likely to prioritize profitability defense over merely securing volume. Industry voices suggest that, given the repeated self-destructive bidding in previous rounds, non-price factors such as safety, domestic production capacity, and supply chain contributions should be more heavily weighted in evaluations.
An industry insider stated, "The second quarter results are expected to be better than initially feared. However, since the domestic ESS central contract market involves competition among the three battery companies, it is difficult to completely eliminate price competitiveness, making it premature to predict the outcomes of the third bidding."
* This article has been translated by AI.
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