Korea’s cathode supplier L&F aims to make it big with anodes: CEO

DAEGU – L&F Co., a former LCD backlight unit maker, has long been a stranger even to locals in Daegu, a provincial city 165 km away from Seoul.

Many people still don’t know where the company, now South Korea’s leading battery materials maker, is located. To investors and global electric vehicle makers, however, L&F is as important as air to mankind.

One of the industry’s few battery materials makers that can mass produce nickel, cobalt, manganese and aluminum (NCMA) cathodes, a key EV battery material, L&F counts Tesla Inc. as well as Korea’s top three battery makers LG Energy Solution Ltd., SK On Co. and Samsung SDI Co. among its major clients.

L&F is also capable of producing the NCM cathode with high-nickel content.

“Global battery makers may not know Seoul, but they know Daegu,” said an industry executive wittingly. “They are flocking to Daegu to secure a stable supply of cathode materials.”

With a firm footing in the cathode segment, the Korean cathode supplier to Tesla is now setting its sights on another key battery component, the anode.

“Anodes are also produced via a similar process as cathodes. We plan to enter the anode market too,” L&F Chief Executive Choi Su-an told The Korea Economic Daily in a recent interview.

Lithium-ion cells are composed of four main components – cathodes, anodes, separators and electrolytes.

Cathode-active materials comprise around 40% of the cost of EV batteries while anodes account for about 15%.

L&F has no plans to enter the separator and electrolyte markets for now, the CEO said.

TO STRENGTHEN MATERIALS SUPPLY CHAIN

Choi said the company aims to enhance its presence in the battery materials market by strengthening its supply chain throughout the entire process.

It is working to build a joint venture to manufacture precursors, an intermediate material for cathodes, at Saeumangeum, an industrial complex in North Jeolla Province.

Industry sources said last month the company plans to spend as much as 800 billion won ($608.8 million) to build a precursor JV with an annual production capacity of 60,000-80,000 tons. Precursors make up about 70% of cathode production costs.

L&F has been relying on Chinese companies for its precursor needs. But it must cut reliance on them as the US government requires that 50% of the value of battery components be produced or assembled in North America to qualify for an EV tax credit. The US also requires that 40% of the value of critical minerals be sourced from the US or its free trade partners for the incentive.

To diversify its cathode product portfolio, L&F is looking to produce cathodes for lithium iron phosphate (LFP) batteries widely used for low-end EV models.

“We will build an LFP cathode factory with an aim to start commercial production in 2025,” Choi said. “We are currently developing six to seven different (cathode) products, including a next-generation cathode.”

Disposal and reuse of waste batteries, often dubbed urban mining, is another sector L&F is looking at as a new source of revenue, he said.

‘BIG BANG’

L&F has rapidly grown from a small LCD backlight unit maker to a global EV battery materials maker amid the “big bang” of electric cars.

Established in 2000, the company entered the cathode business in 2005 and years later developed the NCM523 battery cathode with 50% nickel content, the world’s first with such high content.

The company has successively produced cathode materials with nickel content of 70% and 90%.

With every 1 percentage point hike in battery nickel content, the EV’s driving range increases by 10 km, industry officials said.

“We plan to produce 90,000 tons a year of cathodes with 95% nickel content at our third factory, which is set to start operations by the end of this year,” said Choi, who became L&F’s CEO in 2016.

Having earned a doctorate in chemical engineering from Korea’s prestigious KAIST, he joined L&F as the head of research in 2009.

A KNOWN TESLA SUPPLIER

L&F is one of the very few known battery materials suppliers for Tesla, which barely makes public its partners.

In February, L&F said in a public disclosure with Korea’s financial regulatory body that it clinched a $2.91 billion deal to supply cathodes to Tesla.

Under the deal, L&F will provide high-nickel cathode to Tesla and its affiliates for two years from Jan. 1, 2024 through Dec. 31, 2025.

Competing with crosstown battery material rivals such as EcoPro BM Co. and POSCO Future M. Co., formerly POSCO Chemical Co., L&F targets sales revenue of close to 7 trillion won this year.

It posted 3.89 trillion won in sales last year, up sharply from 970.7 billion won in 2021 and 356.1 billion won in 2020.

The company’s annual cathode production target for 2026 is 400,000 tons, the CEO said.

As the company keeps growing in line with the global takeoff of EVs, it has been actively hiring new employees. It recruited about 1,000 new employees over the past couple of years, many of whom are in their 20s – proof that young people are looking at the company as a promising business.

“This year will be the most significant year in the company’s history,” he said. “Our company has grown big. Nevertheless, survival is our ultimate goal. It is never easy to meet our customers’ needs at the right time.”

Write to Mi-Sun Kang at misunny@hankyung.com

In-Soo Nam edited this article.