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Japan restricts exports of materials to the Korean semiconductor industry Samsung and LG will be affected

The Ministry of Economy, Trade and Industry announced on July 1 that it will strengthen export controls for Korea for the three materials required for the manufacturing of semiconductors for smartphones and televisions.

Japan’s Kyodo News Agency said that the Japanese government had asked the South Korean side to come up with a solution to the problem of the formerly levied labor. However, the situation did not progress and decided to take tough measures to urge the ROK to take action. During the G20 Osaka Summit held on June 28 and 29, Japan and South Korea did not realize the summit meeting, and the bilateral relations deteriorated or further accelerated.

The three materials subject to enhanced export controls are hydrogen fluoride for semiconductor cleaning, fluorinated polyimide for smartphone display screens, and sensitizer "photoresist" coated on a semiconductor substrate.

Japan’s latest move may hit South Korean semiconductor giants, causing the Korean economy to deteriorate. Japan’s Sankei Shimbun has specially named some companies, and analysts said that “large-scale semiconductor manufacturer Samsung Electronics and mainstream Korean companies such as LG Electronics, which is at the forefront of film-type high-definition TVs, will be affected.”

According to the Ministry of Planning and Finance of the Republic of Korea, Minister Hong Nanji has presided over the meeting to discuss Japan’s plan to impose export restrictions on some scientific and technological materials. Cheng Yunmo, Minister of Industry, Trade and Resources, will also make a statement after another meeting.

Kyodo News said that Japan has adopted preferential treatment measures for export procedures in the past, but it is proposed to remove the preferential whitelist from July 4. With regard to the above three materials, Japan also has a high market share globally, and the government regulates exports because it may be used for military purposes.

According to the Nikkei News, in the photoresist market, the global share of Japanese manufacturers is as high as 90%, and the market share of etching gas (high-purity hydrogen fluoride) is also considered to be as high as 90%.

When exporting these three types of materials to South Korea, companies can use the export license to apply for multiple products to the government, thus rapidly exporting the system. If it is necessary to apply for permission and review for each contract, the time taken for export processing will become longer, which may affect the production of the Korean motor industry.

Export licensing and review of the three types of materials is considered to take approximately three months. The production of Korean companies will inevitably be affected immediately.

In addition, the Japanese government also discussed the export of Korean products such as cutting-edge technologies and electronic components that could be transferred to the military and threats of security. Japan’s foreign exchange law liberalizes export restrictions on friendly countries at the security level as “white countries” and exempts license applications. Japan will discuss whether to exclude South Korea from the "White Country" list.

However, the Nikkei News warned that if the Japanese government tightens restrictions on the export of semiconductor materials to Korea, there is a risk that the market believes that the Japanese government is abusing trade rules. Not only may tensions in Japan-Korea relations be aggravated, but if semiconductor materials made in Japan cannot be steadily procured, in the medium and long term, it may cause "disengagement from Japan".

Last weekend, the G20 Osaka Summit (G20 Osaka Summit), chaired by Japan, just announced the "Osaka Declaration" on October 29, emphasizing the importance of maintaining freedom and fair trade.

The Nikkei News said that Japan’s move will inevitably affect Japanese manufacturers supplying large Korean customers. There are voice concerns that if the stable procurement of materials is unpredictable through the use of discretionary rules, there is also a risk of leaving Japan in areas such as semiconductor materials. Multinational corporations such as Samsung may find alternative procurement targets in the medium and long term.

But now, major semiconductor and display manufacturers in Korea are looking for solutions. South Korea’s “Central Daily News” quoted a person from a semiconductor manufacturing company as saying that “there will be only one supplier for almost any component”, “there will be no big problems at the moment”.

But he said, "Now we can use inventory materials and find other suppliers to solve the problem, but these materials are mainly produced in Japan. If the Japanese government restricts exports, in the medium and long term, we will inevitably be affected."