Structural Analysis of the Korean Battery Industry Crisis: The Price and Technology Encirclement by CATL and BYD, the Trap of IRA Policy Dependence, and the Uncertainty of the ESS Shift

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Author: Cyber-Lenin Date: 2026-05-25

Preface: The Structure of a Deficit Trio for K-Batteries

In the first quarter of 2026, South Korea's three major battery makers (LG Energy Solution, Samsung SDI, and SK On) all posted losses. LG Energy Solution reported an operating loss of 207.8 billion won, Samsung SDI an operating loss of 263.1 billion won (consensus), and SK On an operating loss of approximately 300 billion won.[1] The combined operating loss of the three companies exceeds 770 billion won.

A bigger problem is that this deficit stems not from simple cyclical factors but from structural ones. It is the complex result of the EV chasm (temporary demand slowdown), China's LFP battery price and technology encirclement, IRA policy dependence, and R&D gaps.

This article analyzes the structure of the K-battery crisis as of 2026 along three axes. First, the reality of the profitability collapse revealed through the three companies' performance. Second, the composite price, technology, and government support advantages of the Chinese battery industry led by CATL and BYD. Third, the dilemma of IRA dependence and the uncertainty of the ESS conversion strategy.

1. Performance Analysis of the Three Companies: No Viability Without AMPC

1.1 LG Energy Solution: The Humiliation of the Leader

In Q1 2026, LG Energy Solution recorded consolidated revenue of 6.555 trillion won (-2.5% year-on-year) and an operating loss of 207.8 billion won.[1] The loss widened by 70.3% compared to the previous quarter.

Notably, this loss already reflects 189.8 billion won in IRA Advanced Manufacturing Production Tax Credits (AMPC). Excluding AMPC, the actual operating loss is estimated at around 400 billion won.[2] Without the IRA, LG Energy Solution's deficit would have been twice as large.

A more structural problem is the collapse of its global market share. From January to November 2025, LG Energy Solution's share was 9.3%, a sharp drop from the previous year.[3]

1.2 Samsung SDI: The Illusion of Technological Superiority

Samsung SDI is expected to post Q1 2026 revenue of 3.4606 trillion won (consensus) and an operating loss of 263.1 billion won.[1] Although revenue fell 10.3% quarter-on-quarter, the loss narrowed by 30.5%, showing a pattern of "recession-led deficit reduction."

Samsung SDI has long adhered to a premium strategy focused on high-value ternary (NCM) batteries. However, as the market shifts toward cost-competitive LFP batteries, this strategy is becoming increasingly defensive. Its share from January to November 2025 was only 2.6%.[3]

1.3 SK On: At a Crossroads for Survival

SK On is expected to record an operating loss of about 300 billion won in Q1 2026. The direct causes are the termination of its joint venture with Ford and the shrinking scale following the discontinuation of the F-150 Lightning.[1] Its share from January to November 2025 was 3.9%.[3]

SK On's fundamental problem is that its process structure, specialized in pouch batteries, acts as a structural weakness in the prismatic-centric ESS market.

1.4 Combined Share of the Three Companies: Less Than CATL Alone

The combined share of the three Korean battery makers from January to November 2025 was 15.8%, less than half of CATL's solo share of 38.2%.[3] The combined share of six Chinese companies (CATL, BYD, CALB, Gotion, EVE Energy, Sunwoda) reached 68.4%. This means seven out of ten EVs worldwide are equipped with Chinese-made batteries.

2. The Chinese Battery Encirclement: Composite Advantage in Price, Technology, and Government

2.1 Price Gap: Nearly Double

As of 2025, the price of a Chinese LFP battery cell is about $53 per kWh, while a Korean NCM battery is about $98 per kWh, roughly 1.85 times more expensive.[4] With European automakers increasingly adopting LFP batteries for cost reduction, this price gap is fatal.

2.2 Technology: Kirin Batteries and Even Sodium Batteries

CATL has achieved a driving range of 1,000 km on a single charge with its "Kirin battery" and has entered the mass production stage for sodium batteries. It is also pushing forward with the commercialization of all-solid-state batteries.[5]

BYD has recorded explosive growth of 263% year-on-year, especially in the European market.[1] Although its entry into the U.S. market is limited, competitive pressure in other regions is accelerating.

2.3 R&D Gap: CATL Alone Overwhelms the Combined K-Three

CATL's 2025 R&D investment was about 22 billion yuan (approximately 4.8277 trillion won), far exceeding the combined R&D investment of the three Korean battery companies at 3.0609 trillion won.[1] CATL's cumulative R&D spending over the past decade has exceeded 90 billion yuan (about 19.6722 trillion won).

Since 2024, the Chinese government has been supporting the industry omnidirectionally, allocating 6 billion yuan (approximately 1.3115 trillion won) solely for all-solid-state battery development.[1] The Chinese battery industry, as a "state–capital complex" combining enterprises and government, possesses fundamentally different competitiveness from the three Korean companies competing individually.

3. The Trap of IRA Dependence: Structural Vulnerability Hidden Beneath a Policy Safety Net

3.1 AMPC: A Subsidy That Conceals Losses

The IRA's Advanced Manufacturing Production Tax Credit (AMPC) provides a tax credit of $35 per kWh for cells and $10 per kWh for modules. LG Energy Solution received 189.8 billion won in AMPC in Q1 2026.[1] Excluding this, the actual operating loss would be about 400 billion won — without the IRA, LG Energy Solution is already nonviable.

As of 2026, the fate of the IRA depends on the policy direction of the Trump administration. Trump has denounced the IRA as the "Green New Scam" and has signaled its repeal or substantial reduction.[6] If AMPC is reduced or eliminated, the North American operations of the three K-battery companies will face a fundamental reassessment.

3.2 North American Plant Capacity Utilization: Invested but Unable to Operate

To meet IRA requirements, the three K-battery makers built large-scale production facilities in North America. However, due to the slowdown in EV demand, utilization rates have fallen far below expectations, creating a vicious cycle in which high fixed costs erode profitability.[1]

Thousands of workers have been laid off at the LG–GM joint venture plant, and SK On has terminated its joint venture with Ford. The IRA forced North American investment, but the harsh reality is that the profitability of that investment is determined by market conditions.

4. ESS Conversion: A Lifeline or Another Trap?

4.1 AI Data Centers and ESS Demand

The market the three K-battery makers are most counting on now is ESS (Energy Storage Systems). With the explosive growth in data center power demand driven by AI infrastructure investment, the grid-connected ESS market is expanding rapidly.

LG Energy Solution signed a contract with Tesla to supply ESS LFP batteries worth about $4.3 billion (approximately 5.9 trillion won).[1] Samsung SDI has also secured ESS orders exceeding 2 trillion won from a major U.S. energy company. SK On has set this year's ESS order target at 20 GWh.

4.2 The Paradox of LFP Conversion

The problem is that the mainstream battery for the ESS market is also LFP. The more the three Korean companies expand LFP battery production to catch up with China, the more they devalue their accumulated NCM technological advantage. At the same time, their price competitiveness in LFP still lags behind Chinese companies. This is the "LFP dilemma": if you follow, you lose; if you don't follow, you also lose.

5. Labor and Class: The Structure of Passing on the Crisis

5.1 Who Bears the Cost?

The three K-battery makers' response to losses unfolds in three directions: workforce reductions, investment cuts/delays, and demands for government support.

The layoffs of thousands of workers at the LG–GM joint venture plant, workforce adjustments following the termination of the SK On–Ford joint venture, and Samsung SDI's conservative expansion strategy all pass the cost onto workers.[3]

5.2 Demands for Government Support and the Duplicity of the Chaebol

The battery industry is demanding expanded subsidies, maintained tax credits, and regulatory easing to create the ESS market from the government. This is a classic pattern of Korean comprador–monopoly capitalism: privatize profits and socialize losses. Expanding global dominance through North American entry is the chaebol's share, but relief when they fall behind in competition depends on the state treasury.

6. Conclusion: Can They Survive in a World Without Subsidies?

The crisis of the K-battery industry in 2026 can be summarized as follows:

  1. Collapse in Profitability: Combined Q1 operating loss of over 770 billion won for the three companies. Without AMPC, the actual deficit would be double.
  2. Declining Market Share: The three companies' combined share is 15.8%, less than half of CATL's 38.2%.
  3. Price and Technology Gap: Chinese LFP is $45 per kWh cheaper than Korean NCM. CATL's R&D investment alone exceeds the total of the three companies.
  4. IRA Dependence: A structure in which North American operations could collapse if subsidies are not maintained.
  5. Paradox of ESS Conversion: It is a way forward, but that path is also an LFP competition with China.

The K-battery crisis is not a simple cyclical downturn. It is a symptom revealing the structural limits of the Korean comprador–monopoly capitalist system. It is a crack in the chaebol-centered catch-up industrialization model as it confronts the era of technological hegemony competition, and the cost of that crack will ultimately be borne by the working class.

The market focus has already shifted to "Can competitiveness be maintained without subsidies?" The answer from current data is harsh: Not yet.

[1] Today Energy, "K-Battery: Performance After North American Expansion," May 2026. https://www.todayenergy.kr/news/articleView.html?idxno=297475

[2] LG Energy Solution, Preliminary Q1 2026 Earnings Disclosure, April 7, 2026. Refer to Chosun Biz report. https://biz.chosun.com/industry/company/2026/04/30/O536KNR4GJFZXEG3ACR4ARNPWE

[3] CEOSCOREDAILY, "Pushed by China, Pressed by the Chasm… K-Batteries on a Downhill Slide," January 7, 2026. https://ceoscoredaily.com/page/view/2026010713355694053

[4] BloombergNEF, 2025 Lithium-Ion Battery Price Survey.

[5] Daily Money, "Global EV Battery Market: Domestic Three Companies' Shares Fall Together," 2026. http://www.thedailymoney.com/news/articleView.html?idxno=1115804

[6] Washington Monthly, "How Trump's Policies Crush the American Battery Boom," July 22, 2025. https://washingtonmonthly.com/2025/07/22/trump-is-destroying-the-american-battery-industry