Firm to supply more coating for LG Energy Solution

According to The Elec LG Electronics is planning to expand its battery separator coating business,

The company’s Business Solution division is planning to expand researchers in the area.

It will likely attempt to expand separator supply to sister company LG Energy Solution.

It has previously used LG Energy Solution’s coating technology. However, LG Electronics is likely attempting to develop technology in the sector of its own, people familiar with the matter said.

Battery separators are currently in high demand and LG Electronics is preparing to capitalize on this as well as upcoming next-generation batteries, they said.

Currently,

LG Energy Solution outsources the coating of its battery separators to LG Electronics and Toray.

Chinese companies Semcorp and Senior suppies the bar film, and LG Electronics and Toray would coat them. Then they are supplied to LG Energy Solution.

LG Electronics’ Business Solution division recorded 6 trillion won in sales last year, with 4.2 trillion won coming from sales of IT device such as monitors and PCs to businesses.

The remaining 1.7 trillion won comes from solar cells, separator coating and other ventures.

Expanded battery production in the second half of 2020 led to high demand for coated separators, the people said. LG Electronics needed to offer enough production capacity to handle the bare films provided by LG Energy Solution’s suppliers, but failed to do so, they said.

Toray is also looking to expand its separator coating capacity in South Korea. Its subsidiary in South Korea, called Toray Battery Separator Film (Toray BSF), currently coats separators at its Gumi. It is planning to buy land at Ochang, where LG Energy Solution has a battery factory, to build another separator coating factory.

LG Electronics’ move is also likely a reaction to LG Energy Solution’s potential patent lawsuit with SK Innovation, another person familiar with the matter said.

The new joint venture would use existing THU facilities to manufacture battery separator film for automotive lithium-ion batteries for sale to LG Group in Europe and the United States.

To cater to projected demand growth, Toray and LG Chem have agreed to expand film substrate production facilities and install new coating facilities at the existing THU location. Toray has agreed to sell 20% of its stake in LTHS to LG Chem two and a half years after launching the joint venture. LG Chem would then manage joint venture operations.

LG Chem’s robust position in coating technology and Toray’s solid film substrate manufacturing technologies position those two entities well in battery separator films for automotive lithium-ion batteries, and both have been supplying to the global market.

LTHS will license from LG Chem and Toray the technologies necessary to produce separators for LG Group lithium-ion batteries. It should generate synergies from the technologies of its parents to produce top-quality automotive lithium-ion battery separator films, for which demand should surge in coming years. This joint venture should also secure stable customers and expand operations by drawing on the LG Group’s business model, which vertically integrates everything from battery materials through battery production.

The Toray Group will continue to develop, manufacture, and supply battery separator film and coating in Japan and Korea to meet customer needs.

Profile of LG Toray Hungary BatterySeparator Kft. (LTHS)

(1)	Location	Nyergesújfalu, Hungary
(2)	Principal business	Manufacture and sales of battery separator film
(3)	Shareholders	LG Chem (50%) and Toray (50%)

Profile of LG Chem, Ltd.

(1)	Location	Seoul, Korea
(2)	Representative	Hak-Cheol Shin, CEO
(3)	Principal businesses	Petrochemicals, advanced materials (including cathode materials, separators, and other battery-related materials), life sciences, batteries (through LG Energy Solution), others
(4)	Capitalization	391.4 billion won (around ¥38.2 billion)
(5)	Establishment	January 1947

Profile of Toray Industries HungaryKft. (THU)

(1)	Location	Nyergesújfalu, Hungary
(2)	Representative	Koichi Muramatsu
(3)	Principal business	Manufacture and sales of battery separator film
(4)	Capitalization^*	11,000 euros (around ¥1 million)
(5)	Net assets^*	215 million euros (around ¥28.5 billion)
(6)	Total assets^*	222 million euros (around ¥29.5 billion)
(7)	Shareholder	Toray (100%)
(8)	Establishment	April 2018

^*As of March 2021

Schedule

(1) Investment agreement date	October 27, 2021
(2) Planned joint venture agreement timing	First half of 2022

Note: The joint venture establishment would be after fulfilling regulatory requirements.

Outlook
Toray’s net proceeds from the establishment of LTHS with a 50:50 ownership ratio is expected to total around ¥10 billion (after tax) as a revaluation gain on investment. Toray is evaluating its earnings forecast for the fiscal year ending March 31, 2022, in view of the impacts of the planned joint venture and other factors, and will announce any revisions as soon as possible.