LG Energy Solution quadruples investment in U.S. battery manufacturing facility

LG Energy Solution announced what it says is the largest single investment for a stand-alone battery manufacturing facility in North America. The company reports that it will invest approximately $5.5 billion to construct a battery manufacturing complex in Queen Creek, Ariz., where it will make cylindrical batteries for electric vehicles (EV) and lithium iron phosphate (LFP) pouch-type batteries for energy storage systems (ESS).

A year ago LG Energy Solution announced it was investing approximately $1.4 billion to construct a factory to manufacture cylindrical batteries, with mass production slated for the second half of 2024. Now the company says its investment will be more than four times the amount the company initially announced.

Out of the $5.5 billion, LG Energy Solution plans to invest $3.2 billion in building a cylindrical battery manufacturing facility with a capacity of 27 GWh. Cylindrical batteries are used by EV manufacturers as well as electric tool companies in North America. The rest of the investment ($2.3 billion) will go into construction of the second facility where LFP pouch-type batteries will be produced, with an expected capacity of 16 GWh.

The company plans to break ground on both facilities this year, and expects mass production of 2,170 cylindrical battery cells in 2025. These batteries will primarily serve U.S. EV manufacturers who are seeking made-in-the-USA batteries in order to take advantage of the tax credits offered by the Inflation Reduction Act.

The LFP pouch-type batteries will be sold to ESS manufacturers, and LG Energy Solution claims that this will be the first ESS-exclusive battery production facility in the world. The company expects to begin production of the LFP pouch batteries in 2026.

“Our decision to invest in Arizona demonstrates our strategic initiative to continue expanding our global production network, which is already the largest in the world, to further advance our innovative and top-quality products in scale and with speed,” said Youngsoo Kwon, chief executive officer of LG Energy Solution. “We believe it’s the right move at the right time in order to empower clean energy transition in the U.S.”

The new Arizona facilities will use state-of-the-art smart factory technologies that the company says carries out all decision making on machine-produced data. The smart factories are expected to enhance product quality and help the company to increase yield to better respond to the rising battery demands in the region.

LG Energy Solution was formed in 2020 after being spun off from LG Chem, and it debuted on the Korea Exchange (KRX) in January 2022. In 2017 LG Chem was the first international player to enter the U.S. residential battery market, and now, as LG Energy Systems, focuses the burgeoning U.S. battery market for electric vehicles and energy storage systems. In January, LG Energy Systems announced that it will pursue 25% to 30% increase in the annual consolidated revenue in 2023, and plans to double its capex over the previous year; however, there is currently no indication as to whether those plans will change with this new, increased investment in U.S. manufacturing.