Japan hits South Korea with semiconductor sanctions

July 04, 2019 //By Peter Clarke
Japan hits South Korea with semiconductor sanctions
Trade tension appears to be infectious. Japan has taken a page out of President Trump's play book and hits South Korea with sanctions on materials used for making semiconductors and displays.

Specifically, Japan's Ministry of Economy, Trade and Industry (METI) in Tokyo has said it will impose tighter restrictions on exports of fluorinated polyamide, photoresists and hydrogen fluoride etching gas. These are areas where Japan is a leading global supplier and has leverage over chipmakers such as Samsung and SK Hynix. According to reports METI has also said it is considering whether to remove South Korea from a "white list" which would mean in future licenses would be required to export a broad range of technology-based products to South Korea.

Unlike the US-China dispute, the cause of Japan's argument with South Korea is not related to balances of trade, unfair business practices or subsidies for national champions. Instead the cause goes back to the Second World War and Japan's occupation of Korea.

South Korean courts ruled recently Japanese companies should pay individuals compensation for forced labour and where those companies will not pay, assets can be seized. Japan's position is that all such claims were settled in treaty between the two companies signed in 1965.

The rising tension and retaliation between Japan and South Korea are being seen as damaging to both countries economic interests.

The use of materials such as photoresists can be highly specific to particular manufacturing processes and Japan withholding the materials could cause major disruption to chip production, reports said. If the sanctions are allowed to bite it could create long-term delays in chip production while alternative materials are sourced and calibrated for use in the process. As a result, chip prices could spike. It is thought that semiconductor makers would typically hold one or two months of supply although that might vary from company to company and product line to product line.

The disruption of the production of memory and logic chips out of South Korea could quickly create problems for equipment makers around the world, and particularly for makers of high volume consumer goods such


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