Moon praises Seoul's diversification in sourcing core materials

President Moon Jae-in, center, gestures during his scheduled tour to a silicon wafer-producing factory in Cheonan, South Chungcheong Province, Friday. Moon's left is Park Young-sun, minister of SMEs and right is MEMC Korea CEO Cho Chan-rae. Yonhap

By Kim Yoo-chul

A few hours before the official deadline for renewal of an intel-sharing pact between South Korea and Japan, President Moon Jae-in said efforts to diversify channels in procuring “strategic industrial materials” were beginning to yield results.

Speaking to government officials and senior executives at a Korean subsidiary of Taiwan-headquartered silicon wafer producer of MEMC Electronic Materials (MEMC Korea) before his scheduled tour to the MEMC factory in southern Seoul, President Moon said; “Over the last four months, the government and South Korean firms have been accelerating efforts to diversify procurement channels in industrial materials and applying measures that go towards keeping a supply chain running stably,” according to Cheong Wa Dae press pool reports.

President Moon said his administration will apply “indiscriminate measures” to foreign companies invested in South Korea to help them gain the same benefits as other South Korean companies.

“I want to say congratulations to MEMC Korea for the opening of your second factory here in Cheonan, South Chungcheong Province. Your investment decision means South Korea is attractive and safe. The government is offering various tax and administrative benefits for foreign investors. We've been implementing simplified due process, which has so far worked out very well for foreign companies invested in South Korea. The South Korean government is welcomes foreign investors eyeing on industrial materials-related sectors. We will help them,” according to the reports.

Moon said foreign investment last year rose to a historically high of $26.9 billion and remained confident the country will achieve this year's target of $20 billion.

“South Korean companies import 65 percent of silicon wafer; however, if MEMC Korea expands the output of silicon wafer from the newest factory, then 9 percent of the total imports could be replaced by local production. That would be a very important turning point in terms of improving the localization rates of core materials crucial to the semiconductor industry,” Moon said.

In July, Japan imposed its restrictions in exporting core materials crucial to the South Korean manufacturing industry due to historical issues. As a counter, South Korea decided to terminate its General Security of Military Information Agreement (GSOMIA) with Japan. Their spat has expanded to trade.

President Moon's trade war with Japan could have some devastating consequences for South Korean companies. South Korea is heavily reliant on imports of Japanese intermediate parts and materials for its manufacturing industry, having recorded a bilateral trade deficit in parts and materials with Japan amounting to $15.1 billion in 2018.

This highlights the vulnerability of South Korea's manufacturing supply chain to Japanese intermediate goods, notably for electronics components and chemical products.

South Korea is a dominant supplier of memory components mostly used in all electronic devices as Samsung Electronics and SK Hynix supplied 61 percent of memory component in 2018, market research firms said.

“Since July, the production capacity of hydrogen fluoride has been expanded by double, and qualification tests have already been underway. We will see more outputs as factories in producing such key strategic industrial materials will be completed within this year,” according to the President.

“The semiconductor industry is the backbone of the South Korean economy. We will advance further and my administration is ready to offer more and more,” Moon said.

MEMC Korea invested a total of $460 million for its second factory to produce silicon wafers, an original material to fabricate chips. The factory said the 12-inch wafers will fully be operational from February next year.