Expansion of investment in U.S. LFP production line… Signed a KRW 96.2 billion contract with a domestic equipment company to expand ESS supply capacity in North America by converting electric vehicle equipment and securing domestic materials
Samsung SDI (006400) is accelerating its entry into the North American market by converting its electric vehicle battery production line in the U.S. to use for energy storage systems (ESS). Investment in related facilities is also becoming visible, with two domestic equipment companies recently signing a contract to supply battery production facilities worth a total of KRW 96.2 billion. This is a move to increase the production facility operation rate, which has been lowered due to the slowdown in demand for electric vehicles, and at the same time secure supply capacity in the ESS market, which continues to grow.
The production transition is centered around the Star Plus Energy (SPE) plant in Indiana, USA. Samsung SDI is converting part of the existing nickel, cobalt, aluminum (NCA) battery production line of the joint venture established with Stellantis to use for lithium iron phosphate (LFP) batteries. Supply chain reorganization in the North American ESS market is accelerating due to the strengthening of regulations on Chinese batteries in the United States and the increase in power demand due to the expansion of artificial intelligence (AI) data centers.
#### 96.2 billion won contract with equipment company… Expansion of U.S. LFP production line conversion
Battery equipment companies MOT and Phil Energy announced contracts to supply battery assembly equipment worth 10.1 billion won and 86.1 billion won, respectively, on the 21st. The contract period is until April 20, 2027 for MOT and April 1 of the same year for Phil Energy. Both companies did not disclose the contract partners for reasons of trade secrets.
The two companies are major equipment partners of Samsung SDI, and it is reported that the volume of this contract will be input into the lithium iron phosphate (LFP) battery production line for ESS at Star Plus Energy (SPE) in Indiana, USA. As Samsung SDI is in the process of converting its electric vehicle battery production facilities to ESS use, orders for assembly facilities are continuing.
Samsung SDI is converting some of the production lines built in SPE to use for LFP batteries. Unlike existing nickel, cobalt, aluminum (NCA) batteries, LFP requires separate facility investment due to differences in cell size and assembly process. Instead of building a new factory, it is a method of rebuilding production facilities according to product characteristics while using existing facilities.
LFP batteries have a lower energy density than ternary batteries, but are relatively inexpensive and have a long lifespan, making them suitable for large-scale power storage facilities. Samsung SDI, which has focused on high value-added ternary batteries, plans to increase its product competitiveness in the ESS market, which has been led by Chinese companies, by expanding local LFP production in the United States.
#### Increased orders due to reorganization of the U.S. supply chain... Focus on profitability after mass production
The U.S. energy storage system (ESS) market is growing centered on the expansion of artificial intelligence (AI) data centers and increased investment in renewable energy. As the supply and demand stability of the power grid and demand for large-scale power storage increase, tariffs and supply chain regulations on Chinese batteries are strengthened, expanding business opportunities for companies with local production capabilities.
In addition to converting its production facilities, Samsung SDI also began building a supply chain outside China for key materials. Last March, a supply contract worth about 1.6 trillion won worth of LFP cathode materials was signed with L&F, and on the 6th of this month, a long-term supply contract worth about 6 trillion won was signed with POSCO Future M. The contract with POSCO Future M covers existing ternary materials and future cooperation items, focusing on LFP anode materials.
In the North American ESS market, we also secured a large-scale battery supply contract. After signing a contract worth more than 2 trillion won with a U.S. energy infrastructure company at the end of last year, an additional contract worth about 1.5 trillion won was signed with a U.S. energy company in March of this year. The March contract volume is scheduled to be supplied sequentially from this year to 2029.
Performance is also showing signs of recovery. Samsung SDI recorded sales of KRW 3.7688 trillion and operating profit of KRW 203.8 billion in the second quarter of this year, turning a profit for the first time in seven quarters. The increase in sales of ESS for power and high-output batteries for data centers was reflected in the US Advanced Manufacturing Production Tax Credit (AMPC) of KRW 107.7 billion and the effect of tariff refunds.
If mass production of LFP batteries in the U.S. expands, supply of existing orders will begin in earnest, contributing to increased production facility operation rates and sales. Initial facility conversion costs and price competition with Chinese companies may affect profitability. Whether Samsung SDI can translate the large-scale orders it has secured into stable production and operating profits is expected to be revealed in the future operation performance of its U.S. plant.
