The KOSPI fell 11% over Nov. 5–6, with semiconductors and batteries selling off together. Samsung SDI lost 8.1% on Nov. 6 alone.1
Over a longer horizon, the picture changes. From the KOSPI's June 22 peak, the index shed 44.5%, while LG Energy Solution (LGES) and Samsung SDI declined only about 12% each. L&F fell 40%, and EcoPro BM lost 50%.1
Four and a half months after the June peak:
Cell makers and POSCO Future M down in the teens; EcoPro and L&F down 40–50%
Close on June 22, 2026 (KOSPI peak) to close on Nov. 6 · Price change · Cell makers Materials
Source: Daum Finance (regular-session closing prices on the Korea Exchange)
U.S. EV sales fell by more than 40% in September. Yet cell makers held up relatively well, partly on expectations for battery energy storage systems (BESS) serving the U.S. electricity grid.
The earnings breakdown tells a more complicated story. Of LG Energy Solution's ₩756.0 billion in Q3 operating profit, ₩416.9 billion came from U.S. advanced manufacturing production credits (AMPC). iM Securities estimates another roughly ₩320 billion consisted of one-off gains, including compensation tied to the termination of a joint venture. After non-operating losses, the company posted a ₩296.9 billion net loss. Winning more orders and generating sustainable profit from those orders remain two different things.2, 3, 4
U.S. EV sales plunged more than 40% year on year;
Korean cells lost ground to Chinese rivals in Europe
EV batteries face headwinds in both markets: weak demand in the United States and shrinking market share in Europe. The U.S. decline also reflects an unusually strong year-earlier comparison ahead of the consumer tax credit's expiration.
| Market | Units sold | YoY |
|---|---|---|
| The U.S. | 116,000 | −42.4% |
| Europe | 616,000 | +45.2% |
| China | 1,224,000 | −13.0% |
Sources: IBK Securities (Nov. 3); iM Securities estimates September U.S. BEV + PHEV sales fell 43.3%. The U.S. Section 30D consumer clean-vehicle credit expired on Sept. 30, 2025.3, 5, 6
Korean battery makers' combined European market share
fell from 55% to 29% in three years
Combined share of three Korean makers in European EV battery usage (year-to-date basis)
Sources: SNE Research; Hana Securities (Nov. 2)
What matters
- Korean suppliers' EV battery shipments in the U.S. also plunged. In September, U.S. EV battery shipments fell 69.4% year on year for LG Energy Solution, 76.0% for SK On and 88.1% for Samsung SDI.5
- Chinese cells captured more of Europe's growth. In September, European shipments from the three Korean makers rose 15%, versus 58% for CATL. The Korean trio's market share was 29%, down 8 percentage points from a year earlier.7
- That does not mean all EV demand has stopped. LG Energy Solution said its shipments of both EV pouch cells and cylindrical cells increased in Q3.8
- It is too early to price in an EV recovery. Hana Securities argued on Nov. 3 that EV subsidies were not a focal issue in the U.S. midterms, and that earnings forecasts should not assume a rebound in American EV demand.9
Grid storage is filling the gap left by EVs;
the order book is already there, and revenue is starting to follow
U.S. grid-scale storage is becoming a central revenue driver for both companies. But company disclosures must be distinguished from brokerage forecasts.
Samsung SDI in Q4:
ESS revenue projected to overtake automotive batteries for the first time
ESS Automotive batteries · Quarterly revenue (₩ trillion, excluding U.S. AMPC) · 4Q26 forecast
Sources: Samsung SDI; Hana Securities (4Q26 estimate, excluding AMPC); iM Securities estimates ₩1.9 trillion and Yuanta Securities ₩1.98 trillion.
LG Energy Solution's ESS revenue:
from ₩2.4 trillion in 2025 to ₩25.1 trillion in 2028 (Hana forecast)
Annual ESS revenue (₩ trillion) · Hatching denotes estimates
Sources: LG Energy Solution; Hana Securities. 2026 combines Q1–Q3 actuals with an estimated Q4.
| Company | Company disclosure | Brokerage estimate |
|---|---|---|
| Samsung SDI | By October, it had secured over 60 GWh of ESS orders and targeted another 60 GWh by year-end, for more than 120 GWh of annual orders. In October, mass production of LFP cells for ESS began at its SPE facility in Indiana, a joint venture with Stellantis.3, 10 | iM Securities forecasts ₩1.9 trillion in 4Q26 ESS revenue, with ESS accounting for about 85% of company-wide operating profit. Yuanta expects cumulative orders to surpass 120 GWh by year-end.3, 6 |
| LG Energy Solution | ESS backlog stood at 160 GWh at end-Q3; most planned capacity through 2028 was already committed. The company expects Q4 ESS shipments to rise about 40% quarter on quarter.11, 12 | Of its roughly 90 GWh annual new-order target, iM estimates about 30 GWh had been secured, while NH Investment & Securities estimates about 50 GWh through Q3. iM expects major orders in Q4 2026 or early Q1 2027.3, 13 |
The 160 GWh figure is the cumulative order backlog at end-Q3; 90 GWh is the target for new orders in 2026. They are not interchangeable.
What matters
- ESS already accounted for 35% of LG Energy Solution's Q3 revenue. ESS contributed ₩3.34 trillion of ₩9.64 trillion in revenue (Hana segment data). The company said Q3 ESS shipments rose more than 60% sequentially and projected North American ESS manufacturing capacity of over 50 GWh by end-2026 and about 70 GWh by end-2027.9, 12
- Brokerage estimates vary. Hana sees Samsung SDI's Q4 ESS revenue at ₩1.76 trillion, versus ₩1.9 trillion at iM and ₩1.98 trillion at Yuanta. Hana's table excludes AMPC from revenue.3, 6, 9
- An order backlog is a set of contracts; revenue requires shipments. LG Energy Solution warned that Q4 profitability could weaken as one-off gains fade and new factories incur fixed costs.12
Tariffs and tax-credit requirements are shutting out Chinese cells;
Korean cells made in North America are filling the gap
The U.S. ESS market was already substantial. What has changed is who supplies the cells.
Five barriers facing Chinese-made cells
The first three affect cell economics and tax-credit eligibility; the last two apply only to certain equipment or purchasers.
Sources: Yuanta Securities; tariff analyses (including Holland & Knight); U.S. DOE executive order and FCC notice commentary; Reuters reporting
Moving away from China does not automatically mean buying from Korea. The same July measures imposed tariffs of up to 12.5%, including baseline duties, on certain Korean imports (subject to product exemptions). A Section 301 investigation into structural excess capacity, due for a decision by March 2027, also covers 16 economies, including China and South Korea. This is why cells made in North American factories have an advantage.14, 18
| Criterion | Section 45X production credit (AMPC) | Section 48E investment credit |
|---|---|---|
| Recipient | Manufacturer producing cells and modules at a U.S. facility | Project owner installing ESS |
| Amount | $35 per kWh for cells + $10 per kWh for modules | 6% of eligible installation cost as a base rate; 30% if labor requirements are met; up to 50% with applicable bonuses |
| Availability | Full credit through 2029; 75% in 2030, declining to 25% in 2032 | For projects beginning construction through 2033; 75% in 2034, then 50% in 2035 |
| Conditions | U.S. production, no disqualifying PFE status, MACR compliance | MACR compliance across the project, no disqualifying PFE status |
Cells made in Ulsan or Seosan may help an ESS project satisfy Section 48E's non-PFE requirements, but their Korean manufacturer does not qualify for Section 45X on that production. Even with Korean-made cells, PFE-linked cathode materials or other inputs may affect the MACR calculation. LG Energy Solution said in its Q3 results that it had expanded non-PFE cathode sourcing and signed long-term North American lithium supply agreements.6, 8
If tax-credit benefits flow through to cell purchasers,
North American Korean cells could cost roughly half as much as direct Chinese imports
LFP cells for ESS, expressed per kWh of module output · Yuanta Securities scenario · USD/kWh
Source: Yuanta Securities scenario. North American cell manufacturing costs are assumed at $82, higher than in China. The modeled effective cost deducts $25–30 of a $45 Section 45X credit shared with customers and an imputed $15–20 Section 48E benefit. Adding the individual components in Yuanta's table yields $34–44, while its reported result is $37–47; the exhibit shows a range encompassing both. Its $25 tariff assumption implies a roughly 48% duty on a $52 cell; the current 40.9% rate would imply about $21.
The existing power grid—not data centers
- Rising Korean ESS orders do not primarily reflect expectations for on-site data-center generation. That segment remains small.
- Instead, utilities in the established U.S. grid-storage market—roughly 70 GWh a year—are shifting orders away from Chinese cell suppliers toward Korean manufacturers.
- Hana sees diversification away from China as bipartisan, supporting a durable benefit.
Tax-credit provisions remain in law through 2029
- Section 45X credits at full value through 2029 and Section 48E credits through 2033 are established in statute. Changes would require legislation passed by both houses of Congress and signed by the president.
- Yuanta judges that the new Congress taking office in January 2027 following the midterms significantly reduces the risk of early cuts through budget reconciliation, which allows qualifying fiscal legislation to pass the Senate by a simple majority.
- The outgoing Congress remains in session through year-end. Tariff enforcement and implementation of PFE rules remain executive-branch powers, so Yuanta expects limited changes before January 2029.
A potential shortage of qualified cells in the second half of 2027;
analysts disagree on how much data centers matter
Under Yuanta Securities' base case, North American demand for non-Chinese qualifying cells reaches 85 GWh in 2027 against 78 GWh of supply—a roughly 7 GWh shortfall. The firm expects an approximately 21 GWh exemption pool still eligible to use Chinese cells to be largely exhausted in the first half, concentrating the shortage in the second half.
North American BESS cells in 2027:
85 GWh of non-Chinese qualifying demand vs. 78 GWh of supply at the midpoint
Dots show the base case (supply uses the range midpoint); bands show low-to-high scenario ranges · Yuanta estimates
Source: Yuanta Securities estimates. About 21 GWh a year of total demand may still use Chinese cells, including projects that began construction before end-2025; most of this allowance is expected to be absorbed in H1 2027.
| Company | GWh | Details |
|---|---|---|
| LG Energy Solution | 40~50 | North American sites including Michigan and Tennessee; 160 GWh backlog |
| Samsung SDI | 18~24 | Phased startup of Indiana SPE ESS lines in H1 2027; Ulsan |
| SK On | 3~6 | Partial Georgia capacity; conversion of Seosan lines to LFP |
| Tesla in-house + others | 5~9 | Ramp-up of in-house LFP production in Nevada |
| Total | 66~89 | Midpoint of 78 GWh, 7 GWh below base-case qualifying demand of 85 GWh |
Yuanta believes LG Energy Solution and Samsung SDI's North American lines are booked through 2028, with new factories coming online no earlier than H2 2028. But if demand comes in at the low end (68 GWh) and supply at the high end (89 GWh), there would be no shortage.6
Shortage or overcapacity?
Qualified cells will be in short supply in 2027
- Exemptions for Chinese cells are expected to be exhausted in H1 2027, and Korean manufacturers' North American lines are booked through 2028.
- The base case shows a shortfall of about 7 GWh, but demand and supply ranges overlap: this is a conditional forecast, not a certainty.
Capacity could grow faster than demand
- The combined ESS manufacturing capacity of the three Korean cell makers may increase faster than demand.
- LS doubts that U.S. ESS demand alone can lift utilization beyond 80–90%.
A temporary shortage of eligible cells in 2027 and subsequent capacity oversupply can coexist. Nor does a shortage automatically guarantee higher prices or margins: long-term contract pricing, raw-material indexation and tax-credit-sharing terms matter.6, 19
New North American ESS installations:
110 GWh forecast for 2030 (Hana Securities)
GWh of storage capacity · Hatching denotes forecasts
Sources: Benchmark, SEIA, Hana Securities
Two views on data-center demand
Still marginal
- Some long-term contracts cover on-site power for data centers, but volumes remain small.
- Even if some new data-center construction stalls, Hana expects a limited impact on Korea's ESS industry.
Regulation could actually stimulate demand
- Of 106 GWh in expected North American cell demand for 2027, Yuanta assigns 18 GWh to behind-the-meter (BTM) storage at customer sites, including data centers, and server backup batteries.
- The argument: if data centers have to bear grid-upgrade costs, they may add on-site storage rather than wait for interconnection.
LG Energy Solution said it signed its first direct BESS supply contract with a major technology company in Q3 and was selected as an Nvidia BESS partner. More data centers could also lift demand for batteries installed on the wider grid.8
Power (GW) and stored energy (GWh) are different measures. Average U.S. utility-scale ESS duration rose from 2.8 hours in Q2 2025 to 3.5 hours in Q2 2026, meaning roughly 25% more battery capacity is needed for the same GW rating. Hana's installation forecast (79.2 GWh for 2027) and Yuanta's cell-demand estimate (106 GWh, including server backup batteries) are built on different definitions and should not be directly compared.6, 9
Share of 2028 operating profit attributable to U.S. tax credits:
50–80% at LG Energy Solution, 87% at Samsung SDI
AMPC is the Section 45X credit for manufacturing battery cells and modules in the U.S.—up to $45 per kWh ($35 for cells and $10 for modules). Companies recognize it in operating profit.6
LG Energy Solution's Q3 operating-profit bridge:
only about ₩19 billion left after credits and one-offs; net income was negative
₩100 million units · Company data alongside iM Securities estimates · Vertical line marks zero
Sources: LG Energy Solution Q3 earnings and preliminary results filing (Nov. 3); iM Securities (Nov. 2, one-off estimate). The company did not disclose the amount of compensation received.
The company said a one-time volume-related payment from a customer contributed to operating profit. It attributed non-operating losses to fair-value losses on derivatives linked to foreign-currency bonds, interest costs and an impairment of small-format IT pouch-battery assets, without disclosing a breakdown. A mark-to-market loss is not necessarily a cash outflow, and one quarter of net losses does not establish ESS unit economics. LS Securities cautioned that AMPC and one-off compensation accounted for much of reported operating performance, leaving underlying profitability fragile.2, 3, 4, 19
Strip operating profit into AMPC and everything else:
In Hana's 2028 forecasts, AMPC still accounts for most of the total
AMPC (Section 45X tax credit) Operating profit excluding AMPC · ₩ trillion · Percentages show AMPC as a share of operating profit · 2026–28 are Hana estimates
Sources: LG Energy Solution, Samsung SDI and Hana Securities. No percentage is shown for LGES in 2025–26 or Samsung SDI in 2025, when AMPC exceeds total operating profit.
| Brokerage | Operating profit | AMPC | AMPC share | Profit excluding AMPC |
|---|---|---|---|---|
| Hana Securities | 4.78 | 3.80 | 80% | 0.98 |
| Yuanta Securities | 5.03 | 3.42 | 68% | 1.61 |
| iM Securities | 5.34 | 2.65 | 50% | 2.69 |
Hana estimates the 2028 ratio at 87% for Samsung SDI. Yuanta estimates Samsung SDI's 2027 AMPC at ₩1.35 trillion, exceeding its forecast operating profit of ₩1.31 trillion.3, 6, 9
Section 45X payout schedule:
100% through 2029, followed by annual step-downs from 2030
Share of the $35/kWh cell + $10/kWh module credit available
Source: Yuanta Securities (Section 45X as amended by the OBBBA). Section 48E investment credits for ESS installations remain available through 2033.
What matters
- The phase-down begins in 2030. For the same output, the 2030 AMPC amount is 75% of its 2029 value, falling to 25% by 2032. Credits are also unavailable for cells or modules that fail PFE or MACR rules even while the statute remains in force. The key is how much profit manufacturers can build without the credit before then.6
- Hana Securities' view. Hana believes ESS and AMPC could support 2028 net profit of ₩3.15 trillion for LGES and ₩2.26 trillion for Samsung SDI even if EV revenue stalls and EV losses persist.9
- Estimates differ on when ESS becomes profitable without AMPC. Excluding AMPC, Hana forecasts a ₩0.30 trillion operating profit for LGES's ESS business in 2027, while Yuanta expects a ₩0.20 trillion loss (turning to a ₩0.26 trillion profit in 2028). NH Investment & Securities still sees a low-single-digit operating loss margin in Q4 2026 and has pushed back its breakeven forecast. Both Hana and Yuanta project continued EV segment losses through 2028.6, 9, 13
- Not every order is worth taking. On Nov. 5, LG Energy Solution said it would not participate in Korea's third centralized ESS capacity procurement auction (1,180 MW, about 7 GWh), citing the need to fulfill existing commitments first. Industry observers point to clearing bids falling from the ₩30/kWh range in the first auction to the ₩20/kWh range in the second. Domestic auction economics differ from the U.S. market.20
Lithium prices dropped 41% in two months;
is demand being pulled forward—or are costs finally easing?
Spot lithium carbonate traded around $14,000 per metric ton in early November. The same decline has led brokerages to opposing interpretations.21
Demand was pulled forward from next year
- Chinese battery manufacturers accelerated ESS-cell production and shipments ahead of a 2% consumption tax in September and the planned elimination of export tax rebates next January.
- Payback could come in 2027 through weaker cell production and reduced lithium purchases.
- Restarting idled Australian mines and the release of speculative inventories added pressure, although Eugene considers the decline excessive relative to fundamentals.
Lower input costs should widen margins
- Lithium carbonate May futures exceeded CNY 200,000 per metric ton, before spot prices fell to CNY 96,900–98,300 by late October.
- Yuanta estimates this cuts cell costs by about CNY 0.06 per Wh, or roughly 15% of the cell price. Allowing for procurement lags, it expects ESS margins to improve starting in H1 2027.
- U.S. utility-scale ESS system prices have fallen only about 2% over the past year.
What matters
- Hana views CATL's margin decline—from 20% to 12%—as largely a China-specific story. It attributes the squeeze to the reinstatement of a 2% battery consumption tax in September (rising to 4% in September 2027) and a larger share of less-profitable domestic ESS sales. With export rebates also scheduled to end in 2027, Hana sees limited read-through to Korean manufacturers.7
- Watch the gap between shipments and installations. The question is whether Chinese producers cut lithium purchases after shipping batteries ahead of demand (Eugene Investment & Securities).21
Brokerages generally prefer cell makers over materials suppliers,
but materials also have exposure to ESS demand
As the opening chart showed, cell makers and battery-materials stocks have diverged. POSCO Future M, a cathode-material supplier, held up similarly to cell makers, falling 15.7%. Here is what flows and brokerage calls say this week.
| Stock | This week | Short interest | Foreign ownership |
|---|---|---|---|
| LG Energy Solution | −6.1% | 1.94% | 5.4% |
| Samsung SDI | −13.8% | 1.13% | 24.4% |
| POSCO Future M | −0.2% | 4.34% | 8.9% |
| EcoPro BM | −8.6% | 5.27% | 14.0% |
| L&F | −8.7% | 3.91% | 15.3% |
| KOSPI | −11.7% | — | — |
This week means the Oct. 30–Nov. 6 close-to-close change. Short positions as a share of shares outstanding are as of Oct. 28 (Yuanta); foreign ownership is as of Nov. 6 (Daum Finance).1, 6
- Supply-and-demand pressure appears greater in materials. Foreign and institutional investors were net sellers of three cathode-material stocks in October, while only retail investors bought. Short interest is also higher in materials (Yuanta).6
- Materials companies also benefit from ESS. On Nov. 3, L&F disclosed a long-term LFP cathode-material supply contract worth roughly ₩1 trillion with LG Energy Solution for 2028–31. Revenue and profit will lag until new facilities start delivering product.22
- Why LG Energy Solution's reported foreign-ownership ratio is low. On a free-float basis excluding LG Chem's holding, foreign ownership is about 31% (Yuanta, as of October).6
Hana Securities' valuation reference points
- Share-price levels mattered more than the election itself. Hana argued that market capitalization determined how investors framed the election result: near ₩100 trillion, LGES was seen as exposed to downside; below ₩40 trillion, Samsung SDI attracted a more favorable narrative.9
- Where valuations stand now. At the Nov. 6 close, LG Energy Solution's market cap was ₩79.0 trillion and Samsung SDI's was ₩37.7 trillion. Hana's reference prices, taken at the Nov. 5 close, implied ₩81.0 trillion and ₩41.0 trillion, respectively.1, 9
| Brokerage | Rating | Thesis |
|---|---|---|
| Hana Securities (Nov. 6) | Overweight | Buy the cell makers. Diversifying away from Chinese supply is bipartisan; no EV-demand recovery is assumed. Target market caps: ₩110 trillion for LGES and ₩65 trillion for Samsung SDI.9 |
| Yuanta Securities (Nov. 5) | Overweight | Prefer cells to materials. Sees a potential H2 2027 North American cell shortage and a much lower risk of early cuts to Sections 45X and 48E.6 |
| LS Securities (Nov. 4) | Hold LGES | Underlying profitability remains weak given dependence on AMPC and one-off compensation. Combined capacity at Korea's three cell makers could outgrow ESS demand.19 |
| iM Securities (Nov. 2) | Neutral | Selective exposure to cell makers and ESS components; focus on improving ESS earnings rather than election volatility.3 |
| Eugene Investment & Securities (Nov. 6, Energy) | Positive on batteries | The change in congressional control reduces the risk of further policy retrenchment, but the possibility of restoring withdrawn tax credits remains uncertain.23 |
What to watch next
| Date | Event | Why it matters |
|---|---|---|
| 11.10 | Deadline for China's suspension of export controls on lithium batteries, graphite anode materials and other items | The U.S. and China agreed to extend the suspension to Jan. 10, 2027. As of the afternoon of Nov. 8, no implementing extension notice from China's Ministry of Commerce had been confirmed.7, 24 |
| 4Q26~1Q27 | Major LG Energy Solution ESS order announcements | Whether the remaining 40–60 GWh of its roughly 90 GWh annual target (NH and iM estimates) is formally disclosed3, 13 |
| 12.24 | Deadline for DOE implementing rules under the grid-security executive order | What standards apply to screening transactions involving BESS and inverters15 |
| 12.31 | U.S. Treasury's PFE safe-harbor table | Whether the estimated 52% cell-cost share in ESS is confirmed6 |
| 2027.01.01 | Tightening of MACR thresholds | 45X 65%, 48E 60%6 |
| 2027.02.18 | EU battery passport rollout | Registration of origin and manufacturing-process information for batteries sold in Europe. Yuanta sees an advantage for Korean makers with European factories.6 |
| 2027.03 | USTR Section 301 excess-capacity investigation decision deadline | Covers 16 economies including China and South Korea. Watch for additional battery measures and the countries targeted.18 |
| 2027.10.01 | NDAA battery-procurement restrictions take effect | Cells and packs from six Chinese-linked companies17 |
| End of 2029 | Final year at 100% Section 45X credit value | Step-down to 75% begins in 20306 |
Factors that could delay or change the thesis
These three risks primarily concern supply and profitability rather than demand. None of the brokerage reports reviewed here cut its U.S. ESS demand forecast.
KNOWNEstablished facts
- LGES ESS backlog: 160 GWh at end-Q3; Samsung SDI: more than 60 GWh of ESS orders by October
- LGES Q3 operating profit: ₩756.0 billion, including ₩416.9 billion of AMPC; net loss: ₩296.9 billion
- Defense battery procurement ban effective Oct. 1, 2027
ESTIMATEForecasts and estimates
- AMPC as a share of LGES 2028 operating profit: 50–80%, depending on brokerage
- Base-case 2027 shortage of qualifying non-Chinese cells in North America: 7 GWh (Yuanta)
- ESS margins expected to expand from H1 2027 (Yuanta)
UNKNOWNStill unresolved
- When China formally announces the export-control suspension extension
- The actual size of behind-the-meter (BTM) demand from data centers
- Any measures affecting Korean batteries under the Section 301 excess-capacity investigation