South Korea-Japan trade feud engulfs tech giant Samsung

Japanese export curbs have left Samsung looking for new sources of essential chipmaking materials. (AP)
Updated 19 July 2019

South Korea-Japan trade feud engulfs tech giant Samsung

  • Company begins testing non-Japanese material for semiconductors as dispute deepens

SEOUL: Samsung has started testing non-Japanese materials used in producing state-of-the-art semiconductors amid a deepening trade dispute between Seoul and Tokyo.

According to company sources, the South Korean chipmaker has begun testing hydrogen fluoride etching gas from China, Taiwan and some local suppliers.

The etching gas — one of three materials that Japan has decided to restrict shipping to South Korea — is crucial for producing semiconductors since it is used in removing excess material around circuit patterns on silicon wafers.

“We’re testing hydrogen fluoride etching gas from companies outside Japan, such as Taiwan and China, in an effort to diversify supply sources,” a Samsung official told Arab News, asking not to be identified. “We’re also searching for local suppliers of the chemical.”

Testing from new suppliers, however, is to expect to take at least six months, and it remains to be seen if the quality of non-Japanese etching gas will be high enough to be used in the production of semiconductor, the official said, refusing to elaborate new supply sources.

SK Hynix and LG Display have also started testing of non-Japanese high-purity hydrogen fluoride to minimize the impact of Japan’s trade embargo, according to the company officials.

Binhua Group of China is known to be one of the Korean firms’ new suppliers for the etching gas. According to Shanghai Securities News, the chemical company based in Shandong has signed an agreement with South Korean chipmakers to supply etching gas.  

The gas needs to be 99.999 percent pure for it to be used in chipmaking. Companies in Japan maintain top technology levels in the field, taking up to 90 percent of the global market.

HIGHLIGHT

Samsung is the world’s largest chipmaker.

On July 1, Japan announced it would curb shipments to South Korea of three materials used for chip and display production — fluorinated polyimide, photoresists and hydrogen fluoride. The move is widely seen as punitive action for a recent court ruling here that orders two Japanese firms to compensate wartime forced laborers. 

With the Moon Jae-in administration rejecting Tokyo’s demand for third-party arbitration, Japan is expected to take the dispute to the International Court of Justice.

Japanese companies can still export high-tech materials to South Korea, but they are required to get a license from the government. The license could take 90 days to come through even if they are approved.

Samsung Electronics and SK Hynix, the world’s two biggest memory chipmakers, have been hit hardest by the tougher export controls by the Japanese government, as both semiconductor manufacturers rely on Japanese supplies for the materials.

According to the Korea International Trade Association, South Korea imported about 92 percent of photoresists and 43.9 percent of hydrogen fluoride from Japan.

Analysts believe the Japanese trade restrictions will compromise Samsung’s next-generation semi-conductor businesses, such as those based on 7-nanometer chip fabrication. The 7-nano chips are made with technology involving extreme ultraviolet lithography, which requires the use of photoresists.

“Samsung was scheduled to mass-produce 7-nano-chips from the latter half of this year with the supply of photoresists from Japan’s supplier, JSR,” said Lee Mi-hye, a researcher at the Export-Import Bank of Korea.

“JSR-made photoresists are produced in Belgium, so it’s not subject to the restrictions for now. But the foreign branches of Japanese firms would be vulnerable to regulations in the near future.”


After Brexit-settling poll, UK firms see business bounce

Updated 8 min 58 sec ago

After Brexit-settling poll, UK firms see business bounce

  • Surveys point to improved confidence
  • Chancelor’s 3% growth hope seen a distant prospect

LUTON: At Bruderer UK, a small firm selling metal-stamping machines from an industrial estate just north of London, business kicked into high gear right after Prime Minister Boris Johnson’s big election win last month.

Clients, including the Royal Mint which uses Bruderer equipment to make coins, at last knew for sure that Britain would quit the EU on Friday. Many have revived plans that had long been on hold.

“For three years we were stuck in a rut of indecisiveness,” Bruderer UK managing director Adrian Haller said. “Once the election happened, there was a massive sigh of relief.”

Other businesses are also reporting a post-election recovery, and Chancellor of the Exchequer Sajid Javid says he is hopeful that Britain’s economic growth can eventually bounce back to its pre-financial crisis levels of nearly 3 percent a year.

That would represent a victory for Britain’s Brexit supporters and possibly inspire euroskeptics within the EU.

Bruderer has just sold two new machines — used to make car parts, fountain pen nibs, scalpels, drink tins and other products — for a total of £1.5 million ($2 million).

The firm, whose turnover for all of 2019 was below £4 million, has also taken on two projects to retool machines for companies worth £140,000 since the vote.

“January is usually synonymous with a very, very slow start to the year. Now, we’re only three weeks in but our feet have not touched the floor,” Haller said.

However, many firms remain worried about leaving a bloc that accounts for nearly half of Britain’s exports. Johnson’s victory has ended prospects of further Brexit delays, but London and Brussels have yet to start talks on a new trade deal for 2021 and beyond, after an 11-month, no-change transition period.

Johnson’s win also meant no shift to the left under the opposition Labour Party.

Its plans for renationalizing some industries and a greater role for the state worried many business leaders, and the first gauges of the economy since the election have pointed to a bounce in confidence and a quickening of the housing market.

On Friday, the IHS Markit Purchasing Managers’ Index showed firms having their best month in more than a year in January, possibly dissuading the Bank of England from cutting interest rates on Jan. 30.

However, it remains to be seen if the world’s fifth-biggest economy really is emerging from the near standstill of late 2019.  In the medium term, few investors expect British growth to speed up much from its current pace of just over 1 percent a year.

Immediately after the shock decision by British voters to leave the EU in 2016, the PMIs suggested the economy was nose-diving, only to stabilize soon afterwards.

The world economy had its weakest growth since the global financial crisis last year and has not yet reached a turning point, the International Monetary Fund says, and uncertainty could return to weigh on Britain if talks with the EU about a new trade deal go down to the wire before the Dec. 31 deadline. Chancellor Javid plans to give the economy a boost in March, by announcing more investment in infrastructure to tackle Britain’s weak productivity record.

At least for some sectors, the picture is already brighter following the stasis of 2019.

House builder Berkeley is ramping up construction while Countryside Properties reported a record forward order book. Pub chains said they had a good Christmas even if supermarkets have reported little change in demand. Companies in other sectors, especially those with a lot to lose if Britain and the EU do not reach a trade deal this year, remain cautious.

RDM Group, an automotive technology firm that makes computer systems for cars such as self-parking systems that can be operated from an iPhone, has seen no change in demand from clients that include Aston Martin and Jaguar Land Rover.

That reflects the high uncertainty for Britain’s auto sector. It faces the risk of high tariffs on trade with the EU if a deal is not reached by the end of 2020.

But RDM’s Aurrigo unit, which makes self-driving vehicles to shuttle passengers around shopping malls and carry baggage at airports, has seen a revival of interest from potential investors from the Middle East, North America and Australia who had gone quiet before the election.

“There was a lot of nervousness about which way the country would go,” Miles Garner, sales and marketing director for RDM and Aurrigo, said. 

“As it’s turned out, it is more of a business-orientated government. It has helped.”