Samsung SDI offloads polarizing film business to Chinese firm for $833 million

Samsung SDI has inked a deal to sell its polarizing film business to China's Wuxi Hengxin Optoelectronic Materials for 1.12 trillion won to fund investments in its battery business.

Samsung SDI CEO Choi Yoon-ho speaks at a New Year's ceremony at the company's headquarters in Giheung, Gyeonggi, in January. [SAMSUNG SDI]

Samsung SDI is selling its polarizing film business to China's Wuxi Hengxin Optoelectronic Materials for 1.12 trillion won ($833 million) in an effort to unload the underperforming division to secure cash for the expected capital outflow in battery businesses.

The firms inked the deal on Tuesday, which includes a 100 percent stake in the battery maker's Wuxi subsidiary as well as the manufacturing and sales operations of the film business from its plants in Cheongju, North Chungcheong, and Suwon, Gyeonggi.

"Samsung SDI will concentrate our entire capacity on developing next-generation materials for semiconductors, organic light-emitting diodes and batteries to maximize synergy with our battery business," the company said in a regulatory filing.

Wuxi Hengxin Optoelectronic Materials is a joint venture between China's NY Capital — which has a stake in around 40 display, auto and chips firms — and Hengmei Optoelectronics, a subsidiary dedicated to the polarizing film business.

Samsung SDI CEO Choi Yoon-ho, right, takes a photo with General Motors CEO Mary Barra after the two companies first signed a memorandum of understanding on a joint U.S. battery plant in March of last year. [SAMSUNG SDI]

The divestment comes as Samsung SDI has suffered weak profitability in its polarizing film business in recent years, hit by cheap products from Chinese players. Its Wuxi subsidiary's net profit halved to 30.8 billion won last year compared to 2019.

LG Chem in last the year also sold off its polarizing business to a Chinese firm, while SKC sold off its polyester PET film business to Hahn & Company, a local private equity investment firm.

The funds from SDI's sale will likely flow into its battery business as the company presses on with its investments even as competitors strategically scrap or reduce investment plans amid slowing EV demand.

"There is no change in SDI's investment plan" and it already made "twice as much investment in the first half compared to the same period last year," said Kim Yoon-tae, vice president of the business management office at Samsung SDI, during a conference call revealing its second-quarter earnings performance.

The company reportedly estimates around 6.5 trillion won in capital expenditure this year, up 65 percent from the previous year. It spent 1.6 trillion won in investment in the first quarter.

Samsung SDI recently inked an agreement with General Motors on a joint investment of $3.5 billion to build a battery plant in the U.S. state of Indiana.

The plant will be Samsung SDI's third battery-making facility in the United States. The company is already building two battery plants in Kokomo, Indiana, with Stellantis. The first factory is scheduled to start production in December.

Samsung SDI CEO Choi Yoon-ho hinted earlier in the year that he was also considering an independent plant in the United States.

“With the trend of countries ditching Chinese batteries spreading, Samsung SDI’s prismatic batteries will likely fill in as an alternative to Chinese products,” said Jeong Jin-soo, an analyst at Heungkuk Securities.

“The decision to forge ahead with the capital expenditure plan is considered a wise one as expanded partnerships with global automakers are anticipated.”

Samsung SDI shares dipped 3.2 percent to close at 333,000 won on Tuesday.

BY SARAH CHEA [chea.sarah@joongang.co.kr]