Seven of the world’s top ten energy storage system suppliers by shipment volume are Chinese, led by CATL, BYD and Sungrow, and all three face restrictions on US government-linked procurement. Samsung SDI is, by its own disclosure, the only non-Chinese prismatic LFP battery manufacturer with a US production base, a position that makes it structurally indispensable to companies like Sungrow for reasons that have nothing to do with price and everything to do with scarcity.
Sungrow’s move to source battery cells from Samsung SDI, confirmed to ESS News by a person familiar with the arrangement, is being framed around a specific goal: sustaining the Chinese supplier’s ability to deliver energy storage systems into the United States as restrictions on China-linked battery components tighten. The mechanics of that goal are more complicated than swapping one cell supplier for another. Samsung SDI’s US energy storage manufacturing runs through StarPlus Energy, its joint venture with Stellantis in Indiana, where the company has been converting electric vehicle battery production lines to stationary storage cells and expects to begin mass production of prismatic LFP cells in the fourth quarter of 2026. That capacity is not being built for Sungrow alone. Samsung SDI is separately ramping total US ESS manufacturing capacity toward 30 gigawatt-hours by the end of 2026, a build-out already allocated across a direct four-year, roughly 1.1 billion-dollar cell supply agreement with an unnamed US energy company announced in March, alongside LG Energy Solution’s parallel conversion of its own Stellantis joint venture capacity to stationary storage. Samsung SDI executives have said demand for the resulting output is expected to outstrip production, meaning Sungrow is competing for allocation within a constrained supply pool rather than placing an order into ample spare capacity.
Whether cells from that capacity actually resolve Sungrow’s underlying compliance problem depends on a distinction the arrangement’s framing tends to obscure: where a cell is finally assembled is not the same as where the materials inside it came from. Samsung SDI’s own disclosed supply chain remains substantially dependent on Chinese processing even as its finished-cell manufacturing shifts to US soil, with more than 60% of its lithium, cobalt and graphite processing still routed through Chinese entities and graphite anode supply specifically around 80% dependent on Chinese suppliers, a dependency the company has targeted for only a 30% reduction by 2028. The material assistance cost ratio that determines whether a US storage project qualifies for federal tax credits under Foreign Entity of Concern rules is calculated on cost content sourced from prohibited entities across the full supply chain, not on which company’s name appears on the finished cell or where final assembly occurs. A prismatic LFP cell built at an Indiana plant using majority Chinese-processed graphite and cathode inputs does not automatically clear the same compliance bar that sourcing it from a Korean rather than Chinese cell maker is meant to address, a nuance Samsung SDI’s own March move to secure 1.1 billion dollars of LFP cathode material from South Korean supplier L&F, explicitly framed as reducing China dependence for the North American market, suggests the company itself recognizes remains unresolved as of today.
A second, separate compliance layer sits above the cell-sourcing question entirely. President Trump’s August 26 executive order restricting foreign-linked equipment from connecting to the US bulk power system covers not just battery cells but the broader category of grid storage hardware and software, including battery management systems, power conversion equipment and digital control functionality, the components Sungrow itself designs and integrates around whichever cells it uses. The Department of Energy’s implementing rules for that order, due within 120 days of signing, have not yet clarified whether the restriction reaches entity ownership and control regardless of where physical components are manufactured, or whether it focuses more narrowly on component origin the way earlier country-specific tariffs have. Sourcing non-Chinese cells addresses the FEOC tax credit calculation specifically. It does not necessarily address whether a storage system branded, engineered, and ultimately controlled by a Chinese company clears a separate executive order built around restricting equipment tied to entities linked to foreign adversaries, a question that remains open regardless of whose cells sit inside the enclosure.
The financial pressure pushing both companies toward this arrangement is easier to establish than its regulatory outcome. Samsung SDI’s core electric vehicle battery business has weakened sharply, with third quarter 2025 revenue down 22.5% year over year and both operating income and EBITDA turning negative, giving the company a clear incentive to fill converted EV production capacity with energy storage orders from any creditworthy customer willing to pay, including a Chinese competitor whose government-linked market access it might otherwise approach cautiously. Sungrow and Samsung SDI also have a working relationship to build on, having formed a joint venture targeting the Chinese market in 2014 and launched a combined manufacturing operation in Hefei in 2016 that paired Samsung SDI cells with Sungrow’s power conversion technology, though that partnership was built for an entirely different market and regulatory environment than the one this arrangement now has to navigate. Sungrow has stated publicly that it has no current plan to establish its own US manufacturing operations, which leaves the location and corporate control of final system assembly, the element most directly implicated by both the FEOC assistance calculation and the bulk power system executive order’s equipment provisions, undefined. Until that structure is settled, whether a Sungrow-branded storage system can reliably clear the compliance bar for the US market remains an open question regardless of which company’s cells are inside it.
