US trying to lower the dependence on overseas batteries… SK raises expectations for Biden’s ITC veto

Input 2021.02.27 06:00

As the US government has made a move to reduce its overseas dependence on key items such as semiconductors and batteries, it is also interested in whether it will affect the decision made by the US International Trade Commission (ITC) regarding SK and LG’s battery lawsuit. ITC SK innovation (096770)LG Energy Solutions accepted the claim that it violated the trade secret of the electric vehicle battery.

The ITC ruling remains about a month and a half before it takes effect. If US President Joe Biden does not exercise his veto during this period, SK Innovation will be banned from producing and importing batteries in the United States for 10 years, except for Volkswagen and Ford, which received a grace period of two and four years.

Industry is paying attention to President Biden’s recent executive order reviewing the supply chain of major industries in the United States, and the US government’s move to encourage domestic battery production. President Biden signed an executive order on the 24th (local time) to conduct a 100-day review of the supply chain of four key items, including semiconductor chips, rare earths, and pharmaceuticals, including large-capacity batteries for electric vehicles.

These items have in common that the U.S. had difficulty in supply and demand due to the Corona 19 pandemic. The US administration plans to consider cooperating with the alliance or encouraging the production of key items in the country. It can be interpreted as reflecting the intention to prevent China’s technological rise and reduce US dependence on China.

Currently, battery factories in the United States are far short of those in China. According to’Benmark Mineral Intelligence’, there are currently 93 giga factories of lithium-ion battery cells in China. In comparison, there are four in the United States, a difference of almost 23 times. The company predicts that by 2030, there will be 47 more in China, while six in the US.

SK Innovation is building battery factories 1 and 2 by investing $2.6 billion (about 3,160 billion won) in Georgia, raising expectations carefully. The first plant, which SK Innovation started construction in the first quarter of 2019, is expected to operate from the first quarter of 2022, and the second plant is also being built to enable mass production of batteries from 2023. The two factories in Georgia are expected to have a production capacity (21.5GWh) capable of supplying power to more than 300,000 electric vehicles every year. It is estimated that about 2600 jobs are created.

An official from SK Innovation said, “Electric vehicle batteries are being discussed as a national strategic item by the Biden government that values ​​environment-friendly, and if SK’s Georgia battery plant closes, there is a possibility that the right to veto will be exercised because there is no other alternative.” “We regret that the ITC ruling focused on the destruction of evidence, not the fact of infringement of trade secrets, and we will do our best to correct the decision through a presidential review that remains.”

Georgia Governor Brian Kemp said, “ITC’s recent decision puts SK Innovation’s 2,600 jobs and investments in innovative manufacturing at risk. The long-term prospects of SK Innovation’s factory in Jackson County, Georgia will be significantly affected.” He also made a statement.

After the ITC ruling, Jim Parley, Ford’s chief executive officer (CEO) of Ford, a major consumer of SK Innovation, said, “The agreement between the two suppliers of (electric vehicle batteries) will ultimately be in the best interests of US (electric vehicle) manufacturers and workers” Said. Volkswagen also asked the US government to “make use of electric vehicle batteries produced by SK Innovation for at least four years,” saying, “We suffered unintended damage due to a dispute between two Korean battery suppliers.”

However, there is a prospect that it will not be easy to exercise the veto power of the US President overturning the ITC ruling on trade secrets. If President Biden does not exercise his veto and the ITC ruling takes effect, SK Innovation will immediately appeal to the Federal High Court. After that, the decision of the Federal High Court must be issued before it goes to a civil lawsuit in the Delaware Federal Court, which is expected to take two to three years.

Losing the appeal puts SK at a more disadvantageous position in negotiations with LG. Since 2010, there have been a total of six lawsuits for infringement of trade secrets in which an import ban order was issued in the final ITC decision, and five of them have appealed, but the results have never changed.

An industry insider said, “It seems unlikely that the president’s veto is likely to be exercised because ITC gave SK Innovation a grace period for supplying batteries for two and four years, respectively, only when supplied from factories in the United States such as Volkswagen and Ford. It is true that looking at the recent actions of the US government, it is true,” he said. “If the two companies do not rush to an agreement, there is a high possibility that the market will be taken over by Chinese battery companies in the future, and measures are urgent.”