LG Group is making a major push into energy storage and automotive electronics in the US market in seeking the group’s next growth engine.
LG’s tech arms, LG CNS, LG Chem and LG Electronics, have recently jumped into the US market with its energy storage system, or ESS business. ESS captures energy produced for use at a later time, aiming to improve energy efficiency.
The US ESS market -- which is fast growing and already the world’s largest due to its aging grid infrastructure -- is predicted to rise to $1.2 billion in 2021 from $445 million this year, according to market analysis firm GTM Research.
Last month, LG CNS, the group’s energy solution and service arm, secured $43 million contract from the Guam Power Authority for utility-scale ESS, which aims to reduce the intermittent power outages Guam is facing.
LG’s battery subsidiary, LG Chem, also won a multi-year contract last year from a US firm, AES Energy Storage, to supply lithium-ion cell supplies for ESS. The deal led the battery maker to receive the Brad Roberts Outstanding Industry Achievement Award at a conference held by the Energy Storage Association in Colorado in April.
LG Electronics, a key subsidiary of LG Group, also won safety certification in April from an Illinois-based institution for its ESS. LG’s 1-megawatt ESS power conversion system was certified by the American safety organization UL, winning the UL1741 certificate that is one of requirements for ESS suppliers in the US.
“The UL certification will be a trigger to make inroads into the US, the largest ESS market, based on business experience and technology we gained in Korea,” said Lee Sang-bong, head of LG Electronics’ energy business center.
A LG Chem engineer inspects a battery module for energy storage system at the firm’s plant located in Iksan. (LG Chem)
Apart from the energy storage business, LG Group is also betting big on automotive electronics amid growing demand for self-driving technologies in the global automobile industry. The world’s automotive electronics market is predicted to rise from $239 billion in 2015 to $303 billion in 2020, according to Strategy Analytics.
LG Electronics’ vehicle component unit, which was set up in 2013, is predicted to make a turnaround this year following sales growth for nine consecutive quarters, analysts said.
“LG’s VC unit will make a turnaround in the fourth quarter to record 200 billion won ($170 million) in operating profit next year due to the deals with General Motors alongside other global automakers from China, Germany and the US,” said Kim Dong-won, an analyst at KB Investment & Securities.
Earlier this year, LG supplied 11 key auto parts, including a drive motor, inverter, battery pack and electric motion compressor to GM’s electric vehicle, Bolt.
Mirae Asset Daewoo and Nomura Securities predicted the sales of LG’s VC unit will reach 1 trillion won in the third quarter. Kiwoom Securities, JP Morgan and HI Investment & Securities predicted the sales will stand at more than 1.1 trillion won in the fourth quarter.
By Shin Ji-hye(shinjh@heraldcorp.com)