UPDATED. 2023-12-07 18:20 (목)
How Japan’s reversion of trade limit impact Korea’s material tech development
How Japan’s reversion of trade limit impact Korea’s material tech development
  • Jang Keyoung Yoon
  • 승인 2023.03.08 09:55
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Image: TheElec
Image: TheElec

It seems Japan’s trade restriction against South Korea for certain key materials used in advanced tech production that lasted four years is about to end.

The South Korean government has agreed to pay compensation to its own citizens who were forced to work in Japanese factories during World Word Two.

The decision was welcomed by the Japanese government and both countries are expected to discuss lifting the trade restrictions Japan imposed against South Korea in 2019.

Those in the technology manufacturing industry that TheElec talked to generally expressed a positive reception to the news.

Those in the semiconductor industry were especially welcoming of the news as they believe this removes a potential risk and lessen uncertainties. However, there were those who also expressed concern that the move will weaken the drive for South Korean companies to develop their own material, component, and equipment.

On July 1, 2019, the Japanese government announced a trade restriction against South Korea, citing national security concerns.

Specifically, Japan limited the export to South Korea of three materials, hydrogen fluoride, photoresist, and fluorinated polyimide. In the following month, South Korea was also removed from Japan’s White List of countries that it simplifies trade procedures.

The three materials are used in the production of advanced semiconductors and display panels, key exports of South Korea, home to chip giants Samsung and SK Hynix, and component giant LG.

South Korea relied heavily on Japan for the materials: back in 2019, Japan accounted for 44% of the country’s import of hydrogen fluoride and 92% of photoresist, according to data from Korea International Trade Association.

South Korea responded swiftly to Japan’s move by announcing a plan to localize the products and technologies of the three materials.

Some companies had shown success, especially in hydrogen fluoride and photoresist used in extreme ultraviolet process. According to South Korea’s trade ministry, import of products used in chip production from Japan accounted for 34.4% of the total in 2018 but this dropped to 24.9% in 2022.

Meanwhile, Japan’s trade restriction was not an outright ban, and the impact was not as heavy as some featured, Inha University professor Rino Choi said.

Import of the three materials continued during the past four years and South Korean companies suffered very little from the restrictions, Choi said.

Meanwhile, there was strong progress in hydrogen fluoride development by South Korean companies Soulbrain and SK Materials during the four years. As of last year, import of hydrogen fluoride from Japan dropped by 87.6% based on revenue compared to 2018.

However, the development of photoresists mostly failed in South Korean companies. But Dongjin Semichem did succeed in developing EUV photoresist last year and is developing inorganic photoresist material.

Japan’s trade restriction also impacted its own companies. Most Japanese companies that were suppliers to tech giants such as Samsung began building production lines within South Korea to avoid the restrictions.

Sumitomo Chemical’s subsidiary Dongwoo Fine-Chem in 2021 spent 10 billion yen to build a EUV photoresist line that went live in mid-2022. Tokyo Ohka Kogyo is also producing EUV photoresists at Incheon.

South Korea and Japan is planning to end their dispute over the trade restriction field to the World Trade Organization. 

This will most certainly alleviate supply chain concerns of the South Korean chip industry.

However, some raised concerns that lifting of the restriction means South Korean companies’ efforts to develop their own technologies may slow down.

However, Korea Semiconductor Industry Association executive vice president Ahn Ki-hyun said companies are likely to continue the development of technologies as Japan’s unprecedented trade restriction taught them of the importance of the supply chain.

As such things may happen again in the future, South Korean companies are likely to continue their efforts to develop their own materials as a safety net, he said.

A senior executive, who requested anonymity, of a South Korean conglomerate said even partially being able to rely on local suppliers is helpful.

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