A unit of South Korean conglomerate SK Group that makes materials for lithium-ion batteries has raised $2 billion in its initial public offering on the Korea Exchange, underscoring global demand for electric vehicles and its components.
The IPO of SK IE Technology, which takes place on May 11, will be the largest Korea listing since gaming company Netmarble’s $2.4 billion debut in 2017. SK IE Technology used to be a part of SK Innovation, SK Group’s chemical subsidiary that makes electric vehicle batteries, until it was spun off in 2019. SK Innovation will own 61% of SK IE Technology after the listing.
SK Group is one of the largest chaebols, or family-run conglomerates in Korea. The group’s subsidiaries work largely in energy, chemicals, semiconductors, telecommunications and biotech. Billionaire Chey Tae-won chairs the group.
“SK IE Technology is focused on production of battery materials for the world electric vehicle market, which is forecast to grow rapidly over the next decade,” says Rajiv Biswas, executive director and Asia-Pacific chief economist at IHS Markit. Battery materials includes the separator which prevents short circuits.
“We plan to solidify the market leader position in the premium battery separator market with explosive growth potentials by gradually increasing the market share,” Roh Jae-sok, CEO and president of SK IE Technology, said in a statement. “After a successful IPO, we will raise business competitiveness and contribute to the ecosystem for EV related industries.”
Battery-powered EV output globally should increase from 2 million units in 2019 to 14.5 million units in 2027, and reach about 15% of total world light-vehicle production, IHS Markit Automotive forecasts. EVs have jumped in popularity because of government policy commitments to reduce global carbon emissions. That means more demand for battery materials of the type made by SK IE Technology, Biswas says. Last year, SK IE Technology logged 469.3 billion won (about $420 million) in sales, up 78.4% year-on-year. Net profits rose 38.4% last year to 88.2 billion won.
SK IE Technology anticipates “outperforming market growth through profitability and aggressive investment” compared to peers, a spokesperson for the company said. SK IE Technology is eying the eventual pickup in all solid-state batteries, with mass production possible by 2030, as its biggest “structural risk,” the spokesperson says. Solid-state batteries require relatively little built-in safety technology but cost a lot to make today. SK IE Technology for this reason is considering “collaboration with all solid battery developers” and doing business in materials for these batteries, the spokesperson adds.
Some of the battery material maker’s post-IPO success may hinge on the degree of offshoring to be near clients. Battery suppliers already prefer proximity to their customers to avoid costs and hazards of transportation, industry analysts believe. SK IE Technology is planning “significant investment” to expand production in South Korea, China and Poland, Biswas believes.
“If you are in one way or another connected to green space or energy, whether on the software side or on the materials manufacturing side, anything to do with that scene is —I’ll put it mildly—very hot,” says Seng Wun Song, an economist in the private banking unit of Malaysian bank CIMB. “And lots of money on the side is still looking for investment opportunities.”
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