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Samsung SDI has raised 350 billion won in policy funds to support domestic battery and energy storage system (ESS) materials and components makers. The move is seen as a strategy to strengthen its contribution to the domestic industry and gain an edge ahead of a bid for the government-led ESS central contract market worth 1 trillion won.
According to industry sources on the 5th, Samsung SDI recently borrowed 350 billion won through the Supply Chain Stabilization Fund operated by the Export-Import Bank of Korea. The company secured the funds at a low interest rate in the 3% range, with a loan maturity set at three months. This is the first time Samsung SDI has used the supply chain fund.
The supply chain fund is a policy fund that lends money at low interest rates to companies contributing to the production of core industrial materials or components. In taking out the loan, Samsung SDI decided to use the funds to purchase battery and ESS-related materials and components produced by domestic small and mid-sized companies.
A financial industry official explained, "We understand that Samsung SDI first turned to the supply chain fund to procure key materials domestically," adding, "The government can help small and mid-sized companies through policy funds, and Samsung SDI can reduce procurement costs, so the interests of both sides aligned."
Samsung SDI's turn to the supply chain fund is interpreted as a move to reduce procurement burdens while also gaining an advantage in the ESS central contract market bid. The government is increasing ESS orders that can store electricity produced at power plants and supply it when needed, in order to complement renewable energy with irregular power generation. The Korea Power Exchange has held two bids so far and is set to hold a third bid worth 1 trillion won next month.
The industry is paying attention to the trend of increasing weight given to contributions to the domestic industrial ecosystem in evaluation criteria. In the preceding second bid evaluation, the weight of non-price indicators, including the use of domestically produced equipment and safety, expanded to 50% from the previous 40%. The weight for the third evaluation has not yet been disclosed, but the emphasis on non-price factors is expected to continue.
From the operators' perspective, solidifying the domestic supply chain is becoming more important than having price competitiveness. If Samsung SDI increases transactions with domestic small and mid-sized companies that struggle to find supply opportunities, it can raise the proportion of domestic materials used in its products while also strengthening the domestic industrial ecosystem.
Samsung SDI plans to leverage this to maintain its edge in the order competition. Looking at the total volume share in the first and second bids, Samsung SDI won the most at 55.8%. SK On and LG Energy Solution followed with 25.1% and 19%, respectively.
SK On and LG Energy Solution are also refining their production strategies to secure additional orders. SK On plans to convert part of a line at its domestic Seosan Plant No. 2 to build a 3GWh lithium iron phosphate (LFP) battery production line for ESS during the second half of this year. LG Energy Solution is building an LFP production line for ESS of more than 1GWh at its Ochang Energy Plant, targeting operation next year.
The reason the three battery makers are putting effort into the government's ESS bids is that the success or failure of the bids serves as a kind of reference when entering global markets such as the United States. Winning a large volume domestically and successfully operating it can be expected to simultaneously prove safety and business viability to the outside world. With growth in the electric vehicle market slowing, competition among the three battery makers over ESS orders is expected to intensify further.
An industry official said, "Large power companies consider business operation experience in the home country when selecting partners," adding, "If domestic performance lags behind competitors, it inevitably puts them at a disadvantage when negotiating with global players."
