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Auto chip shortages to have limited impact on battery makers
By Kim Bo-eun
Samsung SDI's stock is expected to take a stable upward trajectory in the coming months, based on expectations of its electric vehicle (EV) battery business achieving solid profits this year.
A limited impact from the auto chip shortage on the battery maker's profits as well as plans to aggressively expand its battery product lineup are set to have a positive effect on Samsung SDI's stock.
The battery company's stock closed at 731,000 won, Tuesday, up 1.11 percent from the previous day's close, after a conference call on the company's third quarter earnings outlining this positive outlook. Samsung SDI posted a record 3.44 trillion won ($2.93 billion) in sales and 373.5 billion won in operating profit in the third quarter, up 11.4 percent and 39.7 percent, year-on-year.
The battery company's stock fell in recent months as the idea of separating its battery business was floated as a means to secure funds to invest in new production plants. LG Chem and SK Innovation spun off their battery businesses to be listed on the local stock market to finance such investments.
A senior Samsung SDI official told investors during a conference call after the release of third-quarter results that the shortage of automotive chips has impacted businesses in the auto industry, as carmakers have been forced to scale down production, but that the damage is expected to be limited for EV battery makers.
"Fortunately, compared to internal combustion engine (ICE) vehicles, the production of EVs appears to be less affected because automakers are allocating chips to EV production over ICE production in order to satisfy CO2 regulations and to claim leadership in the future EV market," Samsung SDI Senior Vice President Michael Son said during the call.
"Regarding our full-year targets, we are currently focusing on meeting our original target of full year revenue growth as well as reporting a profit on a full year basis."
Samsung SDI also said it plans to increase the portion of cylindrical batteries, based on a projected growth in demand.
"Our cylindrical batteries for EVs currently take up around 10 percent of our total cylindrical batteries. And next year, we expect the share to increase to above 20 percent with increased supply to existing customer projects and also the addition of new projects," Son said.
In addition, the company said it will pursue a "dual-track" strategy in terms of diversifying its battery portfolios by developing batteries that possess cost competitiveness. Behind the rationale is that the EV battery market is becoming increasingly segmented with an expansion of low-cost, lower-power batteries.
"As the market becomes more segmented, we're also developing different battery technologies that address each market needs," Son said.
"In the case of premium markets, we will focus on delivering maximum energy density by using high nickel cathode material and silicon anode material and enhance our rapid charging performance by adopting new processes. Also, in order to improve the cost competitiveness for the volume market, we plan to adopt cobalt-free cathode material that replaces cobalt with manganese to reduce material costs."
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