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| Samsung Electronics Vice Chairman Lee Jae-yong, fourth from right, checks a semiconductor packaging line at the company's Cheonan plant in South Chungcheong Province, Tuesday. / Courtesy of Samsung Electronics |
By Baek Byung-yeul
Samsung Electronics is moving to reduce its dependence on Japanese parts suppliers by purchasing more chip-making materials from domestic producers and others in the United States and Europe as Japan restricts exports of its high-tech materials to Korea, company officials said Wednesday.
Samsung is trying to diversify its supply chain away from Japanese suppliers after the Japanese government tightened export controls on chip-making materials bound for Korea.
"Samsung has been seeking ways to diversify its supply chain but it is hard to reveal the details of the plan," a company official said.
Industry experts said Samsung's move to cut its dependence on Japanese suppliers is inevitable because the export restrictions could damage Korean chip makers.
A semiconductor industry analyst, who declined to be named, said the move could be interpreted as Samsung's effort to diversify its supply chain, dominated by Japanese suppliers.
"Korean chip makers have become alarmed that their heavy dependence on Japanese suppliers could increase uncertainties of their business outlook due to the ongoing bilateral dispute between Seoul and Tokyo," the official said.
"This is why they are trying to diversify their supply chain to reduce possible negative impacts. But given they are also using numerous kinds of semiconductor equipment made by Japanese companies, it will be hard for Korean chip makers to fully rule out Japanese suppliers."
Lee Jong-hwan, a semiconductor engineering professor at Sangmyung University, said Samsung's effort to diversify its supply chain will be the "correct answer" in the long run as the strategic plan could boost the entire semiconductor industry here.
"As seen in Beijing's Made in China 2025 plan, the Chinese government is trying to secure a more than 70 percent self-sufficiency rate in the chip-making process," Lee said. "Beijing's plan is eventually aiming to nurture the whole semiconductor industry there. Like in the case of China, Samsung's move will become nourishment for the semiconductor industry here."
The professor said a far-sighted view is necessary for the plan. "Samsung's effort cannot be achieved within a year," he said. "It may take up to between five and 10 years to fully exclude Japan from its supply chain list. But in the long run, the strategic plan will become nourishment for the semiconductor industry here."
According to data by the Korea International Trade Association, Korean chip makers have been heavily dependent on Japanese materials.
Among the three high-tech materials that Japan imposed export restrictions on, Korean makers imported 91.9 percent of photoresist, 43.9 percent of hydrogen fluoride and 93.7 percent of fluorinated polyimides from Japanese suppliers in the first five months of this year.
Though Samsung admitted it is trying to diversity its supply chain, it denied speculation it will replace all the 220 Japanese chemicals and materials it uses for chip making with domestic or overseas products.
"We are working on diversifying our supply chain but the speculation that Samsung is going to rule out Japan from our suppliers' list is wrong," the official said.
Japanese suppliers are increasingly concerned about the Korean companies' moves to exclude them, according to Yunogami Takashi, a semiconductor engineer and head of the Microfabrication Research Institute.
"I believe that the restrictions on hydrogen fluoride, on which Korea is the least dependent on Japan, poses the greatest threat to Korean companies," Takashi told EE Times, a U.S.-based electronics industry magazine. "Further, I believe that these export controls will hobble not just Korean, but also Japanese companies.
"The eventual backlash will hit the Japanese government and might undercut Japan's competitiveness. In short, in my opinion, the Japanese government is digging its own grave. The relationship between Japan and Korea will never be the same again."
Park Jae-gun, head of the Korean Society of Semiconductor & Display Technology, also agreed that Japanese suppliers could suffer financial problems early next year.
"Japanese suppliers have lost their trust in the global market due to the decision by the Japanese government," he said. "They will be excluded from the global supply chain and lose their largest market. This may lead them to face financial difficulties."
