The diaphragm used to be one of the products with the highest gross profit margin among the main materials of lithium batteries. Before 2023, the leading companies in the diaphragm industry maintained an ultra-high gross profit margin of 40%-50% all year round. However, with the fierce reshuffle of the industry and the intensification of the contradiction between supply and demand in the industry, the gross profit margin in the diaphragm field has been much lower than before.
For example, the gross profit margin of Enjie Co., Ltd., the leader, was as high as 50.02% in the first half of 2022, but it dropped to 37.43% in 2023. In the first quarter of this year, it further dropped to 18.87% . The gross profit margin of another leader, Xingyuan Materials, was 44.42% in 2023, and further dropped to 35.99% in the first quarter of this year.
At present, the competition in China's lithium battery separator market has entered the open day. Industry insiders pointed out that "with the large-scale concentrated release of production capacity of domestic lithium battery separator companies, there is a temporary oversupply, and cost competition and price competition are fierce." At present, the annual production capacity of domestic lithium battery separators has reached 28.2 billion square meters, but the capacity utilization rate is less than 50%.
In terms of operating performance, Enjie Co., Ltd.'s net profit in 2023 was 2.527 billion yuan, a year-on-year decrease of 36.84%; its net profit in the first half of 2024 was 291 million yuan, a year-on-year decrease of 79.28%. Xingyuan Materials' net profit in 2023 was 576 million yuan, a year-on-year decrease of 19.87%; its net profit in the first quarter of 2024 was 107 million yuan, a year-on-year decrease of 41.45%. Sinoma Technology's net profit in 2023 was 2.224 billion yuan, a year-on-year decrease of 37.77%; its net profit in the first half of 2024 was 465 million yuan, a year-on-year decrease of 66.6%.
Under the fierce internal competition in the domestic market, overseas markets are increasingly becoming a new direction for diaphragm companies to expand their market business and improve their operating performance. Industry insiders pointed out that diaphragm companies building factories overseas can not only get closer to downstream battery users, but also effectively circumvent trade barriers and expand a larger market share, thereby consolidating the overall competitiveness of the company.
01
Stepping up overseas deployment
In order to meet the needs of overseas customers for the stability and timeliness of the supply of wet-process separator products, strengthen the company's overseas market development, and achieve a global layout. In June this year, Enjie Co., Ltd. announced that it plans to invest in the construction of the second phase of a wet-process lithium battery separator factory in Debrecen, Hungary . The total investment of the project is estimated to be about 447 million euros (about 3.5 billion yuan), with a planned annual production capacity of about 800 million square meters.
It is understood that its Debrecen Phase I project has been put into production in July 2023. It is Enjie's first overseas lithium battery diaphragm production base with a total production capacity of over 400 million square meters. In August 2023, Enjie signed an agreement with a large global lithium battery manufacturer to supply it with no less than 960 million square meters of diaphragms from 2025 to 2033. Enjie revealed that its Hungarian base will achieve mass production and supply to the customer in the third quarter of this year.
Enjie Co., Ltd.'s Hungarian base not only supplies this one customer. Earlier, Enjie Co., Ltd. reached a strategic cooperation with France's ACC in 2022, agreeing that from 2024 to 2030, its Hungarian factory will supply ACC with about 655 million euros (about 5.2 billion yuan) of lithium battery separator products.
"As (our) Hungarian factory's output increases, its overseas market share will gradually increase. (Our) Hungarian factory mainly supplies local customers such as Europe and the United States." Enjie Co., Ltd. revealed that the base will also supply and provide services to Chinese battery companies' overseas bases in the future.
In addition to its European base, Enjie has also deployed production capacity in North America. In January this year, Enjie adjusted its investment in the US lithium battery separator project to US$276 million (about RMB 2 billion), with a planned total production capacity of 700 million square meters . Enjie said that the company's US factory is under construction and is expected to send samples to local battery factories in the fourth quarter of 2024 and mass production in 2025.
The pace of overseas factory construction of "friendly competitor" Xingyuan Materials is also accelerating. It is understood that the first phase of the coating production line of the company's Swedish factory was put into production in May 2022. A year ago, Xingyuan Materials announced in March 2021 that it plans to invest no more than 2 billion yuan to build a diaphragm production plant in Sweden, which will become the European headquarters of Xingyuan Materials after completion in 2025.
In addition to the European market, in August last year, Xingyuan Materials announced that it plans to invest no more than 5 billion yuan to build a production base in Malaysia. It is expected that after reaching full production, it will have an annual production capacity of 2 billion square meters of wet-process diaphragms and supporting coated diaphragms. In November of the same year, the groundbreaking ceremony of Xingyuan Materials' Malaysian factory was held. After completion, the factory may become the first lithium battery diaphragm factory in ASEAN at that time.
At present, the overseas customers of Xingyuan Materials mainly include LG Energy Solution, Samsung SDI, NorthVolt, etc. In April this year, Xingyuan Materials announced that the company signed a strategic memorandum with Samsung SDI, agreeing that the company will supply about 2.22 billion square meters of wet-coated diaphragm materials to Samsung SDI to deepen the strategic cooperation in power battery diaphragm-related businesses.
02
Higher gross profit margin than domestic
Compared with China, the penetration rate of new energy vehicles in overseas markets represented by Europe, the United States, and Southeast Asia is still relatively low, and the demand for power batteries is very strong. According to industry estimates, the total demand for power and energy storage batteries in the European market will reach 1,500GWh by 2030. The U.S. Department of Energy predicts that by 2030, its domestic demand for lithium batteries will increase by 5-10 times.
So far, Chinese battery manufacturers including CATL, EVE Energy, Honeycomb Energy, Farasis Energy, Guoxuan High-tech, Envision Power, and Sunwoda have already set up factories overseas, with planned production capacity exceeding 500GWh. At the same time, Japanese and Korean battery manufacturers such as LG Energy Solution, Samsung SDI, Panasonic, and SK on are also expanding their overseas production capacity.
"The low penetration rate of new energy vehicles abroad means a vast market, which is also the reason why new energy companies are actively going overseas. Among them, several power battery companies that have long-term cooperation with (our) company have already established overseas factories, which means that more and more Chinese companies are participating in the (construction) of the new energy global industrial chain." A leading domestic diaphragm manufacturer analyzed.
The overseas diaphragm market not only has a large demand, but also has a better gross profit margin than the domestic market. For example, Enjie Co., Ltd.'s 2023 annual report shows that the gross profit margin in the overseas market was 41.37% that year, significantly higher than the gross profit margin of 37.43% in its domestic market . In 2023, Enjie Co., Ltd.'s overseas operating income accounted for about 17%. The company said that in the future, it will continue to increase its overseas customer share by continuing to tap into existing overseas customers and expand new customers.
Xingyuan Materials' gross profit margin in 2023 is 44.42%, which is higher than Enjie Co., Ltd.'s overseas market gross profit margin. This may be the reason why Xingyuan Materials' overseas shipments account for a high proportion. Statistics from industry institutions that can be used as a reference show that in the first half of 2023, Xingyuan Materials' overseas shipments (including domestic factories of overseas customers) accounted for more than 40%, and the proportion of overseas exports was the highest in the industry.
It is worth noting that compared with companies producing positive and negative materials, Chinese diaphragm companies are currently building fewer factories in overseas markets. Data shows that global diaphragm shipments will exceed 21 billion square meters in 2023, with Chinese diaphragm companies accounting for more than 83% , and they are currently mainly supplying domestic production capacity. In the future, as Chinese companies accelerate their overseas expansion, overseas production capacity will also increase rapidly, achieving more globalized production.