'Tokyo's export curb to backfire on Japanese firms'

The Korea Times

The Korea Times

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Tue, September 26, 2023 | 04:00

Tech

'Tokyo's export curb to backfire on Japanese firms'

Posted : 2019-07-02 17:18

Updated : 2019-07-02 19:04

Japan, which has been in conflict with Korea over Korean victims forced to work in Japanese factories during World War II, decided to impose restrictions on exports to Korean companies of high-tech materials and chemicals used in semiconductor and smartphone production. / GettyImagesBank

By Jun Ji-hye

Tokyo's decision to tighten the rules for exports of materials needed for semiconductor and display manufacture to Korean companies is causing concern among Japanese firms, which ship such items to Samsung, LG and other Korean IT firms, industry analysts said Tuesday.

The Japanese government has imposed restrictions apparently to retaliate economically amid a deepening diplomatic row between the two nations. But the sanctions will also adversely affect the profitability of Japanese companies as they will face difficulties in finding other buyers if their exports to Samsung Electronics and SK hynix are blocked.

Samsung Electronics is the world's top memory chipmaker and the second-largest semiconductor company, while SK hynix is the world's second-largest memory chipmaker and third-largest semiconductor company.

Given that the two account for 50 percent to 70 percent in the global semiconductor market, the aftermath of Japan's sanctions could also spread globally, affecting Apple, HP and other global companies.

Analysts say it will not be easy for Japan to place a total ban on the exports of high-tech materials and chemicals to Korea.

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"The Japanese government is expected to just make the export process more complicated rather than prohibiting the exports," Eugene Investment and Securities analyst Lee Seong-woo said.

Hana Financial Investment analyst Kim Hyun-soo also said, "The Japanese government is likely to use measures on export control as a bargaining chip with Korea."

On Monday, Japan's Ministry of Economy, Trade and Industry announced new restrictions on the exports of three items ― fluorinated polyimide, photoresist and hydrogen fluoride (etching gas) ― to Korea, which will go into effect from July 4.

The announcement was made at a time when the two nations have been in conflict over Koreans forced to work in Japanese factories before and during World War II.

Fluorinated polyimide is used to make the flexible organic light-emitting diode displays for TVs and smartphones, while photoresists and etching gas are necessary in the semiconductor fabrication process.

Under the new rules, exporters have to apply for individual export licenses for each of the three items and their relevant technologies to Korean clients, as the relevant bulk licensing for the items will no longer be applicable.

The approval requirement would lengthen the export process.

In an interview with Japan's Yomiuri Shimbun published Tuesday, Prime Minister Shinzo Abe said his country's decision accords with rules of the World Trade Organization and is unrelated to free trade principles.

But he has already had bad press in his own country.

Japan's Nihon Keizai Shimbun said in an editorial published Tuesday that the latest trade policy will cause considerable side effects to Japanese companies.

The newspaper also raised concerns over long term disadvantages in the global market, saying if a global company like Samsung Electronics faces a setback in its semiconductor production, it will cause setbacks in producing all devices that use semiconductors, including smartphones and PCs.

jjh@ktimes.com