The Yomiuri ShimbunSunday marked one month since the Japanese government tightened controls on exports to South Korea of three items, including hydrogen fluorides used in semiconductor production.
So far, there has been no noticeable impact on production or corporate performance in either Japan or South Korea, yet South Korean firms are moving to increase their stocks of the three products and diversify their suppliers. Meanwhile, some Japanese companies are becoming increasingly concerned about the future.
Big market share
“[The export controls] are being carefully explained to companies. I don’t think very many firms are anxious or worried,” said Economy, Trade and Industry Minister Hiroshige Seko at a press conference during a visit to Beijing on Saturday.
The three items are hydrogen fluorides used to clean semiconductors, photoresists applied to semiconductor boards, and fluorinated polyimides used in organic EL (electroluminescence) panels. Japanese firms hold large shares of global production for each of these items.
Some can be obtained from foreign competitors. However, high-purity hydrogen fluoride, for example, is considered to be only available from Japanese companies, and thus the impact on South Korean companies seeking to develop and produce high-performance semiconductors could be significant.
Sense of crisis
“If the export restrictions persist, we can’t rule out the possibility that production will be disrupted,” an executive of SK Hynix Inc., a major South Korean semiconductor maker, said during a conference call for analysts on July 25.
In addition to adjusting their use of the export-controlled items, South Korean firms are also seeking to obtain as much stock as possible and to broaden their supplier base to include non-Japanese firms.
The website of South Korean newspaper JoongAng Ilbo reported that Samsung Electronics Co. wrote to partner companies in July asking them to “secure a safe stock for at least 90 days by the end of July, no matter the cost.”
“Hydrogen fluoride is time-consuming to produce and difficult to transport. It may be hard for South Korean companies to find alternatives,” said Yasuo Imanaka, chief analyst at Rakuten Securities Economic Research Institute.
Meanwhile, Japanese chemical makers that have been selling the three items to South Korean firms are applying for export permits from the Economy, Trade and Industry Ministry so they can continue trading.
“It’s our role to obey the law as we respond to customers’ needs. If there are procedures to go through, we will do so seriously,” said Japan Petrochemical Industry Association Chairman Kohei Morikawa at a press conference July 18. Morikawa is also president of Showa Denko K.K.
While his firm manufactures hydrogen fluoride, Morikawa said there “has not been any major confusion at this stage.”
The ministry has been reviewing the applications it has received from companies, but as this usually takes about 90 days, no company has received an export permit yet.
“Are they really going to allow it?” an executive of a chemical maker that is going through the process wondered anxiously.
Semiconductors produced by South Korean firms are widely used in electronic devices manufactured by Japanese companies. Sony Corp., which uses South Korean parts, said it has enough to meet sales for the current year, but Sony Director Hiroki Totoki warned, “It’s not a foregone conclusion that the impact will be minor.”
‘No effect’ on Japan
On Friday, the South Korean government announced it would begin proceedings to remove Japan from a group of countries eligible for simplified export procedures. If this occurs, exports to Japan of items that could be diverted to military use would require a separate permit application for each contract, in principle.
The move is a response to a Japanese Cabinet decision to remove South Korea from a group of countries that receive preferential treatment. A Japanese government source said it would “not have a major impact.”
Trade between the two countries primarily involves raw materials being exported from Japan and finished products being imported from South Korea. While Japan imports semiconductors from Korea, “They can also be procured from Taiwan. There are few items for which there are no substitutes,” said a Japanese government source.