Japan shooting itself in the foot with export embargo on Korea: analysts

2019.07.03 15:41:21 | 2019.07.03 15:56:44

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Japan’s export curbs on materials that are essential in making electronic components can hurt Japanese companies more than Korean chipmakers given Korea’s dominance in the memory chip market, according to some local brokerages.

The export restrictions, effective Thursday, would not be as damaging as feared as the initial items to be removed from the white list, or fast-track licensing, do not directly affect Korea’s mainstay fab activities, NH Investment & Securities noted in a report Wednesday.

The three materials to be restricted are fluorinated polyimide, photoresists and hydrogen fluoride etching gas. They are all vital chemicals when producing semiconductors and displays, with Japanese players holding a 70 percent to 90 percent share in world markets.

The resists subject to the export controls are restricted to those that use extreme ultraviolet (EUV) lithography, a next-generation lithography technology, the report found. EUV resists are currently made only by Japanese companies including JSR and Shin-Etsu Chemical. But this is not likely to be a problem as Samsung Electronics and other local chipmakers do not have use for the technology yet, the report said.

Resists commonly used in making DRAM memory chips apply 193-nm ArF immersion lithography technology, while those used for producing 3D NAND flash memory apply 248-nm KrF lithography. However, these two resists are exempt from the current sanctions as Tokyo’s export restrictions are capped to resists with wavelength below 193-nm, the report added. DRAM and NAND flash memory make up a majority of Korean chipmakers’ output.

According to Hyundai Motor Securities, most Korean companies have an inventory stock that would last them for about a month. If tensions build up, any possible disruption in output by the world’s top memory vendors could lead to a spike in memory prices.

The report added that Japan won’t be able to afford a lengthy contest with tech materials as hostage, given the influence of Korean names in the chip and display market.

Korea denounced Japan’s move as economic retaliation involving recent clashes over wartime labor reparations. It also called the sanctions a violation of global trade rules and vowed to take necessary legal actions, which could include filing a suit at the World Trade Organization.

At the same time, the government announced a $5 billion program aimed to groom the tech materials industry and build up the local supply chain to reduce reliance on Japanese imports.

By Chung Seok-hwan and Kim Hyo-jin

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