Most Korean SMEs fear they won’t last more than 6 mos under Japan embargo

2019.07.09 15:58:17

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Six out of 10 Korean mid and small-sized manufacturers fear they won’t last six months if Japan widens restrictions to shipments to Korea.

According to a survey done by Korea Federation of Small and Medium-sized Businesses (KBIZ) on 269 firms expected to be affected by Tokyo’s trade embargo, 59 percent said their business won’t be able to last more than six months if supplies from Japan are cut off.

Although 59.9 percent said the trade row would have a negative impact on the industry, most of them of 46.8 percent said they don’t have any countermeasures to address the situation. About 21.6 percent of the respondents said they would develop substitute materials, 18.2 percent would change suppliers and 12.3 percent would strengthen inventory level. KBIZ said the SMEs have remained helpless against the unexpected hardship.

The small firms believed it will take a long time to cut reliance on Japan for chip and display materials as it would not be easy to procure the products from local producers or other countries, with 42 percent of the respondents saying it would take more than a year to change suppliers. About 35 percent said it would take six months to one year and only 23.1 percent said they could address the problem within six months.

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As for a multiple-answer question about the government possible support measures, 63.9 percent said they needed financial support to localize production of the materials, followed by 45.4 percent who said the government should improve import procedures to diversify import countries and 20.1 percent said they needed emergency subsidy to stabilize their management.

About 54 percent of the respondents said the government should address the conflict through diplomatic negotiations, while only 34.6 percent wanted a tougher measure such as filing a complaint with the World Trade Organization (WTO).

KBIZ said a delegation of SMEs will visit Japan to discuss strategies against the setback because the export restrictions would deal a severe blow to not only large businesses but also small ones.

Last week, Tokyo announced that it will curb Korea-bound shipments of three materials used for chip and display production, in what is widely seen as retaliation for the recent Korean court decisions on wartime labor reparations. Samsung Electronics and SK Hynix, the world’s two largest memory chipmakers, and LG Display, the largest display maker, entirely rely on Japanese supplies.

It also warned it could remove Korea entirely from the white country list subject to fast-track preferential treatment for shipment approval on over 1,000 items.

By Ahn Byung-joon and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]