A red alert has gone off for Korean battery makers as the United States released specific requirements on its Inflation Reduction Act (IRA) subsidy program on Friday that bans producers from acquiring battery components from China, a country which is associated with the majority of top EV battery suppliers.

“Beginning in 2024, an eligible clean vehicle may not contain any battery components that are manufactured or assembled by a FEOC [foreign entity of concern]. In 2025, an eligible clean vehicle may not contain any critical minerals that were extracted, processed, or recycled by a FEOC,” according to the statement released by the U.S. Department of the Treasury and Internal Revenue Service.

A FEOC refers to any foreign entity that is owned, controlled, or subject to the jurisdiction of governments from China, Russia, North Korea and Iran.

Under the proposed guidance, any battery maker that is in partnership with China and the latter owns at least 25 percent of the business cannot receive U.S. subsidies.

The same 25-percent threshold has been set for the final regulations for the Chips Act in September, which prohibits companies that receive funds to engage in joint projects with entities that have 25 percent or more Chinese ownership.

For Korea, top battery makers such as LG Energy Solution, SK On, EcoPro and Posco Future M, are now in limbo as only weeks are left until the law goes into effect next month, as the majority of the companies have set up 51:49 joint ventures with Chinese companies on key battery materials such as nickel, cathodes and battery precursors.

Korea’s Ministry of Trade, Industry and Energy held a meeting on Saturday to discuss the possible implications of the new IRA guidance and said it is planning to ask the U.S. authorities whether Korean companies will be eligible for EV subsidies if joint ventures cross the 25-percent ownership threshold with foreign entities that are not FEOC-listed.

Meanwhile, the U.S. Commerce Secretary Gina Raimondo called out China as “the biggest threat we’ve ever had” and emphasized “China is not our friend” at an annual national defense forum in California on Saturday, urging lawmakers, Silicon Valley and U.S. allies to prevent the country from acquiring semiconductors and cutting-edge technologies essential to its national security.

“Every day China wakes up trying to figure out how to do an end run around our export controls… which means every minute of every day, we have to wake up tightening those controls and being more serious about enforcement with our allies,” she said.

“I know there are CEOs of chip companies in this audience who were a little cranky with me when I did that because you’re losing revenue. Such is life, protecting our national security matters more than short-term revenue.”

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]