The three major domestic battery manufacturers, which had fallen into a prolonged slump due to stagnating electric vehicle demand (the “chasm”), are all posting quarterly profits again, signaling a rebound. Demand for batteries for artificial intelligence (AI) data centers, including energy storage systems (ESS), is increasing mainly in the North American and European markets, driving a return to growth.

● “ESS sales grow by more than 30%”

On the 30th, LG Energy Solution announced that its second-quarter revenue came to KRW 7.5602 trillion, up 24.8% year-on-year. After declining for four consecutive quarters from the second quarter of last year through the first quarter of this year (January–March), revenue turned to growth for the first time in five quarters. Data center battery sales played a major role. At an earnings presentation the same day, LG Energy Solution Chief Financial Officer (CFO) Lee Chang-sil said, “ESS shipments expanded mainly in North America and Europe, recording growth of more than 30% quarter-on-quarter and showing strong growth momentum.”

However, operating profit in the second quarter was KRW 113.3 billion, a 77.0% decline. The company explained that this was due to rapidly increasing investment to expand local ESS production capacity. In May and June this year, LG Energy Solution began operating ESS production lines established through joint ventures (JVs) with GM in the United States and Honda in Japan. LG Energy Solution said, “To respond to ESS demand, we prepared multiple facilities simultaneously in a short period, which incurred initial stabilization costs,” adding, “We will improve profitability through rapid stabilization and company-wide cost reductions.” The company expects that in the second half of the year not only revenue but also profit will increase in earnest, leading to improved profitability.

Samsung SDI also surprised the market by swinging to profit, beating expectations that it would remain in the red in the second quarter. Samsung SDI’s second-quarter revenue and operating profit were KRW 3.7688 trillion and KRW 203.8 billion, respectively. Revenue rose 18.5% year-on-year. In particular, operating profit turned positive. After posting a loss every quarter from the fourth quarter of 2024, the company returned to profit for the first time in seven quarters. Samsung SDI explained, “By actively responding to AI data center demand, including ESS, uninterruptible power supply (UPS) systems, and battery backup units (BBU), we drove an improvement in performance,” adding, “In the second half, revenue will expand by an even greater margin.”

● Diversifying AI-related demand, including for “emergency power”

A key point in these results is that demand has increased not only for ESS as AI data center batteries but also for supporting segments such as UPS and BBU, making the “portfolio” more diverse. While ESS are large-scale electricity storage systems that regulate power supply and demand on an ongoing basis, UPS and BBU are emergency power devices that supply electricity for a short period so that servers can continue operating during unexpected outages in the order of seconds to minutes, such as blackouts.

Samsung SDI forecasts that this year revenue from batteries for UPS and BBU will each grow by more than 70% compared with a year earlier. LG Energy Solution also projected, “As demand increases for reducing power volatility behind the meter, battery applications will become even more diversified.”

SK On also saw its second-quarter revenue increase 23.7% year-on-year to KRW 2.9460 trillion, with operating profit of KRW 821.8 billion, marking a return to the black. This overturned forecasts that losses would continue. A major factor was a lump-sum compensation payment it received because key customers such as Ford failed to take the volumes they had committed to SK On. In addition, by completing the process of ending its joint venture with Ford in the second quarter, SK On was able to reduce depreciation and interest expenses by about KRW 500 billion per year. As SK On entered the ESS business later than the other two companies, its ESS performance is expected to be fully reflected from the fourth quarter.

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