Banking

S.Korean battery maker LG Chem aims to rely less on Japanese parts amid trade row

South Korea's LG Chem Ltd is pushing for the localisation 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.

SEOUL, Aug 28 (Reuters) - South Korea's LG Chem Ltd 051910.KS is pushing for the localisation 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.

LG Chem, which counts the likes of Apple Inc AAPL.O and General Motors GM.N as customers for batteries used in phones and electric vehicles, 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 favoured 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 Co Ltd 008730.KS, citing uncertainty about Japan imports.

LG Chem has relied heavily on Japan's Dai Nippon Printing Co Ltd 7912.T and Showa Denko KK 4004.T 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%, 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.

(Reporting by Heekyong Yang; Additional reporting by Hyunjoo Jin; Editing by Muralikumar Anantharaman)

((Heekyong.Yang@thomsonreuters.com; +82 2 3704 5647;))

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