Samsung SDI Sells Polarizing Film Business to Wuxi Hengxin Optoelectronic⁢ Materials

Samsung SDI‌ has sold ‍its polarizing film business to ⁢Wuxi Hengxin Optoelectronic Materials for $833 million to secure cash for expected outflows from its battery⁢ business.

Samsung SDI is divesting its polarizing film ⁣business to ⁣China’s Wuxi Hengxin Optoelectronic Materials for 1.12 trillion won ($833 million) in an​ effort to sell the underperforming unit and secure cash for expected⁤ capital outflows in its battery businesses.

The deal,‍ signed on September 10, includes a⁤ 100% stake in the battery⁣ maker’s Wuxi subsidiary as well as production and sales ⁣operations of its film business from its plants in Cheongju, North Chungcheong Province, and Suwon, Gyeonggi Province.

“Samsung ⁣SDI will focus all of our capabilities on developing next-generation materials for semiconductors, organic light-emitting diodes, and batteries to maximize synergies with our battery business,” the company said in a filing to‌ regulators.

Wuxi Hengxin Optoelectronic Materials is a joint venture between ⁣China’s NY Capital, which holds stakes in about 40 display, auto, and chip companies, and Hengmei Optoelectronics, a subsidiary specializing in ⁢polarizing film.

The ⁣divestment comes as Samsung SDI has suffered weak profits in⁤ its polarizing film business in recent years, hit by low-cost products ⁢from Chinese companies. Net profit at subsidiary Wuxi fell 50% to 30.8 billion won in 2023 from 2019.

LG Chem also sold its polarizing film business to‍ a Chinese company in 2023, while SKC sold its polyester PET ⁣film business to Hahn & Company, a local private equity firm.

Cash from the SDI sale is likely to flow ⁤into the company’s battery business as it continues to invest even as strategic ⁤competitors cancel or cut investment plans amid slowing demand for electric vehicles.

“There is no change in SDI’s investment plan,” said Kim Yoon-tae, vice president ⁣of business management at Samsung SDI, in a conference call revealing the company’s second-quarter earnings performance,‌ adding that the company has “doubled ​its investment in the first half ‌compared to the ‌same period in 2023.”

The company is estimated‍ to⁢ spend about‍ 6.5 trillion⁢ won this year, up 65% from 2023, according to the report.⁣ The company spent 1.6 trillion won on ⁤investment in the first quarter.

Samsung SDI recently signed an agreement with General Motors for a joint investment of $3.5 billion to build a battery⁢ plant in the US state of​ Indiana. This plant will be Samsung SDI’s third battery manufacturing facility in the US. The company is currently building two battery plants ‌in Kokomo, Indiana, with Stellantis.

The first plant⁣ is expected to begin production in December 2024.

Samsung SDI CEO Choi Yoon Ho hinted earlier this⁢ year that he⁣ was ⁤also considering a⁤ standalone plant in the US.

“With the trend of countries abandoning⁤ Chinese batteries spreading, ⁢Samsung SDI’s prismatic batteries are likely to replace ⁣Chinese products,” said Jeong Jin-soo, an analyst at Heungkuk Securities. “The decision to proceed with ⁢the capital expenditure plan is ⁣considered a wise decision as it is expected to‍ expand cooperation with global automakers.”