Tokyo’s curbs on high-tech materials exports to South Korea could backfire

Chipmakers such as SK Hynix have relied on Japanese materials. (Reuters)
Updated 30 August 2019

Tokyo’s curbs on high-tech materials exports to South Korea could backfire

  • Japan tightened restrictions last month on exports of three chipmaking materials to South Korea

TOKYO: Japan’s curbs on exports of high-tech materials to South Korea could backfire in the long run, eroding its dominance over a key link in the global chip supply chain, suppliers and experts say.

Japan tightened restrictions last month on exports of three chipmaking materials to South Korea, home to memory chip titans Samsung and SK Hynix, threatening to disrupt the global tech supply chain as it provides about 70 percent or more of the restricted products to the world.

While the move highlights Japan Inc’s firm place in the industry even after its once mighty giants such as Sony lost out to nimble Chinese and Korean rivals, it has fueled concerns that its grip on the niche market for fluorinated polyimides, photoresists and hydrogen fluoride could loosen.

“South Korean companies cite quality and stable supply as reasons for choosing Japanese materials. But this has made them aware of the need for change and they are already taking action,” a source at a Japanese materials supplier said. “This will hit us like a body blow.”

Samsung, for instance, has stepped up testing of non-Japanese photoresists and hydrogen fluoride, informed sources said.

Soulbrain, a supplier of hydrogen fluoride to the Samsung and Hynix — the world’s No.1 and No.3 chip vendor — is aiming to match the purity of Japanese hydrogen fluoride at a plant that is still under construction.

Industry experts, however, note it would take time for South Korean firms to move up the value chain as the three high-tech materials are not easy to replicate.

Japanese suppliers “have built up their capabilities through decades-long experience of developing products,” Atsushi Ikeda, Citigroup analyst, said.

Top photoresist supplier Tokyo Ohka Kogyo says it takes up to two years to develop new resists.

From South Korea, the curbs are likely to elicit a response similar to Japan’s during the “rare earth shock” nearly a decade ago, when China’s restriction on exports of rare-earth minerals used in electronic devices forced Japan Inc. to find alternate supplies, industry participants said.

“Under the circumstances, anyone would do that,” said the source at the Japanese supplier that has been hit by the curbs.

Seoul has pledged to subsidise the domestic chip supply chain to accelerate the buildup of knowledge needed for firms to catch up in more advanced fields.

The curbs were prompted by an old row over compensation for forced South Korean laborers at Japanese firms during World War Two.

Japanese suppliers have so far refrained from directly commenting on how the curb will affect their business, claiming they had no inkling of the government’s decisions beforehand.

“We have very good relations with our Korean clients,” said Hideo Ohhashi, a spokesman for Tokyo Ohka. “But this is up to politics.”


Saudi central bank ready for any Aramco-related liquidity squeeze

Updated 24 min 14 sec ago

Saudi central bank ready for any Aramco-related liquidity squeeze

  • Aramco’s long-awaited listing on the Saudi Arabian stock exchange is due on Wednesday
  • The central bank has set up a team to closely monitor all indicators in the banking system during the IPO

RIYADH: Saudi Arabia’s central bank is ready for any liquidity squeeze from Saudi Aramco’s initial public offering (IPO) and is closely monitoring local banks, its governor said, after heavy demand for loans to buy the stock.
Aramco’s long-awaited listing on the Saudi Arabian stock exchange is due on Wednesday, completing the largest IPO on record and raising $25.6 billion from retail and institutional buyers who took on debt to back their orders.
“We don’t rule out that there might be squeeze of liquidity later on, that’s why I am ready and stand ready to intervene,” Ahmed Al-Kholifey told Reuters.
Saudis had clamoured to own part of the “crown jewel” of the world’s top oil exporter in the lead up to its IPO, with Aramco’s institutional tranche 6.2 times oversubscribed, while more than 5 million individuals subscribed to a retail tranche.
The Aramco IPO is the centerpiece of the Saudi crown prince’s plans to diversify the economy away from a reliance on oil, as the money will be reinvested by the Saudi Public Investment Fund (PIF) to promote growth in other sectors.
During the IPO process, the loan-to-deposit ratio (LDR) at some banks had exceeded a 90% “soft guideline” set by the regulator, but the ratio improved after the allocation process ended, Kholifey said in an interview.
“So far no bank has come to ask for liquidity from the central bank. We are ready to intervene in case there is a squeeze of liquidity but most of the indicators right now are not worrying,” Kholifey added.
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The central bank has set up a team specifically to closely monitor all indicators in the banking system during the IPO process, and it held meetings on a daily basis.
“I don’t think in the near future they will settle, we have to keep monitoring the situation until we see things are normal, especially the LDR,” he said.
Saudi corporates snapped up the biggest percentage of allocations to the Aramco IPO at 37.5% and Saudi government institutions were allocated 13.2% of the institutional tranche, the latest figures issued by the deal’s lead bank showed.
Kholifey said that less than 2% of retail subscriptions were leveraged, and most of the bank financing went to high-net-worth individuals and institutional buyers.
He expects most of the IPO proceeds to be invested locally by the PIF, given that most of subscription were internal.
Riyadh scaled back its original IPO plans, scrapping an international roadshow to focus on marketing Aramco to Saudi investors and Gulf Arab allies. It has remained silent on when or where it might list Aramco stock abroad.