Impact of Japan's Trade restrictions
Korea
"The impact of these export controls of these specialised chemicals on Korea's semiconductor industry stands to be significant, placing unwanted risks for both supplying and purchasing firms in the supply chain"
"Although tensions declined in August 2019, SK industry representatives noted that even if licenses were initially granted, importing Korean firms would be highly uncomfortable with a continuous dependence on uncertain licensing procedures that may fluctuate with political tensions.
⭐ Political Tensions=> point of analysis
September, 2019: SK gov. initiated a WTO dispute
Because the barriers to entry are high (high capital expenditure for semiconductor manufactoring equipment), the semiconductor industry is dominated by an oligopoly (small number of large firms)
The semiconductor Industry
"Japanese exports of semiconductor manufacturing equipment remain globally competitive despite this decline, several Japanese firms retain considerable market share due to the maturity of the global industry and high barriers to entry"
The Korean semiconductor industry today is a global leader, with overall fabrication capactiy second only to that of Taiwan (2018)
The top two Korean memory chip manufacturers, Samsung and SK Hynix, accounted for 74.7% of the global DRAM market in 2017
Producers of polyimides for electronic applications appear to be globally distributed, although there remains a cluster of producers in East Asia. (Daikin Chemical - Japan have a global presense)
According to KITA, Japan supplied 93.7 percent of Korea's fluroinated polyimide imports between January and May 2019
⭐ "A disruption in the resist supply chain has the potential to fundamentally alter a manufacturer's process. The firm would rely on any stockpiles it has, which are typically minimal given the shelf life of the resist chemicals"
=> Samsung has reportedly asked its vendors to stockpile enough chemicals to last three months in response to the current situation.
= once those run out, production would cease until a replacement is found
=> alternatives to Japanese resists are uncommon
Japanese media reports that Japan produces approximately 90% of global photoresists and over 90% of 2018 Korean photoresists imports originated from Japan
Industry representatives expect that Japan's export control actions on semiconductor equipment and material can have substantial impacts on Korea's semiconductor industry in the near and medium term
The degree of impact partly depends on the predictability with which the Japanese companies are able to acquire export licenses
"Even in the best-case scenario... this action will likely spur long-term changes in Korea"
- As semiconductors encompass a significant portion of Korean exports (19%), the supply chain vulnerability will not be tolerated int he long term
- The Korean government has taken some steps to encourage on-shoring of chemical manufacturing capacity by relaxing regulatory requirements for replacements of of previously imported substances
Other Nations
Some firms benefit from shutdown of Korean capcity
- TSMC (Taiwan)
- Intel (USA)
Nvidia (USA) that partner with a Korean foundry to prduce chups, and all downstream producers that use Korea-made chips in their products (cell phones, displays, TVs) would be affected as their supply chains are disrupted
- They would have to find alternate sources so they can continue producing
"These actions have the potential to become an ongoing risk in the semiconductor supply chain for Japan and Korea, with consequences for the global semiconductor industry, industries that supply to semiconductor manufactureres, and wider electronics industries that rely on semiconductors as inputs.
- If these supply chain risks stemming from seemingly unresolved and unrelated bilateral political tensions continue, difficult and costly trade and investment decisions may be unavoidable