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SK Innovation pins hopes on Biden after EV battery IP spat ruling favors LG

11 February 2021 Keiron Greenhalgh

SK Innovation was handed another defeat in the electric vehicle (EV) battery manufacturer's heated trade secrets dispute with South Korean rival LG Chem, but hopes President Joe Biden will come to its rescue after a 10 February US International Trade Commission (ITC) ruling.

"We will do our best to correct the decision through the Presidential Review," it said.

SK Innovation is pinning its hopes on Biden's prerogative to nullify rulings by the ITC. The South Korean company is dangling a carrot of 6,000 jobs in Georgia in front of a politician whose plans to combat climate change and rebuild following the COVID-19 pandemic with a promised 100,000 green jobs owe a great deal to support from the Peach State, especially in the US Senate.

In March 2019, SK Innovation broke ground in Georgia on a factory to manufacture 9.8 gigawatthours of batteries a year (GWh/year) for EVs, and the same year announced plans for a second even bigger plant in the state.

SK Innovation said in a statement late 10 February the plants would not go ahead if aid was not forthcoming from the White House. It warned: "The damage will not be limited to SK, but will … affect the entire Georgian economy and society as well."

The White House did not respond to an IHS Markit request for comment 11 February.

The ITC decision, which followed a petition from LG Chem citing Section 337 of the Tariff Act of 1930 related to the company's Holland, Michigan, facility, banned SK Innovation from exporting various lithium-ion batteries and components to the US for 10 years.

That decision was the latest ratcheting up of a row that began in 2017 when LG Chem accused former employees of breaching noncompete contracts after joining SK Innovation. LG Chem prevailed in domestic South Korean courts. But when the spat came to US shores and courtrooms, it added a dimension of intellectual property "misappropriation."

Impact on Ford, VW

In its latest ruling, the ITC did allow two of SK Innovation's top customers in the US some breathing room. It gave Ford four years to find a new domestic supplier and German automaker Volkswagen (VW) two years to do the same for its US operations. SK'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.

Both Ford and VW said 11 February that the ruling had not affected their plans, although neither would say where they planned to source the batteries they will need if President Biden fails to aid SK Innovation.

"This decision does not change our commitment to produce EVs in Chattanooga … in 2022," a spokesman for VW said.

A Ford representative told IHS Markit the ITC decision supported the company's plans to bring an all-electric F-150 to market in mid-2022. "Providing this zero-emissions, purpose-built truck for our customers is an important part of our plan to lead the electric vehicle revolution and is a top priority for the company," the spokeswoman said.

But Ford CEO Jim Farley went on Twitter later 11 February to urge the rival battery suppliers to come to a "voluntary settlement," which he said would be "ultimately in the best interest of US manufacturers and workers."

Ford supported 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. "EV batteries cannot be manufactured in isolation but are an integral aspect of the design plan for the electric vehicle and its other components," the automaker said in a filing with the ITC.

The supply chain for EVs, especially in the US, is having enough difficulties even without the decision.

According to IHS Markit Senior Analyst Chloe Holzinger, there has been far less public funding for lithium-ion battery cell manufacturing in the US, compared with Europe and China. "Increased localized cell production would certainly help support the growing US electric vehicle industry," said Holzinger, whose research focuses on battery and energy storage. As an example, she cited Swedish battery manufacturer Northvolt securing $2.73 billion in fresh funding from European governments, banks, and equity financiers.

"Even before the current global pandemic, the lithium-ion battery value chain was already starting to localize as governments sought to increase local production and reduce dependencies on foreign manufacturing, while companies sought to reduce logistics expenses by building facilities closer to their customers," added Holzinger.

SK Innovation's ability to do so is now in "jeopardy" due to the ITC decision, said Holzinger. The company's first plant was supposed to be operational by the end of 2021 with an annual production capacity of 9.8 GWh, which Holzinger said would make it one of the top three lithium-ion battery cell manufacturing facilities in the US, alongside the Tesla Gigafactory in Nevada and LG Chem's factory in Michigan.

Ball in Biden's court

So that leaves the ball in President Biden's court, although he won't be the first major politician to try to tackle the conflagration between SK Innovation and LG Chem. Only last week, South Korean Prime Minister Chung Sye-kyun made a last-minute attempt to convince the companies to sort out their differences by appealing to national pride, according to local media.

"The future of the so-called K-battery industry will be immense, so I hope the two companies stop fighting over small issues but strive toward the global market by resolving the problem pre-emptively," Chung said in a televised debate 4 February.

"I have reached out to the top executives at both companies, calling them and meeting them, to urge them to resolve the issue. US politicians are also urging for it to be resolved. It's really embarrassing," he said, adding the dispute would only benefit Chinese and Japanese battery makers.

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