Chip, display makers scrambling to find alternative suppliers

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By Jun Ji-hye

Semiconductors and display companies are busy securing stockpiles and finding new suppliers of materials needed in their production amid a prolonged trade conflict with Japan, officials said Friday.

The move comes as the semiconductor and display sectors, which have already been hit by Tokyo's July 4 measures to tighten rules on exports to Korea of key three materials, is now facing further uncertainties following the Japanese government's approval of a proposal earlier in the day to remove Korea from its whitelist of 27 countries that are granted preferential treatment in trade.

Japanese Trade Minister Hiroshige Seko said the new measure will take effect Aug. 28.

Japan's decision, if put into effect, requires Japanese exporters to apply for individual authorization, rather than fast-track approval, for exports of around 1,120 dual-use items to Korea.

This is expected to pose a serious setback to Korean firms' imports from Japan, which would result in delay in production in the long term.

Last month, Japan's Ministry of Economy, Trade and Industry strengthened restrictions on the exports of three items ― fluorinated polyimide, photoresist and hydrogen fluoride (etching gas) ― to Korea.

The moves are widely seen here as a response to the Korean Supreme Court's rulings last year for Japanese firms to compensate surviving Korean victims of wartime forced labor.

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

Japan's new restrictions will further expand the list of items subject to export restrictions, and the items will include other key materials for semiconductor and display production, such as silicon wafers, blank masks and shadow masks.

According to the Korea Research Institute of Chemical Technology, Japan's Shin-Etsu Chemical and SUMCO take 27 percent and 26 percent market share, respectively, in the global silicon wafer market.

“Considering that Japanese companies take about a 50 percent market share in the silicon wafer market, the smooth operation of the semiconductor fabrication lines would be disrupted if the item is added to the list of the restrictions,” an official from a semiconductor company said.

Also, Japan's Dai Nippon Printing and TOPPAN Printing dominate the global market for shadow masks that are essential to produce small- and medium-sized OLED panels.

“We are working hard to secure stockpiles of materials, but if the situations are dragged out for too long, our production could suffer a setback,” an official from a display maker said.

In preparation for worsening situations, Samsung Electronics asked its local partners last month to secure stockpiles of all Japanese materials supplied to the company.

SK hynix has also made efforts to diversify suppliers and localize materials that have been dependent on imports.

LG Display formed a taskforce team to examine the present state of imports from Japan to come up with countermeasures.