Japanese Export Ban Hurts South Korea’s Chipmakers

Japan and Korean Flags

South Korea’s chip-making industry may face hit a lot of hurdles in the coming months. With Japan’s export ban still in effect, the country’s largest chip producers are facing issues sourcing materials for their products.

One of the latest trade restrictions put in place by Japan is a restriction on two crucial materials in the production of electronic chips. Photoresists outbound to Korea now require additional approval from the Japanese government. Export authorities for the latter country; however, has not issued a single approval since last July.

Manufacturers are reportedly trying to minimize the damage due to the export ban by looking for other suppliers besides Japan. However, government officials claim that this would not be a good long term solution to the problem. In fact, the government released a guideline that states that attempting to bypass the restriction may result in trade sanctions.

Reports have also found out that suppliers from countries such as Russia and China are also trying to offer alternatives to the Korean chipmakers. Unfortunately, according to the chipmakers, none of these countries has shown a high-purity hydrogen fluoride that can compete with that of Japan. The high-purity allows higher “yield” rates, which in turn result in higher profits.

Electronics giant, LG, is one of the biggest victims of the current export ban. Their recent financial report has shown a 15.4% drop in their operating income for the second quarter versus last year. Samsung also reported a decline of 56% in their second-quarter profit.

Japan has only banned the export of photoresists that are for the production of chips through extreme ultraviolet lithography. However, this ban will affect Samsung’s attempt to catch up with Semiconductor Manufacturing Co Ltd in the advance chips industries.

These consequences are only expected to get worse as Japan has officially announced dropping South Korea from their list of preferred trading partners. The South Korean government, however, has announced plans to promote local suppliers as alternatives to their Japanese counterparts.

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February 14,2020

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