The Battle Over Batteries: Chinese Ascendancy and Challenges for Korea

In 2022 the US Congress passed the Inflation Reduction Act (IRA). This law aims to reduce American dependency on Chinese batteries and reorder the global supply chain in America’s favor by excluding electric vehicles containing any minerals, materials, or parts sourced from China from federal new car subsidies. In response, China has launched a strategy to strengthen its secondary battery supply chain, leveraging its superiority in all aspects of the chain, including raw materials procurement and cell manufacturing. China’s strategy rests on three core pillars: 1) Internalizing or localizing advanced technologies, 2) globalizing China’s supply chain and increasing investment abroad, and 3) reinforcing the security of its supply chains of raw materials, particularly the supply chains for core minerals. For now, the intensifying US-China rivalry and growing divide in the global supply chain of secondary battery industries presents new opportunities for the Korean battery industry. However, China is determined to bolster its battery technologies and continue to invest abroad; this poses substantial challenges to the Korean battery industry. The Korean secondary battery industry now stands at a crossroads of risks and opportunities, brought about by the widening gaps in the global supply chain and China’s strategy to supercharge its battery industry. Korean policymakers must work to maintain Korea’s technologically superior position by investing in advanced battery research and by establishing a technological alliance with Japan, Germany, and the United States. Korea must also diversify its core minerals supply chains through using the Indo-Pacific Economic Framework, and increase its shares in European, Southeast Asian, and other markets worldwide. It should also look to cooperate with China where possible in order to secure an edge over competitors in emerging markets.