LG Chem's LG Energy Solution (LGES) announced a 1.7 trillion KRW ($1.39 billion) investment in a new factory for cylindrical lithium-ion batteries in Queen Creek, Arizona.

It will be the company's first-ever cylindrical-type battery manufacturing plant in North America and also a wholly-owned subsidiary, rather than a joint venture.

The South Korean manufacturer announced that the construction of the plant is set to begin in the second quarter of this year, while mass production is slated in the second half of 2024.

The manufacturing capacity is 11 GWh/year, which is significant, but not as high as some of the other gigafactories currently under construction (often up to 30-50 GWh/year).

An interesting thing is who is the customer that tempted LGES to build a new plant in Arizona. There are no names in the official press release, but the company reveals two groups: EV startups and electric tool companies.

"Batteries produced from Arizona plant will be supplied to EV manufacturers including prominent startups and electric tool companies based in North America."

What we do know is that two well-known EV startups are located in Arizona - Lucid and Nikola. Lucid uses 2710-type cylindrical battery cells and announced a deal with LG Chem in early 2020.

Nikola recently signed up for Proterra's battery systems, while Proterra also has partnered with LGES (since 2016) and even announced in August 2021 a long-term supply agreement with LGES (cylindrical cells), hinting at LGES's production in the US.

LG Energy Solution notes a growing demand for cylindrical batteries in North America, pointing out that additional manufacturing capacity is under consideration. Let's not forget that Tesla and Rivian also use cylindrical batteries.

"LGES's investment decision comes on the back of growing demand of cylindrical-type batteries in the North American market. New EV startups using cylindrical batteries are on the rise in the region, while demand for applications that use cylindrical-type batteries, such as electric tools, increases in line with the wireless trend."

"The cutting-edge Arizona plant aims to establish LGES's presence in North America cylindrical battery market while actively considering additional production in the future."

Youngsoo Kwon, CEO of LG Energy Solution said:

"With the establishment of our new Arizona plant, LG Energy Solution aims to deliver unparalleled consumer value in the rapidly growing cylindrical battery market. LGES will provide the most dependable, competitive and advanced products to rise as the best business partner that our clients value and trust."

LG Chem's LG Energy Solution investment in Arizona in brief:

  • Type: wholly-owned subsidiary
  • Investment: 1.7 trillion KRW ($1.39 billion)
  • Location: Queen Creek, Arizona
  • Production capacity: 11 GWh/year
  • Battery type: cylindrical batteries for EVs and electric tools
  • Construction: to begin in the second quarter of 2022
  • Mass production: to start in 2024
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