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Korean Leadership Ponder How to Combat Japan Export Restrictions
July 15, 2019 According to J.P. Morgan, Japanese firms are among the leading manufacturers of the three materials, where alternative suppliers (with the exception of a type of fluorinated polyimide) would be hard to find. South Korea is Japan’s third largest export destination following China and the United States. Semiconductor machinery was the top selling item in 2018 taking in 630 billion yen, according to data compiled by the Japan Foreign Trade Council. Some industry observers maintain the trade spat will not likely hurt Japanese firms. “It needs to be said clearly that Japan has not imposed a ban or restriction against South Korea,” Atsushi Osanai, a professor at Waseda Business School, wrote in an email to The Japan Times. Requiring approval for individual shipments is normal procedure for exports being sent to many other countries including China. Thus, “it’s not like the implementation (of the requirement) this time will suddenly stop or restrict exports,” said Osanai. Osanai added that the list is based on trust, so the level of impact on trade may change depending on South Korea’s response. Even if the situation is aggravated and Tokyo decides to actually set restrictions, the overall damage to the Japan’s domestic industries will be probably limited, he said. |
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South Korea’s gross domestic product growth is largely dependent on its big companies and if the export of the three materials is actually regulated, it will be a big blow to companies such as Samsung, LG and SK Hynix, all “chaebols,” or large industrial conglomerates, that help sustain South Korea’s economy. Japanese chemical makers of fluoride polyimide and resist sell their products to other makers in other countries, so the damage would be contained, Osanai said. But Japanese hydrogen fluoride makers ship a good chunk of their exports to South Korea, so they may see some fallout. Tokyo Ohka Kogyo sells various types of photoresist to South Korean firms, which makes up a big part of its business, according to the company spokesman. But the change in the trade procedures only applies to some of its products, so the firm’s sales will not likely be affected much, he said.
Under such circumstances, big companies could switch or increase their sales to other semiconductor makers. But for small and mid-size companies, things may be more unpredictable. Many smaller Japanese companies do business with South Korean semiconductor-related companies, so there will be some impact whether it’s direct or indirect, said a chief executive at such a manufacturing firm in Tokyo, who wished to remain anonymous.
In reaction to the change in Japan’s policies. Minister of Economy and Finance Hong Nam-ki met Samsung semiconductor chief Kim Ki-nam after the ministry called an urgent meeting with government agencies to respond to the recent trade dispute and was aimed at finding ways to weather the looming challenges in the chip and display industries that will be caused by the trade spat with Japan. Korea’s exports mostly driven by semiconductors, electronics and petrochemical products have been on a downward trend for the past seven months. Last month alone, the Korean semiconductor sector saw the export volume drop by 25.5 percent on-year.
Japan is one of the largest exporters of fluorinated polyimide, hydrogen fluoride and resist, which are used in producing chips and displays for smartphones and TVs. Polyimide, for example, is a crucial component for flexible OLED displays for smartphones, which means the restrictions, scheduled to go into effect from July 4, could affect Samsung’s smartphone business. Most of its smartphones utilize flexible OLEDs, and its upcoming flagship Galaxy Note 10, and foldable smartphone Galaxy Fold require the display material. Samsung also supplies, through its subsidiary Samsung Display, the flexible OLED displays to Apple. Market watchers forecast that prolonged export regulations could cause a supply bottleneck for global smartphone makers, including Samsung, Apple and Huawei. Local analysts expressed mixed views over the trade conflict with Japan. Some claimed Japan would not be able to rely on the retaliatory moves for a long term since it could lead to havoc in the global markets for chips, smartphones and electronics while others said the shortage of raw materials could bring some benefits for Samsung’s memory chip business. From: ([email protected])
One potential action that South Korea seems to be considering is limiting exports of OLED TV panels to Japanese companies, Sony and Panasonic. Semiconductors sold to Sony and Sharp could also be stopped although there are other sources that could make up the difference. The long terms impact of the new rules is to encourage semiconductor materials development in South Korea and the government plans to invest $850m/year in support of the initiative.
Table 1 Core OLED Display Equipment Revenues
Under such circumstances, big companies could switch or increase their sales to other semiconductor makers. But for small and mid-size companies, things may be more unpredictable. Many smaller Japanese companies do business with South Korean semiconductor-related companies, so there will be some impact whether it’s direct or indirect, said a chief executive at such a manufacturing firm in Tokyo, who wished to remain anonymous.
In reaction to the change in Japan’s policies. Minister of Economy and Finance Hong Nam-ki met Samsung semiconductor chief Kim Ki-nam after the ministry called an urgent meeting with government agencies to respond to the recent trade dispute and was aimed at finding ways to weather the looming challenges in the chip and display industries that will be caused by the trade spat with Japan. Korea’s exports mostly driven by semiconductors, electronics and petrochemical products have been on a downward trend for the past seven months. Last month alone, the Korean semiconductor sector saw the export volume drop by 25.5 percent on-year.
Japan is one of the largest exporters of fluorinated polyimide, hydrogen fluoride and resist, which are used in producing chips and displays for smartphones and TVs. Polyimide, for example, is a crucial component for flexible OLED displays for smartphones, which means the restrictions, scheduled to go into effect from July 4, could affect Samsung’s smartphone business. Most of its smartphones utilize flexible OLEDs, and its upcoming flagship Galaxy Note 10, and foldable smartphone Galaxy Fold require the display material. Samsung also supplies, through its subsidiary Samsung Display, the flexible OLED displays to Apple. Market watchers forecast that prolonged export regulations could cause a supply bottleneck for global smartphone makers, including Samsung, Apple and Huawei. Local analysts expressed mixed views over the trade conflict with Japan. Some claimed Japan would not be able to rely on the retaliatory moves for a long term since it could lead to havoc in the global markets for chips, smartphones and electronics while others said the shortage of raw materials could bring some benefits for Samsung’s memory chip business. From: ([email protected])
One potential action that South Korea seems to be considering is limiting exports of OLED TV panels to Japanese companies, Sony and Panasonic. Semiconductors sold to Sony and Sharp could also be stopped although there are other sources that could make up the difference. The long terms impact of the new rules is to encourage semiconductor materials development in South Korea and the government plans to invest $850m/year in support of the initiative.
Table 1 Core OLED Display Equipment Revenues
Source: Etnews