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Technology

LG wins key EV battery dispute against SK Innovation in US

Rival excluded from American market for 10 years but can sell to Ford and VW

The U.S. International Trade Commission is allowing SK Innovation to import components for U.S.-based production of certain battery products for Ford Motor and Volkswagen.   © Reuters

SEOUL/NEW YORK -- The U.S. International Trade Commission has ruled in favor of LG Chem's trade-secrets theft claim against rival SK Innovation, concluding a 20-month investigation on the dispute between the two South Korean conglomerates.

The commission's decision on Wednesday includes a 10-year exclusion order against SK Innovation, or SKI, to ban it from importing certain lithium-ion batteries, battery cells, battery modules, battery packs and components into the U.S. and manufacturing such products in the country, effectively barring the company from the American electric-vehicle battery market.

But the agency is allowing SKI to import components for U.S.-based production of certain battery products for Ford Motor and Volkswagen for four years and two years, respectively, to enable American automakers to transition to different suppliers.

"SKI's total disregard of our warnings and intellectual property rights gave us no choice but to file this case," Jong Hyun Kim, CEO of LG Energy Solution, said in a statement, adding that the company is "grateful to the International Trade Commission for protecting our innovations and significant economic investments in the United States."

"As a global leader and technology innovator, we will further strengthen the protection of intellectual property rights going forward," he said.

The commission has investigated SKI since June 2019 based on a complaint filed by LG Chem that alleged SKI's violations of a U.S. tariff act pertaining to the importation and sale of EV batteries and battery cells by misappropriating trade secrets. A commission judge ruled a year ago that SKI spoliated evidence, but the commission determined that it would review the case in its entirety.

The ruling comes as both LG and SKI expand their EV battery businesses in the U.S. LG Chem launched a $2.3 billion joint venture with General Motors in 2019 to mass-produce battery cells in the Midwestern state of Ohio.

LG Chem spun off its battery business unit as LG Energy Solution in December. SKI is building two EV battery factories in the Southern state of Georgia with $2.7 billion of investment, and it is planning to supply batteries to Ford and Volkswagen.

LG Energy Solution is the world's second-largest EV battery maker with 23.5% of the global market share in 2020, according to SNE Research. SKI is No. 6 with 5.4%.

Analysts say that the ruling could undermine SKI's credit ratings further if the commission bans imports or sales of the company's batteries.

Moody's Investors Service last month downgraded the company's credit ratings by one notch to Baa3, expecting the company's net debt to increase to 13.5 trillion won ($12.2 billion) by the end of this year from 11.6 trillion won in September 2020.

"There remain significant uncertainties and execution risks in this business, considering its fast-growing nature as well as ongoing lawsuits in the U.S.," said Wan Hee Yoo, a senior credit officer at Moody's. "In addition, large investments and losses from this business will strain the company's financial profile, at least during 2021 and 2022."

As LG Energy Solution and SKI are at loggerheads, the South Korean government intervened, asking them to reach a compromise.

Prime Minster Chung Sye-kyun last month said that he did not want to see the two South Korean companies battle against each other over "a small pie," hoping that they could resolve the issue quickly.

The EV battery sector is a key part of President Moon Jae-in's K-New Deal project, which aims to invest 160 trillion won in the technology and biotechnology sectors in an effort to overcome economic disruptions caused by the coronavirus pandemic.

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