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In an unusually politicized world, the focus is on the possibility that negotiations between the two companies, which have fallen to a standstill, will escalate rapidly while emphasizing the end of the dispute between LG Energy Solutions and SK Innovation and the harmony at the ‘Drum K’ level.
‘While the consensus’ in political circles
Prime Minister Jeong Sye-gyun rebuked the lawsuits, saying, “I am very embarrassed,” saying, “Even in US politics, the lawsuit between LG Energy Solutions and SK Innovation is said to come out quickly,” regarding to the lawsuit between LG Energy Solutions and SK Innovation in the broadcast reporters club discussion held on the 28th.
Prime Minister Jeong Sye-gyun said, “LG, SK, and major Korean companies have been suing lawsuits for three years, and the costs of the litigation alone are known to be worth hundreds of billions of won.” The fight between domestic battery manufacturers is not only wasteful in terms of timeliness and legal cost, it also benefits only Japan and China, which compete fiercely with Korea for battery supremacy.
Prime Minister Jung said, “Isn’t it embarrassing to meet the CEOs of both companies over the phone and face to face?”
He added: “The future of the K battery will largely open up only when the two companies solve the problem quickly,” he argued. “We should not fight for small cakes between national companies, but actively pursue a large global market.”
Prime Minister Chung’s remarks come to the fore at a somewhat delicate moment in which the final decision of the US ITC is not announced. Some argue that the intention is to pressure LG Energy Solution and SK Innovation to agree before the final US ITC decision is made.
Previously, LG Energy Solutions sued SK Innovation before the ITC for infringing on battery trade secrets in April 2019, and a final decision on the matter is expected to be released on the 10th of next month (local time).
In fact, this is so unusual that it is the first time that government officials, especially high-ranking officials, have publicly expressed a specific position on a dispute between companies. Based on this, the possibility arises that the government directly mediates in the dispute between the two companies in the future.
LG · SK, “We will do our best to agree”
In response to Prime Minister Chung’s comments, SK Innovation, Ji Dong-seop CEO of the battery business, directly announced the position, “(SK Innovation) has sincerely been involved in all litigation with LG Energy Solutions so far, but ( legal dispute) has not been able to resolve (legal disputes) to the public. I’m very sorry. “
CEO Ji Dong-seop said: “(SK Innovation) is seriously accepting that it is a national wish for the Prime Minister (between LG Energy Solutions and SK Innovation) to express great concern about the demand for batteries.” “I will do my best to maintain a constructive and cooperative dialogue with LG Energy Solutions throughout the year and resolve disputes smoothly.”
In addition, CEO Ji emphasized the K battery and said that “(SK Innovation) will make efforts for the K battery to contribute to the development of the national economy and industrial ecosystem as people expect.”
LG Energy Solutions also responded to Prime Minister Jung, saying: “Regarding the demand for batteries (from LG Energy Solution and SK Innovation), we are currently doing our best to reach an agreement and will actively work to solve the problem. Smoothly. . “
However, LG Energy Solutions said: “There seems to be no willingness to negotiate with the proposals that SK Innovation has made until recently,” and said: “I hope to have a proposal to discuss.”
While both companies have expressed their position that they will do their best to reach an agreement, a subtle difference in temperature is detected.
In the case of LG Energy Solutions, at one point they took a strong ‘go to the end’ attitude, but now they are putting weight on the deal. LG Energy Solutions also mentioned that it has not ruled out the possibility of concluding negotiations with SK Innovation before and after the final decision of the US ITC in the conference call for the announcement of commercial results of the 4Q 2020 held on the 27 of this month.
Furthermore, there is an analysis that the two companies have already entered into last minute negotiations and are fighting over the size of the deal amount. According to the battery industry, LG Energy Solution is known to require trillions of money, and SK Innovation is known to insist on 100 billion units. In particular, the part that LG Energy Solutions said, “I look forward to a proposal that can be discussed,” lends strength to this analysis.
Will Prime Minister Jung’s ‘Bitter Sound’ Speed Up LG · SK Deal?
There are mixed reactions inside and outside the battery industry on Prime Minister Chung’s order for an immediate deal between LG Energy Solutions and SK Innovation.
It is pointed out that it is unreasonable pressure to demand a massive deal from companies fighting for intellectual property rights by politicians and, furthermore, there are concerns that it could hamper the possibility of market development.
There are many voices warning that the nature of the demand will be obscured by outside interventions, including the government. An official from the national battery industry said: “If the perpetrators and victims are obscured by outside intervention and reconciliation is emphasized under the name of K battery, this will set a bad precedent.” “LG Energy Solutions and SK Innovation will be in a lawsuit in China. It could also appear as a legal dispute between battery companies and Korean companies.”
In addition, if there is a precedent that does not cover intellectual property rights, it is very likely that knowledge of trade secrets and patent rights, and the efforts of companies to secure their own technology or invest in research and development will be reduced. (R&D) is likely to decline.
Park Yong-man, president of the Korea Chamber of Commerce and Industry, also said, “There is a need to develop an advanced view of the company” in connection with the LG Energy Solution-SK Innovation litigation last month. “(The lawsuits of both companies) will be concluded by law in some way, arbitration based on evidence will be possible. ” Until legal conclusions are reached, they should not intervene in disputes between companies in any way.
However, in general, the atmosphere is that the agreement between LG Energy Solution and SK Innovation is the best option.
Regardless of the final decision of the ITC, if either party repeatedly disagrees and the demands of the two companies last 3-4 years or more, it is clear that the K battery, which is currently emerging in the global market, will be will weaken. Not only is there a significant financial and time loss, but there is also great concern that Japanese and Chinese companies that go after Korean battery manufacturers in the rapidly changing EV battery market will lose their lead.
Furthermore, with the launch of the Joe Biden administration, which emphasizes the environmentally friendly stance in the US, LG Energy Solutions and SK Innovation, which are building batteries for electric vehicles locally, are expected to be benefit enormously in the future. This is because the President of the United States, Biden, announced that he would exchange all commercial vehicles for electric vehicles made in the United States and that he would actively promote the market for electric vehicles in his country.
In the case of SK Innovation, if it eventually loses the ITC claim, it is expected to await the worst case scenario. This is because all imports of SK Innovation battery cells, packs, modules, and related materials into the US are banned. This is a crisis that could eliminate SK Innovation’s construction of a 21-year-old battery plant. 5 gigawatt hours (GWh) in Georgia. SK Innovation invested a total of $ 2.5 billion (approximately 2.8 trillion won) for the project alone, but it is a loss considering the contract to supply batteries to be produced at the Georgia plant in the future to automakers like Volkswagen in Germany and Ford in the United States. The cost is expected to be higher than this.
Volkswagen is reported to have even sent a letter urging the Korean government to end the dispute between LG Energy Solutions and SK Innovation late last year, fearing that the loss of SK Innovation could disrupt its production of electric vehicles. At the time, Volkswagen is also said to have mentioned that it would receive batteries from Chinese companies instead of SK Innovation unless uncertainties such as lawsuits between the two companies are resolved.
It is reasonable for the government to mediate the dispute between the two companies, and the argument that if a loss from one side in the battery industry, which is seen as a national growth business, disrupts exports to the United States, weighs on the argument that national interests cannot just sit back.
