Samsung SDI Co Ltd Q3 2020 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jeongu Ko - NH Investment & Securities Co., Ltd., Research Division - Analyst : [Interpreted] I have 2 questions also about automotive batteries. First of all, recently the automotive OEMs have started to look into internalizing their battery sourcing. This has always been a possibility that's been talked about, but especially as during the battery day event, Tesla mentioned its strategies about producing batteries. This is setting a bit of concern in the market. What do you think will be the impact of -- these changes, internalizing battery sources by auto OEMs, would have in the battery industry? Or what will be the impact to battery companies? The second question is about your cylindrical battery business. It seems [your] cylindrical battery supply for EV applications aren't picking up as fast as we have expected. In that context, can you share with us your business outlook for the cylindrical EV battery business for next year? And can you share with us whether you are starting to also win orders from new customers? Unidentified Company Representative [Interpreted] To answer your first question about OEMs, automotive OEMs, talking about internalizing their battery supply. Given that batteries are the most critical part of an EV and also account for a major share of the vehicle cost, OEMs would naturally have a very strong need to internalize their battery sourcing. However, EV battery manufacturing requires a huge initial investment as well as technology development and mass production know-how which needs to be accumulated over some time, which makes it very difficult for anyone to internalize large-size capacities in a short period of time. So even if the OEMs internalize some capacity, a large part of their battery needs would still have to be satisfied through cooperation with the existing battery companies. As the EV market grows rapidly, OEMs may start to internalize their battery sourcing. And also even new players may enter the battery market, but regardless of such changes, we will leverage the capabilities that we have accumulated over an extensive period of time as a battery specialist to continue high-quality growth by offering even more competitive products and expanding the partnership we have with customers. Your second question was about our cylindrical battery business for EV applications and our outlook for next year as well as whether we are adding additional orders from new customers. Some of the projects that were originally scheduled for this year have been delayed. And this has been causing some -- causing the cylindrical battery sales for EV applications to remain sluggish until this year, but we expect sales to significantly increase from next year as these new projects come online. We are currently in discussion also with several customers about new projects for post 2021 for both passenger vehicles and commercial vehicles, which will help us diversify our customer base and also increase our revenue. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 27, 2020 / 4:30AM, 006400.KS - Q3 2020 Samsung SDI Co Ltd Earnings Call

Question: H. Kwon - JPMorgan Chase & Co, Research Division - Analyst : [Interpreted] I have 2 questions. First question is about the revenue towards new applications such as M mobility and TWS. Can you share with us the revenue contribution of your sales through these new applications and give us some outlook for the future market? Second question is about the ESS market. The ESS market is expected to grow with many countries adopting ecofriendly policies. What is the ESS market outlook that you have as well as your guidance for this business next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 27, 2020 / 4:30AM, 006400.KS - Q3 2020 Samsung SDI Co Ltd Earnings Call Unidentified Company Representative [Interpreted] Your first question was about the revenue towards new applications such as M Mobility and TWS. With the increase in demand for personal mobility due to COVID-19, micromobility is expected to record over 30% growth on an annual basis this year and continue over 10% growth next year. The contribution of M mobility sales to our overall cylindrical battery business is expected to be around 20% this year. Our TWS-related battery demand is also rapidly increasing, as major smartphone OEMs have introduced new wireless designs and TWS is becoming sort of a basic accessory for smartphone users. Accordingly, the demand for coin cell batteries, which are used for TWS, is expected to double this year versus last year and continue high-growth rates of above 50% even next year. Even though coin cells account for a small portion of our revenue yet, because these are high-value-added products, once sales start to grow at full scale, it will become a strong contributor to our profitability. Your second question, about the ESS market outlook and our growth outlook for next year. The global ESS demand next year is expected to grow by between 30% to 40% or more versus this year, driven by the stronger ecofriendly policies globally and also better economics of renewable energy combined with ESS. By region, we think that the U.S. power utility market would be the major driver behind the overall ESS market globally. Meanwhile, looking at the ESS market in Korea, the Korean ESS market is expected to shift the focus from the renewable energy applications towards applications for stabilizing the power grid, led by KEPCO, as well as other commercial applications. Because the overseas markets are expected to lead ESS demand growth next year, we're also focusing our promotion, order-winning and sales activities towards the overseas markets; and we will also be launching competitive ESS products to drive our growth further.