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.”


Oil prices surge after attacks hit Saudi output

Updated 16 September 2019

Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.