The 700-day war between LG Energy Solutions and SK Innovation over the infringement of battery trade secrets has ended.
If the fight is over, the final winner is neither LG nor SK. As the two companies fight hard, the market dominance of Chinese batteries will be strengthened, and the two companies’ ‘Jang’ sprayed like water before the litigation will only be called the double of the American lobbyists and lawyers.
Is there any reason to continue the stupid fight where only scars will remain due to the loss of money, customers, and corporate image?
This is probably why SK Group Chairman Choi Tae-won and LG Group Chairman Koo Kwang-mo agreed to stop the battery battle here.
◇ LG earned ‘2 trillion won and justification’, and SK gained’Sili’
LG Energy Solution and SK Innovation held a board meeting on the 11th and approved the agreement between the two sides.
The agreement is that SK Innovation will pay 2 trillion won in cash and 1 trillion won in royalties as compensation to LG Energy Solutions. Initially, LG insisted on 3 trillion won and SK insisted on 1 trillion won, but it was decided at the middle line, 2 trillion won. The two companies also agreed to end all ongoing disputes and lawsuits targeting each other.
SK Innovation’s decision to pay LG Energy Solutions an astronomical amount of KRW 2 trillion, the largest ever intellectual property dispute, means that it has accepted the US International Trade Commission’s ruling in February regarding the infringement of trade secrets.
As a result, the 10-year import ban on SK Innovation by ITC was lifted, and SK Innovation was able to continue its business in the US.
As for SK Innovation, business uncertainty in the U.S. has been removed, and damages expected in the event of a disruption in the supply of batteries to customers such as Volkswagen and Ford, as well as sunk costs and facility relocation burdens due to the suspension of the construction of a plant in Georgia have been relieved.
LG Energy Solutions collected a huge settlement amount of 2 trillion won. It also got the justification that the company was “right”. Even if not, it has secured a tremendous’real shot’ as an LG energy solution that is promoting listing within the year to raise investment funds.
However, due to the long dispute, LG Energy Solution and SK Innovation have already suffered deep internal wounds. Both companies are reported to have lost hundreds of billions of won in litigation and lobbying over the past two years. Some have observed that if the lawsuit is prolonged, more than 1 trillion won is expected to bleed. It was a situation where the belly button could become bigger than the stomach.
The fight between the two companies may have had some effect on the declaration of internalization of batteries by Volkswagen of Germany, the world’s second-largest electric vehicle company, in the middle of last month.
During the week of the announcement of Volkswagen’s internalization of batteries, LG Chem (parent company of LG Energy Solutions) and SK Innovation’s market capitalization evaporated 13 trillion won.
In the course of a long dispute, the two companies caused an unstable battery supply chain in the global automobile industry, resulting in a decline in reliability, and allowing the Chinese battery to expand its aggressive market.
The agreement seems to have been decisively influenced by the pressure and mediation of the US administration of Joe Biden and the Korean government. For the US government, it would have been difficult to tolerate the two companies’ battles to open holes in their electric vehicle battery supply chains and to lose jobs, as well as to give fishermen to Chinese companies.
Prime Minister Jeong Sye-gyun and other Korean government officials were also concerned about serious damage to national interests due to the prolonged battery dispute.
The agreement between the two governments may not have been the result of laying a mat for LG Energy Solutions and SK Innovation, which were looking for a justification for folding the’chicken game’.
The Washington Post (WP) evaluated this as “a victory for President Biden who wants to build jobs and electric vehicle battery supply chains in the US without taking either side.”
◇ China beats out… K battery in a hurry to grind
The global battery market, the electric vehicle market, which is the largest demand source, is now in its infancy, so there is no clear leader in the semiconductor market or a super gap in technology. Existing battery makers as well as auto makers are also entering the market.
According to SNE Research, a market research firm, China’s CATL held the top spot in the global battery market last year with a market share of 24%, but LG Energy Solutions followed closely with 23.5%. Japan’s Panasonic ranked 3rd with 18.5%, BYD (China) ranked 4th with 6.7%, and Samsung SDI and SK Innovation ranked 5th and 6th with 5.8% and 5.4%, respectively.
By country, it seems that Korea and China are in a fierce battle for the lead, but the situation is not simple. From January to February this year, CATL’s market share soared to 31.7%, but LG Energy Solutions fell to 19.2%.
In addition, Volkswagen announced that it will build six battery factories in Europe by 2030 to supply next-generation electric vehicle batteries.
In addition, from 2023, it is decided to increase the proportion to 80% by 2030 by installing a prismatic battery instead of the current pouch-type battery. China’s CATL, which produces prismatic batteries, was selected as a cooperative partner.
This is a bad thing for Korean battery makers, such as LG Energy Solution and SK Innovation, which mainly produced pouch-type batteries and supplied them to Volkswagen. Tesla, a leading global electric vehicle company, declared battery internalization early, and global automakers such as Toyota and Ford GM are rushing to produce batteries themselves. That’s not all. Apple, a mobile phone maker, has also started to develop electric vehicles with self-designed batteries. In particular, Japan’s Toyota has announced that it will unveil an electric vehicle test vehicle equipped with a’all-solid-state battery’ called the dream battery this year, and the competition to take the lead in the battery is burning.
In the chaos of not knowing where technology standards and market competition will flow, there is no time for SK Innovation and LG Energy Solutions to struggle with fighting’in the well’.
Sohn Seung-woo, a professor at the Department of Industrial Security, Chung-Ang University, said, “It is not desirable to prolong the dispute between LG and SK in a world where global battery competition is unfolding so fiercely that it is difficult to see ahead. We must compete but cooperate with each other, and the government must actively help with this,” he said.
“The dispute between the two companies will eventually give fishermen to China and Japan by defeat,” said Pil-soo Kim, a professor at Daelim University. “This agreement should be used as a starting point to further enhance the K-battery’s status and competitiveness.”