When will Samsung start spending aggressively in batteries?

Batteries, biopharmaceuticals, and chips. These three products are largely considered to be Samsung’s three growth engines today by observers of the South Korean conglomerate.

Samsung SDI is the subsidiary that handles batteries.

But in contrast to the other two products, Samsung SDI’s investment in the battery sector is relatively lower compared to the other business units that handle the other products.

Samsung SDI is, according to analysts firms, also ranked fifth or sixth in terms of market share based on revenue or unit shipment.

However, in terms of profitability, it could be argued that the company is ranked first. During the third quarter of this year, Samsung SDI said it had reached double-digit operating margin rate for the first time. At least the rate is higher than CATL’s, the world’s largest battery maker, which recorded 9.5% in the same quarter.

So when will the South Korean battery maker begin to scale? Samsung SDI is slow to invest aggressively, likely because of some accidents involving its batteries.

In 2003, its cylinder batteries on Dell notebooks caught on fire. In 2016, there were the infamous Galaxy Note 7 fires. From 2018 up to 2019, energy storage systems in South Korea that used its batteries also caught on fire.

In 2015, Samsung’s Future Strategy Office, also known as the Corporate Strategy Office, the highest decision-making body of the conglomerate, conducted a business review of Samsung SDI and also noted that batteries were vulnerable to safety issues. The Galaxy Note 7 fires only reinforced this belief by Samsung’s leadership that batteries were prone to safety issues. Samsung SDI had been conservative in expansion and focused on profitability since then.

This is why in 2018 when it won the order from Volkswagen to supply batteries for their MEB electric vehicle platform, Samsung SDI gave up the deal as Samsung’s leadership believed profitability was not guaranteed from the deal.

Because Samsung SDI turned the order down, SK On took it instead, allowing batteries to become their next growth engine. Yunho Choi, who is known as a financial expert, became CEO of Samsung SDI earlier this year but had not commenced any new spending plan since his tenure began.

So are solid-state batteries the answer then? Solid-state batteries are reportedly safe from fires and Samsung SDI’s key partner BMW has shown strong interest in the technology.

Sources have told TheElec that Samsung SDI had been actively sharing its roadmap for solid-state batteries with major automobile makers since last year.

However, it is highly unlikely that solid-state batteries will be commercialized within the next five years. Even when it launches in the future, the batteries will be largely premium products and help little in terms of scale.

Samsung Electronics chairman Lee Jae-yong had said the company plans to invest in new technologies. The industry awaits what this would involve when it comes to batteries.