Market tension and political pressure escalated Wednesday as South Korea’s major battery makers -- LG Energy Solution and SK Innovation -- awaited the final ruling from the US International Trade Commission regarding their yearslong trade secret battle.

While the outlook has so far largely favored LG, some market observers have suggested recently that newly inaugurated US President Joe Biden might veto the final ruling to support US-made vehicles.

“SK Group is sinking about $2.6 billion into a massive battery plant that is capable of producing 21.5 gigawatt-hours in a rural town in Georgia, marking the largest foreign investment in the state’s history,” the Washington Post reported last week.

LG’s claim of trade secret infringement, according to the report, would hurt SK’s two biggest customers, Ford and Volkswagen.

It went on to speculate that Biden might go as far as to overturn the ruling if the trade commission sided with LG. Earlier, the Democratic US president vowed to shore up the country’s manufacturing sector and the sale of US-made electric vehicles, under his “Buy American” slogan.

In February last year, the USITC handed down a preliminary ruling in favor of LG Energy Solution, ruling by default that SK Innovation had infringed on LG’s electric vehicle battery trade secrets.

Should the USITC uphold its preliminary ruling -- as it always has for cases involving trade secrets from 1996 to 2019 -- SK Innovation will have to halt shipments of batteries, parts and manufacturing equipment to the US.

With the commission set to deliver its final decision Wednesday at 5 p.m. Eastern Standard Time, neither SK nor LG had provided an official comment, according to foreign media.

Along with the two Korean battery makers, the US auto market remained tense over the imminent results -- especially Ford and Volkswagen, which could have their business schedules delayed for years should the Georgia plant fall through.

According to Hwang Sung-ho, a mechanical engineering professor at Sungkyunkwan University, it takes several years for automakers to complete the optimization of batteries for electric vehicles. Also, a Hyundai Motor official pointed out that carmakers choose which batteries to use in the early stage of developing electric vehicles.

Of course, Ford and Volkswagen can improvise and reach out to LG Energy Solution, which is building its own second battery plant in Ohio -- set for completion early next year -- that can make about 30 gigawatt hours of batteries annually.

However, as LG Energy Solution is building the $2.3 billion plant with General Motors, most of the batteries will be allocated to GM, not to GM’s competitors.

Tesla, which can manufacture 35 gigawatt hours of batteries per year at its Gigafactory in Nevada, only supplies batteries for its own electric vehicles, so Ford and Volkswagen are almost out of options.

In a filing with the ITC, Ford said “with every new electric vehicle, the EV battery supplier must be selected approximately four years (and sometimes more) before the launch.”

“EV batteries are not commodity products, but are manufactured according to technical specifications developed specifically for the electric vehicle into which they will be assembled,” the company’s lawyers wrote in the document. “Consequently, EV batteries cannot be manufactured in isolation but are an integral aspect of the design plan for the electric vehicle and its other components.”

Volkswagen warned in its own filing that an ITC ruling preventing it from using SK Innovation batteries “at this late stage will require restarting the process of finding another domestically manufactured battery option” and said “creating new capacity for a specific electric vehicle contract typically takes years.”

Political pressure has also been on the rise here, with Korean Prime Minister Chung Sye-kyun publicly reprimanding both battery makers, calling the prolonged lawsuit an “embarrassment” during a press conference last month. 

Chung’s comments echoed statements from three US politicians in December.

Reps. Earl Carter and Sanford Bishop from Georgia and Rep. Chuck Fleischmann from Tennessee urged LG Energy Solution and SK Innovation to reach a “workable, amicable and accountable resolution” in a letter sent to both companies Dec. 10. Tennessee is home to a Volkswagen electric vehicle assembly line, which uses batteries made by SK.

However, it remains to be seen whether Biden will actively intervene in the case as the Biden administration pledged to take a hard line on intellectual property theft, saying it would “fight back against unfair trade practices and the theft of American intellectual property.” 

Biden would face a dilemma if he had to decide whether to side with Georgia and Tennessee against Ohio, where LG’s battery plant is being built. Politicians there are calling for tough action against SK Innovation.

Ohio Sens. Sherrod Brown and Rob Portman submitted a joint statement to the USITC in early May in support of LG, saying LG Energy Solution’s investment in Ohio cannot succeed without fair trade and the protection of trade secrets.

Ohio Gov. Mike DeWine also presented a statement to the USITC. If the infringement of LG Energy Solution’s intellectual property rights by SK Innovation is left uncorrected, the statement said, it can weaken LG Energy Solution’s investment, which otherwise would create more than 1,000 jobs in the US.

By Kim Byung-wook (kbw@heraldcorp.com)