The global frenzy for electric vehicles (EV) that has seen Tesla Inc’s stock surge threefold is now juicing the shares of a South Korean supplier that has become the world’s biggest maker of electric vehicle batteries.
South Korea’s LG Chem Ltd has surged more than 60 percent this year to a valuation of about US$30 billion, becoming the sixth-largest stock on the benchmark KOSPI and leaving Hyundai Motor Co, the nation’s largest automaker, in the dust.
While LG supplies many automakers, including Hyundai, it has been particularly fueled by a deal to supply batteries to Tesla’s China factory, which is pumping out Elon Musk’s vehicles at a growing clip.
Photo: Reuters
Expanding electric vehicle subsidies in Europe and Tesla’s stupefying rally have buoyed related stocks worldwide, despite global economic concerns. Fundamentals matter little, with Tesla just starting to show profit and electric truck maker Nikola Corp yet to produce its first semi.
“We believe LG Chem is set to benefit the most in Europe with its high market share and positioning,” said Jae Lee, chief executive officer at Timefolio Asset Management SG Pvt, a Singapore-based hedge fund that holds LG Chem shares.
LG Chem had 24 percent of the global electric vehicle battery market as of the end of May. China’s Contemporary Amperex Technology Co Ltd (時代新能源科技) has been hurt by the pandemic, a trade dispute with the US and a scaling back of government subsidies in its home market, although it recently forged a supply contract of its own for Tesla’s Shanghai facility.
LG Chem had a US$124 billion battery order backlog early this year and aims to expand capacity to 100 gigawatt hours by end of the year and 120 gigawatt hours next year.
Investors increasingly view it as a battery company rather than a chemicals producer, despite 52 percent of total revenue coming from chemicals last year, according to Bloomberg Intelligence.
“LG Chem has the largest capacity for EV batteries in the world now and it’s even increasing it, while rivals are not doing so,” said Wooho Rho, an analyst at Meritz Securities Co.
Rho and at least six other analysts raised their price targets for LG Chem this month, with Meritz expecting a consolidated operating profit of 532 billion won (US$440 million) for the quarter ended last month, the most in about two years.
The firm’s shares fell 1 percent in Seoul yesterday, extending its 2.5 percent drop last week.
Some investors are worried that rising competition among battery makers might put pressure on growth in margins, Hana Financial Investment Co analyst Kim Hyun-soo said.
Other market concerns include the possibility that Tesla could announce a new battery supplier at its “Battery Day” event on Sept. 22, Rho said, adding that such concerns are probably overblown given the high barriers for any potential new partner.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to