Japan’s sanction lifts Korean stocks of component material makers

2019.07.01 13:50:01 | 2019.07.01 15:41:45

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Tokyo’s announcement to restrict shipments of chip- and display-making materials to South Korea, while triggering disruption concerns among Korean manufacturers, has lifted stocks of Korean material makers on expectations of a shift to local supplies.

Shares of Dongjin Semichem Co. surged 17.9 percent to close Monday at 11,850 won ($10.2) and Foosung Co. 9.87 percent to finish at 7,460 won.

Dongjin Semichem produces photoresist and other materials for semiconductors while Foosung specializes in hydrogen fluoride, a material used as etching gas when making chips and displays.

Samsung Electronics Co., the world’s largest chipmaker, finished the day 0.85 percent lower at 46,600 won, while its smaller rival SK Hynix Inc. closed 0.72 percent higher at 70,000 won.

The Japanese government decided to tighten the export restrictions of high-tech materials used in making chips and smartphone displays to Korea from July 4. The move was widely viewed as retaliation of the recent Korean rulings on wartime forced labor.

Since late last year, South Korea’s top court has delivered a series of rulings ordering Japanese companies to compensate Korean workers for their forced labor during World War Two. Korea was a colony of Imperial Japan for 35 years until Japan’s surrender to the Allies in 1945.

The three materials to be restricted are fluorinated polyimide, resist and high-purity hydrogen fluoride. They are all key materials for making smartphone displays and semiconductors, two of Korea’s main export items.

Japan intends to stop the preferential treatment granted to Korea for these three materials, meaning Japanese exporters would need to file for regulatory approval each time they make shipments to Korea.

For Korean companies, supply disruptions appear inevitable as it would not be easy finding alternative sources. Japan makes about 90 percent of the world’s fluorinated polyimide and resist, as well as about 70 percent of etching gas.

KTB Investment & Securities Co., however, saw the latest sanctions as a boon to local companies in the long term.

In a report on Monday, the Korean brokerage said the restrictions could limit output of local chip and display makers in the short term but projected a gradual shift toward local sourcing, which would benefit the Korean materials industry in the long run.

The report said the Korean companies could take this opportunity to streamline their inventories, as the chip and display industries are in a supply glut. They could also cite the damage incurred from the restrictions as a bargaining chip to later lower prices from Japanese partners, it added.

Korea is the world’s largest market for semiconductor materials, accounting for 53 percent of the capacity planning for memory chip manufacturing worldwide. As a result, the latest sanctions are likely to deliver a blow to Toshiba, Sharp and other Japanese companies that have little room to expand their market share elsewhere, the report projected.

By Jung Hee-young and Kim Hyo-jin

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