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  5. LG Chem Ltd. Business Report FY ended Dec. 2020

LG Chem Ltd. Business Report FY ended Dec. 2020

Financial Overview

 (in KRW millions)
FY ended Dec. 31, 2020 FY ended Dec. 31, 2019 Rate of Change
(%)		 Factors
Overall
Sales 30,076,510 27,353,078 10.0 -The company recorded its highest ever profit mainly due to increased sales of EV batteries.
Operating income 1,798,159 825,415 117.8 -In the petrochemical and other sectors, the company is improving operational efficiency and profitability.
Net income 682,408 376,104 81.4
-Sales by Business Sector
Battery Solution 12,363,524 8,350,251 48.1

 

LG Energy Solution formally launched

-On December 1, 2020, the company's battery business was spun off to form LG Energy Solution Ltd. LG Energy Solution has a workforce of about 22,000 globally including 7,000 in South Korea and 15,000 in other countries. The company has plants in Ochang-eup, South Korea; Michigan, the U.S.; Nanjing, China; and Wroclaw, Poland. It also has R&D centers in Daejeon, South Korea; Michigan, the U.S.; Nanjing, China; and Frankfurt, Germany. It plans to generate sales of KRW 13 trillion (JPY 1.22 trillion) in 2020 and more than KRW 30 trillion (JPY 2.82 trillion) in 2024. (From a press release on December 1, 2020)

　

Joint Ventures

<GM/USA>
-In November 2020, GM announced it was seeking 1,100 employees for Ultium Cells LLC plant, a joint venture with LG Chemical that is now under construction, Ohio, to produce Altium battery cells.he plant, which will cover an area of 3 million square feet, invest $2.3 billion to mass produce Altium battery cells for use in electric vehicles (EVs).2The plant, which is expected to be operational by April 2022, is adjacent to the former GM Roadstown plant and will have an annual production capacity of more than 30 GWh, with room for expansion. The company is aiming to reduce the cost of battery cells to less than $100/kWh at full capacity, and the new Altium battery will be a large pouch-shaped cell with high nickel content and minimal cobalt. The battery will also be used in GM's own brand of electric vehicles (EVs) and in the jointly developed Honda EV.
(GM press release on November 5, 2020)

＜Hyundai/Indonesia＞
-Reported on June 24, 2020, Hyundai Motor Group and LG Chem Ltd are considering establishing a joint venture in the field of manufacturing electric vehicle batteries in Indonesia. LG Group Chairman met with Hyundai's Deputy Executive Chairman on June 22 to discuss future battery and technology cooperation. LG Chem and Hyundai Motor Group confirmed the meeting but said no decision had yet been made. According to Hyundai, Hyundai Motor Group collaborates with LG Chem on various projects. However, there has not been any concrete discussion about the battery joint venture in Indonesia. (From an article of Republika on June 24, 2020 and multiple sources)

＜Vinfast/Vietnam＞
-In May 2020, Free Malaysia reported that Vietnam’s first domestic car manufacturer, VinFast (VinFast Trading and Production LLC), part of Vietnam's largest conglomerate Vingroup Company, plans to start production of its first electric vehicle (EV) model in 2021. The EV can travel up to 500km on one charge and will use battery cells made by LG Chemical. In April 2019, LG Chemical announced the establishment of a joint venture with Vinfast, VinFast Lithium-ion Battery Pack LLC, to produce lithium-ion batteries for the automaker’s electric scooters and EVs.
(From an article of Free Malaysia Today on May 28, 2020)

　

Contracts

Emerging Electric Bus Manufacturer Proterra/USA
 -Proterra Inc. announced on December 10 that it has opened an EV battery production line in its bus assembly plant in the City of Industry, Los Angeles County, California. The batteries manufactured at the City of Industry facility will feature Proterra’s redesigned modules with next-generation cells developed with LG Energy Solution. (Proterra press release on December 10, 2020)

Skoda Enyaq iV
-On September 9, 2020, Czech Invest reported that LG Chem will supply electric vehicles (EV) batteries to Skoda’s first electric SUV Enyaq iV. With this, LG Chem has become a supplier of Volkswagen Group such as Audi and Volkswagen as well as Skoda for the electric vehicles. Since Enyaq is based on Modular Electric Drive (MEB) platform for mass production of pure electric vehicles, LG Chem could possibly gain the momentum for future supply deal of VW’s MEB models. Batteries are supplied from LG Chem’s Wroclaw plant in Poland. (Czech Invest press release on September 9, 2020)

　　

Other Developments

-L&F Co., Ltd. (L&F) announced that it has signed a contract with LG Energy Solution to supply cathode materials for lithium-ion batteries to LG Energy Solution and its subsidiaries’ plants inside South Korea and overseas. The contract period is valid from January 2021 to December 2022, and the total amount of the order is expected to reach KRW 1.45 trillion (JPY 138.2 billion). (From a press release dated December 16, 2020)

-Several media sources reported that Samkee Automotive Co., Ltd. (Samkee Automotive) has received a new order for electric vehicle (EV) endplates worth KRW 138.6 billion (JPY 12.2 billion) from LG Chem Ltd. The new supply will begin in February 2021. Samkee Automotive currently supplies EV components to European premium brands and German automakers. It also plans to start supplying EV components to US automakers within 2020. (From various releases on June 18, 2020)

　

R&D Expenditure

 (in KRW millions)
FY ended Dec. 31, 2020 FY ended Dec. 31, 2019 FY ended Dec. 31, 2018
Amount 1,139,237 1,130,986 1,066,415
% of sales 3.8％ 4.1％ 3.9％

　

R&D of LG Energy Solution

-The company is engaged in research and development of batteries for automobiles such as BEVs and PHEVs, as well as for smartphones, power tools and homes. In addition to the battery research center in Korea, the company conducts R&D in collaboration with the US, Germany, Poland, China, and Japan.

R&D locations Research Activities Specifics
Battery Research Center Development of battery materials -Development of high-capacity high nickel cathode materials
-Development of high-capacity, fast-charging anode materials
-Development of high performance (high temperature durability/rapid charging/safe) electrolytes
-Development of highly safe (flame/heat resistant) separators
Advancement of battery manufacturing processes -Development of manufacturing and assembly processes for electrodes
Automotive Battery Development Center BEV, PHEV batteries (cell/pack development) -High capacity, high energy density BEV and PHEV batteries (cells/pack)
Compact Battery Development Center Development of batteries for next-generation new markets
ESS Battery Development Center Development of storage batteries -Development of long-life, high-efficiency and low-cost batteries for power grids, industrial and residential applications

　　

Capital Expenditure

 (in KRW billions)
FY ended Dec. 31, 2020 FY ended Dec. 31, 2019 FY ended Dec. 31, 2018
in KRW billions 5,300,000 6,900,000 4,600,000

-The main capital expenditures in the battery business unit were for cylindrical batteries and automotive batteries in China and Poland.

 

Investment

＜Korea＞
-The company announced a plan to increase its carbon nanotube production capacity at its plant in Yeosu-si, South Jeolla Province, by 1,200 tons. The South Korean company plans to invest KRW 65 billion (JPY 5.7 billion) in the three months from January to March 2021 for this project. Upon completion, the company's annual output will be expanded to 1,700 tons from the current 500 tons. With this plan, the company aims to capture the rapidly growing demand in the market of carbon nanotubes, which are used as positive electrode conductive materials for lithium-ion batteries. Also, it plans to boost sales to automakers based in regions such as North America, Europe, and China and is considering building additional plants in 2022. (From a press release on April 27, 2020)
＜China＞
-Several Chinese media sources reported that LG Chem Ltd. (LG Chem), LG Electronics Inc. (LG Electronics) and the Nanjing Economic and Technological Development Zone (NETDZ) have signed investment agreements at the Second China-Korea Trade and Investment Expo held in the city of Yancheng, Jiangsu Province. Under the agreement, LG Chem will invest USD 500 million to build a plant to manufacture cylindrical automotive batteries in the NETDZ mainly to supply OEMs such as Tesla and BMW. After the completion, the plant will generate annual sales of CNY 10 billion. (From various media sources dated November 2, 2020)
<Poland>

-The company announced that it will raise EUR 550 million (JPY 63.92 billion) from financial institutions including the Korea Development Bank. The company will be able to secure stable funds for the expansion of a plant for electric vehicles (EV) batteries in Poland. LG Chem plans to make capital investments of KRW 3 trillion (JPY 264 billion) in the battery field in 2020. At the moment, the South Korean company has a backlog of orders for EV batteries of KRW 150 trillion (JPY 13.2 trillion). Also, the company has set a target to expand its sales in the battery segment to KRW 30 trillion (JPY 2.64 trillion) in 2024.。(From a press release on April 23, 2020)