(Yicai) Dec. 1 -- Yunnan Energy New Material, also known as Semcorp, a leader in China’s lithium battery separator field, plans to acquire equipment supplier Zhongkehualian New Material to cope with pressure on its business performance amid competition.

Semcorp intends to launch a private placement to fund its acquisition of a 100 percent stake in Zhongkehualian, the Yunnan province-based buyer announced yesterday. The deal is still in the planning stage, and Semcorp is in talks with the shareholders of Zhongkehualian, with no detailed transaction plan finalized yet.

Semcorp [SHE: 002812] closed at CNY55.35 (USD7.82) Nov. 28 and suspended trading today due to uncertainties from the deal. The company is expected to disclose the transaction plan within 10 trading days.

Founded in 1996, Semcorp started by producing cigarette packaging boxes and later switched to new energies. It is now the world’s largest supplier of lithium battery separators, with clients including major global battery manufacturers, such as Contemporary Amperex Technology, BYD, and Eve Energy.

Lithium battery separators are made of polypropylene or polyethylene materials and are produced through either dry or wet processes. Their main function is to separate the positive and negative electrodes of the battery to prevent short circuits.

Formed in 2011, Zhongkehualian researches, develops, and produces equipment to manufacture polymer materials. It has mastered the core technology of the wet process to make lithium battery separators.

The competition in China’s lithium battery market has intensified in recent years, leading to a decline in prices of upstream products, including separators, thus imposing huge performance pressure on manufacturers. Semcorp reported a net loss of CNY556 million (USD 78.6 million) last year, marking its first loss since it went public in 2016. Revenue declined 16 percent to CNY 10.2 billion (USD 1.4 billion).

In the first three quarters of the year, Semcorp logged a net loss of CNY86.3 million (USD12.2 million), with revenue rebounding 28 percent to CNY9.5 billion (USD1.3 billion) from a year earlier.

Chinese regulators have been continuously promoting anti-involution policies in multiple industries, including lithium batteries, in the second half of this year.

The Ministry of Industry and Information Technology will accelerate the introduction of targeted policies to address irrational competition in the battery industry, strengthen capacity monitoring, early warning, and regulation, and guide firms in the industry to scientifically plan their production capacity, Minister Li Lecheng said at a symposium with the heads of 12 battery manufacturers on Nov. 28.

Editors: Dou Shicong, Futura Costaglione