Tougher export curbs spark fears of chip price spike, disruption

Mobile memory chips made by chipmaker SK Hynix are seen in Seoul. (Reuters/File)
Updated 18 July 2019

Tougher export curbs spark fears of chip price spike, disruption

  • Japan has tightened curbs on exports of three chipmaking materials

SEOUL: Memory chip spot prices have risen for the first time this year, indicating grim warnings of “never seen before” spikes and a supply disruption could come to pass as a dispute between South Korea and Japan drags on.

The 15 percent spike in DRAM chip prices over a week — in a sector dogged by oversupply and weak demand for more than a year — comes after Japan tightened curbs on exports of some chipmaking materials to South Korea — home to the world’s top two memory chipmakers, Samsung and SK Hynix Inc.

To be fair, the price surge indicated by industry tracker DRAMeXchange refers to the spot market that accounts for less than a 10th of the memory chip landscape as most major tech firms source through mid- and long-term contracts.

Given this background, major customers such as iPhone maker Apple are yet to start stockpiling, but the price spike has started fueling fears that Japan’s curbs will soon impact supply, several industry sources said.

“If the ban continues, memory prices will skyrocket like never seen before as 75 percent of DRAM and 45 percent of NAND global output is at risk,” Mark Newman from Bernstein said, referring to South Korea’s dominance in the supply of those memory chips.

A person at a South Korean chipmaker said customers were “following the situations closely” but “taking a wait-and-see approach as demand remains weak.”

Samsung and SK Hynix declined to comment.

“We will need contingency plans if the impact materializes,” said a spokeswoman at Vaio, a Sony Corp. spinoff.

“Options include seeking alternative chip suppliers outside South Korea,” she said, adding business at the Japanese computer maker had not yet been hit.

Taiwan Semiconductor Manufacturing Co. Ltd, the world’s top contract chipmaker, warned that Japan’s export curb is the “biggest uncertainty” for the fourth quarter.

Japan has tightened curbs on exports of three chipmaking materials — fluorinated polyimides, used in smartphone displays; photoresists, used to transfer circuit patterns onto semiconductor wafers; and hydrogen fluoride, used as an etching gas when making chips.

South Korea sourced 94 percent of fluorinated polyimides, 92 percent of photoresists and about 44 percent of hydrogen fluoride from Japan in the first five months of this year, Korean industry data showed.

Seoul has said it is seeking to make its supply chain more independent and has been getting fresh offers from Russia and China to provide hydrogen fluoride.

In the NAND flash market, supply has also been hurt by an output halt at Japan’s Toshiba Memory last month due to a power outage.

A person at Toshiba Memory said the plant resumed operations in mid-July, but it will take time for shipments to recover fully.

Economists fear a US recession in 2021

Updated 19 August 2019

Economists fear a US recession in 2021

  • Trump’s higher budget deficits ‘might dampen the economy’

WASHINGTON: A number of US business economists appear sufficiently concerned about the risks of some of President Donald Trump’s economic policies that they expect a recession in the US by the end of 2021.

Thirty-four percent of economists surveyed by the National Association for Business Economics, in a report being released Monday, said they believe a slowing economy will tip into recession in 2021. 

That’s up from 25 percent in a survey taken in February. Only 2 percent of those polled expect a recession to begin this year, while 38 percent predict that it will occur in 2020.

Trump, however, has dismissed concerns about a recession, offering an optimistic outlook for the economy after last week’s steep drop in the financial markets and saying on Sunday, “I don’t think we’re having a recession.” A strong economy is key to the Republican president’s 2020 reelection prospects.

The economists have previously expressed concern that Trump’s tariffs and higher budget deficits could eventually dampen the economy.

The Trump administration has imposed tariffs on goods from many key US trading partners, from China and Europe to Mexico and Canada. 

Officials maintain that the tariffs, which are taxes on imports, will help the administration gain more favorable terms of trade. But US trading partners have simply retaliated with tariffs of their own.

Trade between the US and China, the two biggest global economies, has plunged. Trump decided last Wednesday to postpone until Dec. 15 tariffs on about 60 percent of an additional $300 billion of Chinese imports, granting a reprieve from a planned move that would have extended duties to nearly everything the US buys from China.

The financial markets last week signaled the possibility of a US recession, adding to concerns over the ongoing trade tensions and word from Britain and Germany that their economies are shrinking.

The economists surveyed by the NABE were skeptical about prospects for success of the latest round of US-China trade negotiations. Only 5 percent predicted that a comprehensive trade deal would result, 64 percent suggested a superficial agreement was possible and nearly 25 percent expected nothing to be agreed upon by the two countries.

The 226 respondents, who work mainly for corporations and trade associations, were surveyed between July 14 and Aug. 1. That was before the White House announced 10 percent tariffs on the additional $300 billion of Chinese imports, the Chinese currency dipped below the seven-yuan-to-$1 level for the first time in 11 years and the Trump administration formally labeled China a currency manipulator.

As a whole, the business economists’ recent responses have represented a rebuke of the Trump administration’s overall approach to the economy.

Still, for now, most economic signs appear solid. Employers are adding jobs at a steady pace, the unemployment rate remains near a 50-year low and consumers are optimistic. US retail sales figures out last Thursday showed that they jumped in July by the most in four months.