LG, SK Innovation close the book on EV battery IP dispute
South Korean rivals LG Energy Solution and SK Innovation inked a last-minute deal 11 April in their long-running electric vehicle (EV) battery intellectual property dispute, negating a February US trade court ruling and sparing President Joe Biden a difficult decision.
The companies agreed to settle all legal disputes in both South Korea and US after discussions ahead of an 11 April deadline for Biden to overturn the US International Trade Commission (ITC) ruling via presidential veto. The agreement also offers a lifeline to SK Innovation plans to build battery factories in the US while also saving automakers Ford and Volkswagen plenty of heartburn too.
SK Innovation will also pay LG Energy Solution 2 trillion won ($1.8 billion) in the form of lump-sum payments and a royalty, after entreaties from US political figures, including Senator Jon Ossoff, Democrat-Georgia, led to company representatives burning the midnight oil into the early hours this past weekend to overcome a gap between their positions.
The talks followed an ITC decision based on a petition from LG Energy Solution. LG Energy Solution said SK Innovation stole trade secrets its rival had developed for the battery manufacturing process by hiring dozens of key engineers and other employees.
As a remedy, the ITC said SK Innovation could not ship components to the US to manufacture its batteries but instead would have to find domestic suppliers — conditions that battery market analysts say would be difficult if not impossible to meet.
That put at risk an SK Innovation battery factory in Commerce, Georgia. In March 2019, SK Innovation broke ground in Georgia on a factory that would manufacture 9.8 GWh/year of batteries for EVs, and the same year announced plans for a second even bigger plant in the state.
SK Innovation said in a statement 10 February the plants would not go ahead if aid was not forthcoming from the White House.
IHS Markit Senior Analyst Chloe Holzinger said the deal was positive for the growing US EV industry, as it removes much of the doubt around the Georgia plant, but the focus would now shift to how the payout would affect SK Innovation's battery costs and long-term expansion plans.
Biden dodges a bullet
The deal meant Biden was able to thread the needle on several key issues simultaneously: thousands of jobs in a state where the electorate is split evenly between Democrats and Republicans; not undermining intellectual property rules; his electrification of the transportation sector plans; and the needs of the US energy transition supply chain.
As a result, Biden was fulsome in his praise for the compromise. "This settlement agreement is a win for American workers and the American auto industry. A key part of my plan to Build Back Better is to have the electric vehicles and batteries of the future built here in America, all across America, by American workers," he said in an 11 April statement.
The deal also found favor with Biden's South Korean counterpart, President Moon Jae-In, who tweeted: "The agreement between the two companies is very meaningful in that it is in line with both national interests and the long-term interests of individual companies that domestic industrial ecosystem members compete and collaborate based on mutual trust."
World leaders are worried about their supply chains as the electrification boom gathers pace, particularly in power generation and transportation. The Biden administration on 24 February said it would review key US supplies, involving EV batteries, to ensure other countries cannot weaponize them against the US.
"Remember that old proverb," Biden said in February when he signed the executive order to review supply chain issues. "'For want of a nail, the shoe was lost. For want of a shoe, the horse was lost.' And it goes on and on until the kingdom was lost, all for the want of a horseshoe nail. Even small failures at one point in the supply chain can cause outside impacts further up the chain."
Biden re-emphasized this concern in his 11 April statement, saying: "We need a strong, diversified and resilient US-based electric vehicle battery supply chain, so we can supply the growing global demand for these vehicles and components - creating good-paying jobs here at home, and laying the groundwork for the jobs of tomorrow."
It was a position that found support from LG Energy Solution, with CEO Jong Hyun Kim noting in the statement announcing the end to the dispute and impasse that the company was making investments that aligned with Biden's environmental policies.
In March, the company announced plans to invest $4.5 billion through 2025 in new US production facilities, which it said will create 10,000 clean energy jobs and drive down the cost of EV and energy storage facilities.
The investment would increase the company's US battery manufacturing capacity by nearly 70 GWh compared with previously announced plans for its own production facilities and a joint battery venture with General Motors to supply the automaker's drive to expand its EV offerings in the next few years.
GM rivals Ford and Volkswagen are also ramping up their EV ambitions, plumping for SK Innovation as their battery supplier, with the former supporting SK Innovation in its fight at the ITC, arguing that battery suppliers must be selected at least four years before the launch of a product, and that batteries are developed for specific vehicles.
SK Innovation's batteries are set to support Ford's plans to produce an electric version of its best-selling F-150 truck in addition to supplying VW's planned EV plant in Chattanooga, Tennessee.
Responding to the deal involving its battery supplier, Ford said it was pleased SK Innovation and LG Energy Solution had settled their differences.
Volkswagen Group of America CEO Scott Keogh also expressed support for the agreement and praised the Biden administration's role in bringing an end to the dispute. "We would like to thank the Office of the United States Trade Representative and the [Biden administration] for their role in bringing this issue to a successful resolution," he said in a statement.
Investors were also supportive of the deal 12 April, with SK Innovation shares opening 15.7% above their 9 April close and closing 11.7% higher day on day. The share price of LG Energy Solution parent LG Chem opened 4.1% higher 12 April, although it finished the session only 0.6% higher day on day.
- International Finance Corporation inks first certified African green loan
- EU states slow to claim recovery funding for greener roads and heat
- Private sector must fund bulk of EU's climate change projects: CLC CEO
- Danish companies’ hydrogen pipelines to cut across northern Europe
- Energy transition demands a critical minerals supply chain transformation: IEA
- Readily available technologies can plug global methane releases: UN study
- Asset managers unhappy with multiple climate disclosure regimes, seek consistency
- Vattenfall unveils electric, hydrogen vehicle concept in the UK