U.S. Defense Battery Market Sees 'China Out' — a Chance for K-Battery?

[The Financial News] The United States defense battery market is emerging as a potential new opportunity for domestic battery makers. As the United States excludes Chinese batteries from its supply chain for security reasons, expectations are growing that Korean companies could benefit.
According to the industry on the 2nd, the Center for Strategic and International Studies (CSIS), a U.S. security think tank, released a report titled "A New Stage for the U.S. Battery Industry" on the 27th of last month local time and identified defense batteries as a strategic battleground.
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According to the report, the United States Department of War, formerly the Department of Defense, spent about $1.8 billion from 2010 to 2022 to procure 7 gigawatt-hours (GWh) of secondary batteries. So far, most of them have been low-cost lead-acid batteries, but CSIS expects lithium-ion batteries to account for most defense demand by 2050.
If the Department of War's scenario for electrifying weapons systems moves forward, demand for lithium-ion defense batteries is expected to rise to 1 GWh a year by 2053. That would be 1.5 to 2 times the current procurement volume.
Defense batteries are ultra-high-value products that must meet extreme temperatures, external shock resistance, and waterproofing requirements. Their unit price is several times higher than that of batteries for ordinary electric vehicles, meaning a 1 GWh order could amount to nearly trillions of won in actual sales.
In particular, the United States Department of War's move to exclude China from its battery supply chain is expected to create opportunities for Korean companies. Under the 2024 National Defense Authorization Act (NDAA), the Department of War will fully ban purchases of batteries made by six Chinese companies, including CATL and BYD, starting in October 2027.
CSIS said the Department of War would have little choice but to rely on proven private-sector manufacturers with large-scale mass production capabilities rather than produce batteries itself. The most likely alternatives to fill the gap left by Chinese products are Korean battery makers such as LG Energy Solution, SK On, and Samsung SDI. Since they already mass-produce batteries in the United States, they are likely to be in a favorable position as partners that can provide stable supply.
LG Energy Solution operates seven plants in five locations: the State of Georgia, Arizona, State of Michigan, Ohio, and Tennessee. SK On runs three plants in the State of Georgia and Tennessee, while Samsung SDI operates a plant in Indiana, giving all three companies existing production bases in the United States.
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gogosing@fnnews.com Park So-hyun Reporter