Samsung SDI, the conglomerate's battery-making affiliate, is likely going to start using more manufacturing equipment from Chinese suppliers. The company not only makes batteries for mobile devices, electronics, and other consumer devices, it also makes them for electric vehicles and other commercial applications.
Kim Ik-hyeon, Samsung SDI EVP and head of its procurement team, said during the annual shareholders' meeting that the sophistication of Chinese battery equipment makers has improved and they're now offering competitive prices compared to equipment providers in South Korea.
Chinese companies are expanding their reach into the Korean battery supply chain
This is the typical Chinese approach that we've seen being implemented across different industries. They rapidly achieve technical parity or even superiority and then displace the incumbent companies by offering aggressive prices. That's exactly how Chinese smartphone makers have caught up to Samsung in some of its most valuable smartphone markets.
Chinese battery equipment makers have been trying to win business from Korean manufacturers. They've formed subsidiaries in South Korea and achieved great success. Zhejiang Hangke, for example, supplies its kits all three Korean battery makers, Samsung SDI, LG Energy, and SK.
Samsung SDI would be able to improve its margins by relying on competitively priced battery equipment from Chinese companies. Despite the closer relationship, these companies won't be joining the Samsung SDI Partnership Association, membership of which is reserved for the most excellent of supply chain partners.
Analysts expect that Chinese suppliers will continue to gain more influence over the South Korean battery supply chain, particularly with their cyclers. These suppliers are offering their cyclers are very competitive prices, and the quality is also very close to what South Korean vendors are offering.
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