Korea Takes Over Battery Leadership from Japan

Samsung SDI’s strong growth and a recent surge by LG Chem have given Korea its first lead over Japan’s Panasonic and Sony in the global lithium-ion battery market, according to JoongAng Daily.

In 2011 23.6% of the global lithium-iron battery market belonged to Samsung SDI, the Samsung Group’s battery and liquid crystal display unit. Panasonic, Japan’s top battery maker, claimed only 18.1%, according to Japan’s tech market researcher IIT.

In third place was Korea’s LG Chem with a 16.4% market share, followed by Sony with 8.9%, down from 14.8% in 2008.

Together Samsung and LG controlled 40% of the market, a larger share than several leading Japanese rivals combined for the first time, according to Japan’s Nihon Keizai Shimbun (Nikkei). It foresees Samsung adding another 1.1% to its market share to keep its global lead this year. It is currently in talks to supply batteries for BMW’s electric vehicles which are currently undergoing consumer testing.

IIT projects LG Chem to pass Panasonic by 0.3% this year to become the second largest battery maker. LG Chem has put itself at the forefront of EV batteries, a potentially fast-growing segment.

Rechargeable lithium-ion batteries were pioneered by Sony in 1991. As of 2008 Japanese firms claimed over half of the global market with Korean firms at 20%. The gap between the two nations closed quickly because of aggressive R&D efforts by the Koreans. LG Chem managed to develop rechargeable batteries in three years compared with 10 years for its Japanese rivals. It developed the world’s first pillar-shaped lithium-ion batteries for 2,200 milliamp-hour (mAh)-class laptops in 2001 and batteries for 2,600 mAh-class in 2005, pulling ahead of Japanese rivals.

The Koreans have also been quicker to cut costs by sourcing raw materials from China. Now Panasonic is responding by investing $366 million to build a new plant in China to shift more of its lithium-ion battery production from Japan in a bid to recover lost market share by cutting production costs, reported Nikkei. It hopes to cut manufacturing costs by 30% and boost production volume for the batteries in China to 50% by 2015.

Korean companies have also benefited from the earthquake and tsunami that devastated northeastern Japan in March of 2011, creating supply bottlenecks for many Japanese battery makers. The damage suffered by Sony’s battery production base in Fukushima Prefecture caused its market share to plunge from around 11.7% to 8.9%.

Analysts see the current leadership shift in lithium-ion batteries as a repeat of the shift in the global semiconductor market. Until 1987 Toshiba, NEC, Fujistu and Hitachi claimed over 70% of the global dynamic random-access memory (DRAM) market. A decade earlier US firms like Intel, Texas Instruments and Motorola began cutting into market share.

But within a decade Korean chipmakers moved aggressively into the market. Samsung Electronics took the top spot with DRAM chips for small computers. In 1999 Hynix, formed by the merger of LG Semicon and Hyundai Electronics — became the No. 2 DRAM maker. Today Samsung is the undisputed world leader in chipmaking with 45% of the global DRAM market.

Samsung focused aggressively on small chips for PCs while Japanese rivals focused on larger chips for bigger business computers. Consequently Samsung’s share of the DRAM market soared from 12.7% in 1991 to 45.1% in 2011. It’s top Japanese DRAM rival Elpida and the world’s No. 3 saw its share plunge from 20.1% to 12.2%, leading to its bankruptcy last month.

There remains much uncertainty in the lithium-ion battery market. Not only are EVs not selling nearly as rapidly as carmakers had expected, emerging battery technologies using carbon nanotubes and other exotic materials that dramatically improve energy density may give market access to new players. Advances in fuel cell technology may also disrupt projections in the global EV battery market.