Crisis or Turning Point? Energy Storage and the Next Growth Engine for Korea’s Battery Industry

Talk of a crisis in Korea’s battery industry has not subsided. Slowing demand for electric vehicles, China’s expanding market share, and mounting policy uncertainty in major economies have arrived together, and the earnings of Korean firms have suffered as a result. What deserves attention, however, is that this recent weakness does not stem from any stagnation in the global battery industry. World battery demand continues to rise in existing markets, on the intensive margin, and demand in new applications, on the extensive margin, has lately been expanding quickly. This paper shows that the root cause of the crisis in Korea’s battery industry lies not in the electric vehicle chasm itself but in an erosion of competitiveness in the country’s core market and core product. It further argues that the industry’s center of growth is shifting structurally from electric vehicles to energy storage systems (ESS), and it focuses on the US ESS market, which is growing on the strength of expanding renewable generation and the spread of AI data centers. The United States is combining tariff policy with the supply chain restrictions attached to the advanced manufacturing production credit (AMPC) to reduce its reliance on Chinese ESS and build a supply chain centered on itself. These policy changes are expected to open new growth opportunities for Korean battery firms that have established production bases on US soil. ESS is critical infrastructure underpinning the global energy transition and the spread of the AI industry. Building ESS into a new engine of growth for Korea’s battery industry will require using US supply chain policy strategically, and it will also require expanded policy support to strengthen the domestic battery materials industry, to upgrade the systems through which Korea responds to industrial and trade policy in major economies, and to build capability in next-generation ESS technology and system integration (SI).