The Peninsula

Two South Korean Companies To Meet in U.S. Court

This briefing comes from Korea View, a weekly newsletter published by the Korea Economic Institute. Korea View aims to cover developments that reveal trends on the Korean Peninsula but receive little attention in the United States. If you would like to sign up, please find the online form here

What Happened

• South Korean electric vehicle (EV) battery manufacturer LG Chem sued SK Innovation for stealing trade secrets by poaching employees.
• With the lawsuit filed in the United States, LG Chem called on the U.S. International Trade Commission (ITC) to freeze imports by SK Innovation.
• LG Chem expects the ITC’s final ruling on the case in the second half of 2020.

Implications: The legal challenge between the two Korean companies places the U.S. government in an awkward position. SK Innovation just started building a $1.67 billion battery plant in Georgia. This massive investment is expected to not only add 2,000 jobs to the region but also help local car makers (like Kia Motors) move into the higher-value electric vehicle market. Commerce Secretary Wilbur Ross attended the plant’s groundbreaking ceremony in March. This hints at the U.S. government’s heightened attention on this project. LG Chem’s allegation that SK Innovation poached employees who stole proprietary technology could jeopardize all this. Given the far-reaching implications of this case, the two companies’ case could spill over onto the court of public opinion.

Context: LG Chem is the fourth largest EV battery maker in the world with a 10.4% market share. SK is in tenth place with a 1.7% market share. LG Chem is currently advancing plans to invest $5.29 billion to further expand its battery production capacity to 110-gigawatt hours (GWh) by 2020 (from the current 34 GWh). This is good news for LG’s battery manufacturing plant in Michigan. However, the growth of LG Chem’s debt leverage has led Standard & Poor’s to downgrade the company’s credit rating. At this delicate time, a successful lawsuit against SK Innovation could serve to signal the likelihood of LG’s long-term dominance in the market.

Korea View is edited by Yong Kwon with the help of Haram Chung, Yea Ji Nam, Steven Lim, and Haeju Lee.

Image from the U.S. International Trade Commission