[Edaily Reporter SOYEON KIM ] While South Korea’s three major battery manufacturers saw significant improvements in their second-quarter earnings thanks to one-time factors, they will once again face a serious test of their profitability in the third quarter. With the recovery in electric vehicle demand proceeding slowly, the key will be whether earnings from energy storage systems (ESS) improve. ESS is emerging as the key variable that will determine the performance of the three battery manufacturers in the second half of the year.

According to financial information provider FnGuide Inc. on the 29th, the consensus estimate (average of securities firms’ forecasts) for LG Energy Solution’s third-quarter operating profit this year stands at 308.1 billion won. LG Energy Solution posted an operating profit of 113.3 billion won in the second quarter, returning to profitability for the first time in three quarters. Production subsidies, including the U.S. Advanced Manufacturing Production Tax Credit (AMPC), totaled 241 billion won and were reflected in those results.

As LG Energy Solution expands its ESS production in North America, it is gradually reducing the fixed-cost burden associated with initial operations. The share of ESS in the company’s total revenue has also expanded to the high 20s percent. With the stagnation in electric vehicle demand lasting longer than expected, improved profitability in the ESS business is seen as a key factor that will determine the company’s performance in the second half of the year.

In the first half of this year, LG Energy Solution secured more than 3 trillion won in new ESS orders, including projects for artificial intelligence (AI) data centers. Industry observers expect LG Energy Solution’s ESS business to turn a profit in the fourth quarter of this year, even excluding AMPC. The outlook is that the intrinsic profitability of the ESS business will improve as utilization rates at North American production facilities rise.


With the recovery in demand for electric vehicle batteries remaining limited, ESS has emerged as the main driver of earnings. However, profitability is expected to vary significantly among companies. Although LG Energy Solution incurred initial operating costs for its ESS battery production facilities in North America, the North American ESS business is expected to gradually become profitable.

The consensus estimate for SAMSUNG SDI CO.,LTD.’s third-quarter operating profit this year is 131.8 billion won. After posting losses for seven consecutive quarters, SAMSUNG SDI CO.,LTD. successfully returned to profitability in the second quarter, emerging from its losing streak. Some securities firms are forecasting third-quarter operating profit in the range of 200 to 300 billion won, raising the possibility that the company could post results exceeding market expectations. The industry estimates that a compensation payment of approximately 150 billion won resulting from the liquidation of the joint venture with GM will be reflected in this quarter’s earnings.

In August, SAMSUNG SDI CO.,LTD. terminated its North American battery joint venture agreement with GM and decided to operate the relevant production facilities independently. In addition, the company decided to sell approximately 4.4 trillion won worth of its stake in Samsung Display, representing one-third of its holdings. Using the funds secured from this sale, the company is expected to accelerate the expansion of its production capacity (CAPA) to meet North American ESS demand. Once the North American ESS production line begins full-scale operations in the fourth quarter, this is expected to provide a boost to earnings.

SK On posted an operating profit of 821.8 billion won in the second quarter of this year, returning to profitability for the first time in seven quarters. However, one-time factors, such as compensation received from clients, played a significant role in the improvement of its financial results. The securities industry estimates that one-time gains, stemming from the termination of the joint venture with Ford Motor Company, amounted to around 1 trillion won. As these one-time effects will disappear in the third quarter, the key focus will be on how much SK On can boost the core profitability of its battery business.

SK On is also cultivating ESS as a new growth engine. SK On recently signed a supply contract with U.S. ESS company “NeoVolta Power” for ESS battery cells, estimated to be worth 1.5 trillion won. The supply will be produced at SK On’s plant in Georgia, marking the company’s first step into the U.S. ESS market. In addition, the company plans to supply 1 GWh of ESS batteries—an order received from Flatiron last year—in the fourth quarter.

Analysts note that, ultimately, the second-half performance of the three battery companies will depend on how quickly they can achieve profitability in their ESS businesses after factoring out one-time items. With the recovery in demand for electric vehicle batteries remaining limited, all three companies are seeking a breakthrough by expanding their ESS production capacity, primarily in North America. LG Energy Solution is expanding its ESS production capacity by utilizing its Lansing, Michigan, plant as well as production facilities at joint ventures (JVs) with GM and Honda, while SAMSUNG SDI CO.,LTD. and SK On are also accelerating efforts to utilize their North American production bases for ESS production.

Jeon Yu-jin, an analyst at iM Securities, explained, “The recent expansion of ESS demand related to the construction of AI data center power plants in the U.S. is very clear,” adding, “In addition, the Trump administration is strengthening its exclusion of Chinese products by restricting the installation of Chinese-made power equipment and ESS systems.”