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.”


China's aviation regulator raised concerns with Boeing on 737 MAX design changes

Updated 12 December 2019

China's aviation regulator raised concerns with Boeing on 737 MAX design changes

  • China is reviewing the airworthiness of the plane
  • China was first country to ground plane in March

BEIJING: China’s aviation regulator raised “important concerns” with Boeing Co. on the reliability and security of design changes to the grounded 737 MAX, it said on Thursday, but declined to comment on when the plane might fly again in China.
China is reviewing the airworthiness of the plane based on proposed changes to software and flight control systems according to a bilateral agreement with the United States, Civil Aviation Administration of China (CAAC) spokesman Liu Luxu told reporters at a monthly briefing.
He reiterated that for the plane to resume flights in China, it needed to be re-certified, pilots needed comprehensive and effective training to restore confidence in the model and the causes of two crashes that killed 346 people needed to be investigated with effective measures put in place to prevent another one.
China was the first country to ground the 737 MAX after the second crash in Ethiopia in March and had set up a task force to review design changes to the aircraft that Boeing had submitted.
The US Federal Aviation Administration (FAA) will not allow the 737 MAX to resume flying before the end of 2019, its chief, Steve Dickson, said on Wednesday.
Once the FAA approves the reintroduction into service, the 737 MAX can operate in the United States, but individual regulators could keep the planes grounded in other countries until they complete their own reviews.
“Due to the trade war, the jury is still out on when China would reintroduce the aircraft,” said Rob Morris, Global Head of Consultancy at Ascend by Cirium.
Chinese airlines had 97 737 MAX jets in operation before the global grounding, the most of any country, according to Cirium Fleets Analyzer.