SEOUL -- LG Chem is pushing for the localization of some battery parts in an effort to reduce its dependence on Japan amid a deepening political and economic feud, its president said on Wednesday.
South Korea's LG Chem, which supplies batteries to automakers including Volkswagen Group, Volvo and General Motors, is bracing for the possible fallout from an escalating trade spat with Japan stemming from the latter's wartime past.
Effective Wednesday, Tokyo dropped South Korea from a so-called "white list" of favored trade partners, which could lead to more paperwork and on-site inspection for some Japanese exporters.
Speaking at a battery conference, Kim Myung Hwan, president of LG Chem, said the company is testing products of South Korean pouch film maker YoulChon Chemical, citing uncertainty about Japan imports.
LG Chem has relied heavily on Japan's Dai Nippon Printing and Showa Denko KK for pouches for its lithium ion batteries. The combined market share in the global battery pouch market of the two Japanese companies is about 70 percent, according to industry tracker SNE Research.
"I expect we wouldn't have any issues with those Japanese suppliers if they follow the compliance rules, but we are in the situation where the Japanese government could say different things if they wanted," Kim added.
Changing suppliers will not be easy, however, as it will take quite some time for LG Chem to run a series of tests and discuss the matter with clients, said an industry source with knowledge of the matter.
LG Chem's comments came as the South Korean government said on Wednesday it would invest more than 5 trillion won ($4.12 billion) in research and development for local materials, parts and equipment between 2020 and 2022.