Samsung, LG brace for Japan's economic sanctions

Japanese Prime Minister Shinzo Abe speaks during a press conference after the G20 summit in Osaka, Saturday. / AP-Yonhap

By Jun Ji-hye

Samsung, LG and other IT companies are keeping a close watch on possible Japanese economic sanctions amid a deepening diplomatic row between the two nations over forced labor during Japan's 1910-45 colonial rule of Korea, officials said Sunday.

Japan's conservative daily Sankei Shimbun reported earlier in the day that the Japanese government plans to impose economic sanctions on Korea beginning this month to protest the ruling of Korea's Supreme Court last year that Japanese companies, including Mitsubishi, must pay compensation to individual Korean victims of wartime forced labor.

The newspaper said the Japanese government will implement stricter restrictions on exports of three items ― fluorine-containing polyimide, photoresists and etching gas ― to Korea on July 4.

Fluorine-containing polyimide is used to make displays for TVs and smartphones, while resists and etching gas are necessary in the semiconductor fabrication process.

Samsung Electronics, SK hynix, LG Electronics and other large companies here are expected to be affected if Japan implements the sanctions.

"We will need to watch what announcement the Japanese government will make, but if the press report was correct, it would exert adverse influence on the nation's semiconductor and display industries in the long term," said a company official, who declined to be named.

Another official at a semiconductor maker said Korean companies have stocks of material necessary to manufacture products in the short term, but if the sanctions are implemented, there would be production delays in the long term.

"There are a lot of concerns as Korean companies have imported a considerable quantity of materials from Japan for semiconductor fabrication," the official said.

According to the Sankei Shimbun, the Japanese government has decided to exclude Korea from its whitelist of countries.

The Japanese government exempts exporters from needing permits when exporting the high-tech materials to its whitelist of countries, including the United States and the United Kingdom. Japan added Korea to the list in 2004.

If Korea is excluded from the list, Japanese companies will need to apply for permits whenever exporting fluorine-containing polyimide, resists and etching gas to Korean companies from July 4.

It reportedly takes about 90 days for the Japanese authorities to examine and approve applications.

Japanese companies occupy about 90 percent of the global fluorine-containing polyimide and resists market, and 70 percent of the etching gas market.

If the sanctions are implemented, Korean companies will need to find alternative sources for the materials, officials said.

But another official in the semiconductor industry said: "Korean companies are major clients of Japanese companies, thus it will not be easy for the Japanese government to make a decision as the sanctions will also adversely affect Japanese companies' profitability."

Amid the diplomatic row, President Moon Jae-in and Japanese Prime Minister Shinzo Abe did not meet on the sidelines of the G20 Summit held Friday and Saturday in Osaka, Japan.

Tokyo will reportedly announce its decision on the export controls today.

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