Cowintech: Automation system maker for Secondary Batteries

The success of Korean conglomerates has had a positive trickle-down effect on domestic suppliers, providing them with growth momentum and core capabilities. However, in recent times, due to an increasingly saturated and competitive domestic landscape, it has become essential for enterprises to think globally to continue their growth trajectories. In order to achieve this goal, Korean companies will need to find their place in the global supply chain. What are the challenges and the opportunities for the Korean suppliers in the global supply chains? How can Korean companies benefit from the ongoing realignment of the supply chain, promoted by governmental policies such as IRA and CHIPS Act?

Due to the small size of many Korean SMEs, they often struggle to enter overseas markets independently. Their primary avenue for international expansion is through partnerships with larger conglomerates. However, we are taking a different approach by expanding internationally through direct sales efforts.

In the past, Korea, Japan, and China competed primarily in the secondary market. While Japan's activities have plateaued, Korea has focused on high performance type of NCM (Nickel Cobalt Manganese battery) technologies and China has concentrated on LFP (Lithium Iron Phosphate) technologies.

The trade dynamics between the US and China led the US administration to enforce the IRA (Inflation Reduction Act), which has benefited Korean companies by facilitating easier entry into the US market. As Korean conglomerates establish a presence in the US, Korean equipment companies naturally follow.

However, stringent US regulations on the procurement of raw materials mean that Korean companies will not qualify for tax credits when purchasing Chinese-made lithium, graphite, or carbon. Consequently, Korean companies are increasingly looking for global outsourcing options to remain cost-effective.

In the long term, this situation could be advantageous for Korean companies. During the boom in the EV (Electric Vehicle) industry, substantial subsidies were available. As these subsidies are gradually phased out, EV makers will need to reduce prices significantly to compete with internal combustion engine vehicles (ICEVs). The key challenge will be lowering the cost of EVs. Despite this, EVs have unique attributes that set them apart from ICEVs, which could lead to growing consumer preference for EVs due to their distinct advantages.

Given the recent slowdown in the EV market, with no growth in the second quarter creating uncertainty about the future of the battery industry, how do you see the evolution of the battery landscape over the next five years, and how are you adapting to this situation?

Initially, Korean companies focused heavily on NCM (Nickel Cobalt Manganese) batteries, which offer higher energy density compared to LFP (Lithium Iron Phosphate) batteries. They developed their strategies around NCM, while Chinese companies concentrated on LFP, which, although it has lower energy density. In this context, NCM batteries are suited for vehicles with a range of over 400 kilometers, whereas LFP batteries are used for those with shorter ranges.

Looking ahead, we anticipate the market for batteries will continue to evolve dramatically. We are also investing in the development of all-solid-state batteries, which promise faster charging times and higher mileage. This technological advancement could significantly expand the battery market.

Renewable energy presents another major opportunity. Energy Storage Systems (ESS) are crucial due to the intermittent nature of solar and wind power. Since ESS can be powered by both NCM and LFP batteries, Korean conglomerates are prioritizing this market and working to establish a strong presence in it.

From a cost perspective, manganese is a highly abundant material used in cathodes. We expect that secondary batteries will increasingly incorporate manganese due to its availability. Our affiliate is also conducting R&D to optimize the use of manganese in battery technologies.

With the diversification of battery cell makers—including major companies and even startups—how do you tailor your solutions to meet the varying needs of these different types of customers, each with their own size, requirements, and manufacturing expertise?

Given our extensive experience and successful track record working with both Korean multinational corporations and international conglomerates, we customize our solutions to align with each company’s specific business characteristics. We leverage our expertise in equipment selection and layout configuration to deliver tailored solutions. By utilizing 3D simulations, we optimize systems for each client’s unique requirements.

We also collaborate closely with our affiliate, Top Material, to maximize synergy. While Top Material excels in overall technological prowess and system configuration, they may lack in layout planning and land-use determination. To address this, we integrate our expertise with theirs to develop the most efficient and effective solutions, ensuring a seamless and optimized system for our clients.

Automation encompasses two main areas: logistics, which uses AMRs (Autonomous Mobile Robots) and AGVs (Automated Guided Vehicles), and processes, which employ industrial robots, as seen in the automotive industry. Your company stands out for integrating your automation systems with actual processes through Top Material and collaborating with other suppliers to offer a comprehensive range of automation solutions. This approach is both unique and advanced. How does your turnkey solution, which covers both automation and processes, enable you to compete more effectively than your competitors?

Top Material is instrumental in this process. They receive battery recipes and manufacture sample batteries to provide to startups. If these startups approve the samples, Top Material proceeds with full-scale production. This approach offers significant advantages to startups by streamlining their path from sample testing to production.

Another crucial aspect is space management. Traditional conveyor systems can obstruct pedestrian pathways and logistics operations. To address this, we integrate AMRs and AGVs to enhance walkability and logistics efficiency. We invest heavily in researching AMR and AGV technologies, including the development of a direct-docking AGV, which has received positive feedback and increased customer satisfaction.

In terms of processes, we address both systematic and unsystematic elements. The backend processes are typically more systematic, whereas the unsystematic parts involve handling raw materials or hazardous equipment, such as 1.5-ton vehicles. Our solutions are designed to reduce workplace hazards and enhance occupational safety, providing a comprehensive approach that sets us apart in the industry.

Initially, Cowintech focused on a range of applications including medical, logistics, and automotive sectors. However, you made a strategic shift by investing heavily in the battery industry, which has been reflected in your rapid revenue growth. What have been the key milestones on your journey to becoming a leading battery automation provider? What factors have contributed to your success and positioned you as a leader in Korea?

View of Cowintech's Plant

When Cowintech was established in 1998, we began with just five personnel who had left Samsung. At that time, we faced limitations and concentrated on enhancing our production capacity. In 2012, we began supplying equipment for secondary battery lines to Samsung SDI, marking our entry into the battery industry. Our aggressive development strategy allowed us to expand significantly in this sector.

In 2016, we extended our reach by supplying equipment for LG Energy Solution's plant in Poland. The following year, in 2017, we achieved a significant milestone by automating both front-end and back-end processes for Samsung SDI, becoming the first in the industry to do so. Automating the back-end process is relatively straightforward, but the front-end process, which involves handling raw materials and dealing with various hazards, is much more complex. Our success in automating the front-end process was a key factor in our exponential growth.

Unlike many industry peers who concentrated solely on equipment manufacturing, we placed a strong emphasis on the future maintenance of our equipment. Given our limited workforce, we prioritized creating highly efficient equipment that required minimal manual labor. This focus on user-centric and user-friendly design has been integral to our success, setting us apart from competitors and establishing us as a leader in the battery automation industry.

You are the first company to fully automate the production line for lithium batteries, including both back-end and front-end processes. What challenges did you face during this automation process, and how did you address them?

The automation of secondary battery production comes with significant challenges, primarily due to issues related to flammability. Given that cobalt and nickel are highly reactive and can be explosive, we have made it a priority to rigorously test and refine our system configurations to enhance reliability and minimize the risk of flammability.

To mitigate potential setbacks, we are also expanding into the inspection equipment sector. This allows us to proactively detect and remove any residual materials that could lead to failures.

One of our key innovations involves using digital X-ray technology with carbon nanotubes. We are heavily invested in researching and developing carbon nanotube technology for digital X-ray applications. Once successful, we plan to integrate this advanced technology into our inspection equipment, particularly for the final stages of the front-end process.

You mentioned your ongoing R&D efforts and the expansion of your portfolio to include new technologies. You’re transitioning from AGVs (Automated Guided Vehicles) to AMRs (Autonomous Mobile Robots), moving from more rigid solutions to advanced, flexible automation systems. Could you elaborate on your developments in AMR technology and what we can expect from your innovations in the coming years?

As part of our transition, we are integrating SLAM (Simultaneous Localization and Mapping) and AI functionalities into our robots. Additionally, we are developing cooperative robots designed to be mounted on AMRs, enabling these robots to perform their tasks more effectively. These advanced robots are capable of multitasking, allowing them to execute various functions while in motion. This integration represents a significant leap forward in automation technology, and we anticipate that it will greatly enhance operational efficiency and flexibility in the coming years.

The company has successfully rebounded from the impact of COVID-19 in 2020, showcasing resilience and strategic growth, going from about 45 billion KRW to 350 billion KRW in 2023. What are your goals for the next 3-5 years?

My primary goal is to achieve 1 trillion KRW in revenue. To reach this target, it’s crucial not only to focus on revenue but also to improve operating profit. We aim to enhance our operating profit by developing and implementing new equipment, particularly in the relatively unexplored area of battery front-end processes. Our R&D efforts will be laser-focused on penetrating this new territory. Additionally, drawing from experiences in the semiconductor field, we plan to expand into HBM (High Bandwidth Memory) handlers.

You are actively focusing on the battery industry, but you also mentioned the semiconductor industry. How do you see your revenue share and the distribution across different markets in the next five years? Do you anticipate a dominant industry with a larger share?

While our primary focus is on the secondary battery market, we are also expanding into the semiconductor industry. We plan to broaden our presence in this sector as soon as possible.

If I break down the secondary battery market into two main segments, our business will primarily concentrate on digital X-ray equipment and automation, as these areas are expected to experience significant growth. The burgeoning secondary battery market is likely to drive growth in related materials, such as coaters and slitters. We have already begun to explore opportunities in the materials sector, particularly with companies like LG Chem, but this is still an ongoing process.

Talking about international markets, you have established strong connections with Korean OEMs and have also developed relationships with international companies, such as those in Poland and the US. Could you explain the importance of these international partnerships and collaborations for your company's growth? Are there specific regions you are focusing on that you believe will be particularly important?

Initial attempts to enter Northvolt in Europe were unsuccessful, but we continue to try to do so. In Norway, we signed a supply agreement with Morrow Batteries, which is showing promising potential. In North America, we have set up a Canadian subsidiary that serves as our sales hub for Volkswagen Canada.

We have also tried and continue to try to get into Tesla's German plant. Our performance has already demonstrated high excellence in this field.

Despite the high performance (in Q1 of this year), the stock price is not doing well. After recording 45,667 won during trading on July 25th last year (stock price reflecting year-end stock dividend ex-dividend), it fell 60,50% (closing price on the 15th 18,000 won) in a year. However, there are also individual investors' complaints in the stock discussion room, saying, "Good news is coming, but the stock price is going down.” How do you explain this imbalance between the investor market’s sentiment and your actual performance, and how can it be addressed?

Our semiannual earnings performance has been steady, but the decline in our share price is primarily due to insufficient investor relations (IR) efforts. We have not communicated effectively with investors despite strong internal performance. Additionally, Global Secondary Battery Companies have delayed several new projects, contributing to a less optimistic outlook among private investors. We recognize the need to improve our IR activities and communication strategies to better align investor perceptions with our actual performance.

Let's imagine we return for your company’s 30th anniversary and conduct this interview again in four years. What are your goals and dreams for the next four years, and how would you like your company to be perceived in the global market?

Over the past 25 years, we have navigated numerous challenges while striving to become a best-in-class automation company. By our 30th anniversary, I hope to have realized that primary objective. Looking ahead, I aim for our company to not only be sustainable but also to foster a work environment where employees are motivated to see their own children join and thrive in the company. Our goal is to be a win-win organization, as reflected in our name, benefiting not just ourselves but also our shareholders, employees, clients, and partners. We want to be recognized globally as a company that creates value and builds enduring relationships across all stakeholders.

For more details, explore their website at: http://cowintech.com/ko/