[COX] ESS Holds the Key to Samsung SDI, LG Energy Solution, and SK On'…

LG Energy Solution, Samsung SDI, and SK On, which have long suffered from losses, are now looking to ESS (Energy Storage Systems) for a turnaround. However, Tesla has emerged as a variable. Pricing pressure is expected to intensify further. / Photo generated by COXNEWS using Gemini (AI)

LG Energy Solution, Samsung SDI, and SK On, which have long suffered from losses, are now pinning their hopes on ESS (Energy Storage Systems) for a rebound. However, a key variable is that even Tesla, which leads this market, has acknowledged that price competition is intensifying. ESS, once expected to be the breakthrough for reversing earnings, could end up becoming more of a burden than a benefit.

Let's start with Samsung SDI. The company posted an operating loss of 1.72 trillion won in 2025 alone. It was the first time since its founding that it recorded an annual loss exceeding 1 trillion won. Fortunately, conditions improved in the first quarter of 2026. Revenue rose 12.6% year-over-year to 3.5764 trillion won, while operating losses narrowed 64.2% (278.5 billion won) to 155.6 billion won. CEO Choi Joo-sun said the company would make 2026 the first year of its recovery by increasing ESS orders and securing premium electric vehicle battery contracts.

However, forecasts in the securities industry are sharply divided. Looking at Samsung SDI's projected operating profit for 2026, the lowest estimate among 23 brokerage firms (LS Securities) calls for a loss of 265 billion won, while the highest (NH Investment & Securities) expects a profit of 430 billion won. Such a wide gap in projections for the same company underscores how difficult it is to predict its future. KB Securities raised its target price by 39%, expecting ESS demand to grow alongside increased construction of AI data centers in the United States. In contrast, LS Securities believes ESS sales alone will not be enough to offset weak electric vehicle battery demand.

Among the three companies, LG Energy Solution moved into ESS first and the fastest. As of the end of April 2026, its ESS order backlog in North America had reached 440 GWh. By the end of the year, it plans to expand its battery production capacity for North American ESS to more than 50 GWh.

SK On entered the market relatively late. Nevertheless, it achieved a turnaround by winning 284 MW (worth more than 1 trillion won), or 50.3% of the total volume, in South Korea's second ESS bidding round. This marks a significant reversal from the first round, where its winning rate was 0%. The change was influenced by the government's decision to increase the weighting of non-price factors from 40% to 50% and to adopt the use of domestically produced materials as a new evaluation criterion.

The problem is that the ESS market itself—the foundation of all these turnaround scenarios—is beginning to wobble. Tesla announced on July 22 (local time) during its earnings call that the gross margin of its energy business fell from 39.5% to 20.4% in the second quarter. It was nearly cut in half.

Chief Financial Officer Vaibhav Taneja explained the decline with three factors. First, Tesla incurred an additional $240 million in warranty costs due to battery cell issues in products sold previously. Second, the tariff benefits worth more than $200 million that the company enjoyed in the first quarter were absent this quarter.

In addition, the selling price of utility-scale energy storage systems is itself declining. Battery cell manufacturers are expanding into system integration (SI) businesses, while new entrants such as Ford are joining the market, indicating that price competition is becoming structurally more intense.

Tesla expects the profit margin of its energy business to settle in the low-to-mid 20% range going forward. Compared with margins that once climbed into the high 30% range, the company has significantly lowered expectations.

For LG Energy Solution, Samsung SDI, and SK On, the ESS turnaround narrative is now shifting from "how much they can sell" to "at what price they can sell." Volumes are already increasing. The key question is how well the three Korean battery makers can withstand the same downward pricing pressure that Tesla is experiencing.