SK On, the battery-making arm of South Korea's SK Group, has signed a three-year supply agreement with L&F, a specialist cathode-materials manufacturer, covering 160 billion won (roughly $120m) worth of lithium iron phosphate (LFP) cathode materials. The deal is being read as the clearest signal yet that South Korea's battery industry, which has long staked its future on nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminium (NCA) chemistries, is now ready to contest a market that Chinese rivals have made their own.
LFP is no longer just a cheap battery
LFP batteries have historically carried one significant drawback: lower energy density than NCM or NCA alternatives. But their advantages — superior thermal safety, stable raw-material supply chains and lower production costs — are drawing fresh attention, and their share of the global electric-vehicle battery market is rising fast. According to SNE Research, a South Korean market-intelligence firm, LFP accounted for roughly 40% of global EV battery sales in 2023; by 2030, the firm expects that figure to exceed 50%.
Tesla's decision to fit LFP cells in its Standard Range models was an inflection point. Volkswagen, Ford, and Hyundai have since followed, broadening LFP adoption across their mid-range and entry-level EV line-ups. As the roster of customers diversifies, so does the market's foundations.
Can South Korea crack China's dominance?
For now, the LFP market is effectively a Chinese duopoly. CATL held approximately 37% of the global battery market in 2024 and commands an even larger share within LFP specifically; BYD is a formidable second. South Korea's three major battery makers — LG Energy Solution, Samsung SDI, and SK On — have concentrated on high-energy-density NCM chemistries, targeting premium-segment customers. As demand for affordable EVs surges, however, the absence of a credible LFP strategy has become an increasingly conspicuous vulnerability.
Against that backdrop, the SK On–L&F agreement amounts to more than a routine procurement contract. SK On is moving more aggressively than any other South Korean battery maker to build an LFP portfolio, while L&F is seeking to diversify away from its existing high-nickel cathode business to broaden its revenue base. "LFP has moved from optional to essential," said one industry insider. "This deal should be seen as the South Korean battery value chain properly engaging its LFP transition."
Reading L&F's survival strategy
L&F enjoyed a golden run in 2022 and 2023, supplying high-nickel cathode materials to Tesla. But a slowdown in EV demand and Tesla's subsequent supply-chain restructuring hit the company hard. By 2024 it was recording operating losses running to tens of billions of won, confronting what analysts describe as a structural crisis. Moving into LFP cathode materials is its central response. The technology barrier to LFP is lower than for NCM alternatives, making market entry more accessible — but competing on cost against established Chinese producers will require significant scale and manufacturing efficiency.
Analysts broadly welcome the fact that L&F has secured a reliable offtaker in SK On, though they note that a 160 billion-won contract is too small on its own to reverse the company's financial fortunes. "This deal creates a reference case for the LFP business," said one securities analyst. "The real question is whether it leads to further orders."
Policy tailwinds and industrial ecosystems
South Korea's government is also considering policy measures to support the domestic industry's LFP pivot. Crucially, America's Inflation Reduction Act restricts the use of battery components sourced from China, placing Korean-made LFP cells in an advantageous position: they can potentially qualify for federal EV subsidies while remaining cost-competitive. American automakers, including GM and Ford, are actively seeking non-Chinese LFP supply chains, creating a structural opening for Korean producers.
Europe is moving in the same direction. The EU's Carbon Border Adjustment Mechanism and mandatory battery supply-chain due-diligence rules are raising the barriers for Chinese battery imports. If South Korean producers can establish a reputation for transparent and responsibly sourced LFP supply chains, they have a plausible path to capturing meaningful market share in a segment where they have thus far been absent.
Outlook: the LFP contest is just beginning
The SK On–L&F deal formally marks South Korea's battery ecosystem entering the LFP arena. Success, however, is far from assured. Closing the gap with CATL — which has spent years refining its LFP technology and cost structure — will demand substantial time and capital. Close collaboration across the domestic materials, components, and equipment supply chain, alongside government support for research and development, will be essential to generating genuine competitive advantage.
Whether this contract proves a genuine turning point for the South Korean battery industry, or merely an isolated foray, will ultimately depend on the execution capabilities of both companies and on how market conditions evolve. One conclusion seems clear: as EV adoption broadens and affordability becomes ever more important, LFP's strategic significance will only grow. How quickly South Korea's battery makers can position themselves in that market may well determine the industry's competitive standing for the next decade.