Explainer: The high-tech trade dispute rooted in Japan's wartime history
08/07/2019 12:47
By Makiko Yamazaki, Heekyong Yang and Ju-min Park
TOKYO/SEOUL, July 8 (Reuters) - Japan has tightened curbs on
exports of high-tech materials used in smartphone displays and
chips to South Korea, upping the ante in a decades-old dispute
with Seoul over South Koreans forced to work for Japanese firms
during World War Two. urn:newsml:reuters.com:*:nL4N2491GT
The export curbs highlight how Japan, the world's
third-largest economy, continues to hold sway over a vital
corner of the global supply chain. It remains a major player in
specialised chip components, even though it was overtaken as a
chipmaker years ago by South Korea.
Below are some details about the materials targeted, the
companies involved, the outlook for further curbs and the row
itself:
WHAT IS BEING CURBED?
The tighter export curbs target three materials: fluorinated
polyimides, used in smartphone displays; photoresists, used to
transfer circuit patterns on to semiconductor wafers; and
hydrogen fluoride, used as an etching gas when making chips.
WHAT IS JAPAN'S SHARE OF THE MARKET?
Japan produces about 90% of fluorinated polyimides and about
70% of etching gas worldwide, Japanese media have said. It
produces around 90% of photoresists, according to a government
report. That makes it difficult for South Korean chipmakers to
find alternative sources of supply.
South Korea imported $144 million of the three materials
from Japan in the first five months of this year, accounting for
94% of its fluorinated polyimides, 44% of its etching glass and
92% of its photoresist, Korean industry data showed.
A source at one of South Korea's top memory chipmakers said
chipmakers would have to try to build stockpiles.
WHAT FIRMS ARE LIKELY TO BE IMPACTED?
South Korean tech giants such as Samsung Electronics
005930.KS , SK Hynix 000660.KS and LG Display 034220.KS are
all expected to be hit.
Japanese suppliers include JSR 4185.T , Tokyo Ohka Kogyo
4186.T Shin-Etsu Chemical 4063.T and Stella Chemifa
4109.T . Other suppliers include Showa Denko KK 4004.T and
Kanto Denka Kogyo 4047.T , analysts say.
WHAT ABOUT STOCKPILES?
South Korean chip giants Samsung Electronics 005930.KS and
SK Hynix 000660.KS rely on Japan for most of the materials,
although they source some hydrogen fluoride from China. They
have up to four months of stockpiles for some of the materials,
according to experts.
"The materials are hard to build stockpiles of because
photoresists, for example, can deteriorate over time," said
Nomura analyst Shigeki Okazaki. Likewise, etching gas is hard to
store in high volumes, he said.
HOW WILL THE CURBS WORK?
Japan is stopping preferential treatment for shipments of
these three materials to South Korea and will require exporters
to seek permission each time they want to ship, which takes
around 90 days, a government official said.
WHAT CAN SOUTH KOREA DO?
South Korean chipmakers are now seeking to buy more from
elsewhere, such as China or Taiwan, where Japanese jurisdiction
can't reach, according to Park Jea-gun, a semiconductor
engineering expert who heads the Korean Society of Semiconductor
& Display Technology.
WHAT ELSE CAN JAPAN DO?
Japan also plans another round of export curbs for South
Korea that could target a broader range of items applicable to
weapons production, including machine tools, the government
says.
Specifically, it plans to remove South Korea from a "white"
list of countries with minimum trade restrictions, requiring
Japanese exporters to go through a lengthy permit application
process each time they want to export restricted items to South
Korea, it said.
On Japan's white list are 27 countries, from Germany to the
United Kingdom and the United States. South Korea, which was
added in 2004, would be the first country to be removed.
WHAT'S BEHIND THE ROW?
Tokyo has been frustrated by what it calls a lack of action
by Seoul over issues stemming from a top South Korean court
ruling last October that ordered another Japanese company,
Nippon Steel 5401.T , to compensate former forced labourers.
The neighbours share a bitter history dating to the Japanese
colonisation of the Korean peninsula from 1910 to 1945,
including forced use of labour by Japanese companies and the use
of comfort women, a euphemism for girls and women, many of them
Korean, forced to work in its wartime brothels.
Japan says the issue of forced labour was fully settled in
1965 when the two countries restored diplomatic ties.
WHAT ABOUT THE WTO?
South Korea has denounced Japan's moves as a violation of
World Trade Organisation rules, saying it would take the
necessary countermeasures, including filing a complaint.
Japan has said the moves are not in violation of WTO rules.
(Writing by David Dolan; Editing by Nick Macfie)
((david.dolan@tr.com; +81 3 6441 1526; Reuters Messaging:
david.dolan.thomsonreuters.com@reuters.net))