Korea's three battery makers all returned to profit in the second quarter this year. A full earnings rebound had been expected only in the second half, but the companies achieved a turnaround earlier than anticipated.
The battery industry's growth is driven by two pillars: energy storage systems (ESS) and the European electric vehicle (EV) market. In the ESS segment in particular, LG Energy Solution (373220) is strengthening its position as a leading player by leveraging production bases it built preemptively in North America, while Samsung SDI (006400) has unveiled a differentiation strategy focused on uninterruptible power supplies (UPS) and battery backup units (BBU) that enhance the stability of artificial intelligence (AI) data centers. SK On also succeeded in slimming down ahead of an earnings recovery, cutting costs by about 500 billion won through a reorganization of its production system.
Samsung SDI reported second-quarter consolidated revenue of 3.7688 trillion won and operating profit of 203.8 billion won on the 30th. Revenue rose 18.5% from a year earlier, and operating profit turned positive for the first time in seven quarters. Even excluding 107.7 billion won from the U.S. government's Advanced Manufacturing Production Credit (AMPC), the company posted a profit of 96.1 billion won. The industry had expected Samsung SDI to narrow its second-quarter operating loss to 27.3 billion won and turn a profit sometime in the second half, but the company earned about 220 billion won more than that.
Samsung SDI was able to turn a profit thanks to ESS. Based on the competitiveness of its prismatic batteries, Samsung SDI signed long-term supply contracts with major U.S. ESS customers, and in Korea it won 66% of a next-generation distribution grid ESS project, laying the groundwork to preempt the market.
In particular, high-output batteries related to AI data centers, such as uninterruptible power supplies (UPS) and battery backup units (BBU), contributed significantly to earnings. UPS and BBU are devices that immediately supply emergency power to prevent data loss when a data center loses electricity. Samsung SDI holds more than half of the UPS and BBU market share and forecast that this year's revenue would grow 70% from last year.
In the EV segment, in the first half the company won a new project from Mercedes-Benz, securing all three German automakers as customers, and became the first in the industry to win a project for cylindrical batteries for hybrid electric vehicles.
SK On reported second-quarter revenue of 2.946 trillion won and operating profit of 821.8 billion won. It was also SK On's first profit in seven quarters. SK On explained that operating profit increased sharply due to factors such as expanded sales volume in Asia, receipt of compensation from customers, and an increase in AMPC receipts. "Although many one-time factors are included, cost-reduction efforts produced an improvement in profitability," an SK On official said.
Earlier, LG Energy Solution reported second-quarter revenue of 7.5602 trillion won and operating profit of 113.3 billion won. It marked a return to profit for the first time in six months, since the fourth quarter of last year. Lee Chang-sil, CFO of LG Energy Solution, said, "Revenue rose 15% from the previous quarter, driven by increased shipments of mid- to low-priced EV products and cylindrical batteries, as well as expanded ESS production capacity in North America."
The battery industry expects the earnings improvement to become more pronounced in the second half. LG Energy Solution forecast that its 50GWh (gigawatt-hour) ESS production facilities will all be operational and that battery output in the second half will more than double compared with the first half. Samsung SDI projected 70% revenue growth for UPS and BBU, in which it holds a 50% market share. The two products are used as backup power sources for data centers.
In the second quarter, SK On completed the process of winding down the "BlueOval SK" system, a joint venture with Ford, launched a standalone plant in Tennessee, and completed a restructuring of its financial structure. SK On forecast that operating the standalone plant would produce a total profitability improvement of 500 billion won, including 300 billion won in depreciation costs and 200 billion won in interest costs.
The battery industry dismissed concerns raised in some quarters about a growth stagnation in the North American ESS market. Cho Yong-hwi, executive vice president and head of Samsung SDI's ESS Business Team, said, "Reflecting projects with a high likelihood of being won in the second half, production capacity will exceed order volume from 2028."
The outlook for the EV market is also bright. Europe's EV penetration rate is expected to rise from below 20% last year to the mid-20% range this year. As demand for production within Europe grows, a favorable environment has been created for Korea's three battery makers, which operate plants in Hungary and Poland.
