Copper Foil, Once Stuck in the EV Chasm, Gets a Boost from AI and ESS

Doosan Electronic BG Forecast to Post Record Third-Quarter Results
Lotte Energy Materials Becomes Lotte Group's Largest Company by Market Capitalization
SK Nexilis Plans Full-Capacity Operations at Malaysian Plant

Driven by the rapid growth of the artificial intelligence (AI) and energy storage system (ESS) markets, the copper foil industry has entered a phase of earnings recovery. Copper foil companies that once produced battery foil for use in secondary battery materials and circuit foil for printed circuit boards (PCBs) are now emerging from the trough of the industry downturn after successfully reshaping their businesses around high-value-added products.

Lotte Energy Materials' copper foil product. Photo: The Asia Business Daily archive.

According to industry sources on Oct. 21, Doosan's Electronic Business Group (BG), its electronic materials division, is expected to post a record-high result for the third quarter.

NH Investment & Securities estimates that Doosan's Electronic BG will record third-quarter revenue of 747.5 billion won and operating profit of 222.8 billion won. Kyobo Securities forecasts revenue of 736.4 billion won and operating profit of 225.9 billion won. The operating profit estimate represents a 117.4% increase from a year earlier. Doosan's Electronic BG also posted record quarterly results in the second quarter, with revenue of 676 billion won and operating profit of 201.3 billion won.

The sharp growth at Doosan's Electronic BG is driven by rising demand for copper-clad laminate (CCL), a key base material for PCBs used to connect semiconductor chips with mainboards. AI semiconductors must transmit large volumes of data quickly and reliably, making high-quality CCL essential. Revenue from high-value-added optical-module CCL, which has higher profitability, is expected to increase in the third quarter. Revenue is also expected to rise further as supplies to Nvidia for its Vera Rubin platform ramp up.

Lotte Energy Materials, which supplies high-specification copper foil for CCL, is also making progress. Despite posting an operating loss in the second quarter amid weak demand, Lotte Energy Materials may rebound in the third quarter. The company recorded operating losses of 5 billion won and 16.9 billion won in the first and second quarters of this year, respectively.

SK Nexilis copper foil production. The Asia Business Daily archive.

However, Lotte Energy Materials is substantially shifting its domestic plants toward circuit foil production while running its Malaysian plant, which produces battery foil for ESS, at full capacity. The company is also selling all of its output. As expectations for improved profitability have been priced in, its share price has risen more than 70% in three months, making it the Lotte Group company with the largest market capitalization.

SK Nexilis, SKC's investment affiliate in the copper foil business for secondary batteries, is also preparing to run its copper foil plant in Malaysia at full capacity. In the second half of this year, it aims to raise the share of battery foil produced and sold at the Malaysian plant to more than 90%. A return to operating profit in the relevant business is expected to become increasingly likely starting next year.

SK Nexilis' revenue growth is also the result of rising demand for copper foil for ESS. SK Nexilis, which had produced battery foil for electric vehicles, now expects to generate profits from producing battery foil for ESS as well. The reduction in battery foil supply, as most existing battery foil producers shift to circuit foil, is also expected to be a positive factor.

In particular, SK Nexilis' second-quarter sales volume of copper foil for ESS rose 76% from the previous quarter, led by the North American market. Its share of total revenue also expanded from around 50% to 67%. The global ESS market is expected to grow from 390 GWh last year to around 920 GWh by 2030.

"With explosive demand for ESS continuing, particularly in North America, improvements in plant utilization and profitability across South Korea's copper foil industry will gain further momentum as the second half of the year progresses," an industry official said. "Copper foil companies will emerge as key players in the value chains for AI and energy infrastructure."

This content was produced with the assistance of AI translation services.