Japanese media: Japanese export restrictions benefit South Korean chip material makers

Profits for suppliers of South Korean chipmaking materials have more than doubled in the past four years as Japan's restrictions on exports of key materials have prompted chipmakers such as Samsung Electronics to source locally.

Investors and industry watchers will be watching to see if these suppliers can maintain growth now that the Japanese government has ended material export restrictions amid a thaw in bilateral relations, the Nikkei Asian Review reported.

The Korea Stock Exchange identified 17 materials companies in August 2019 shortly after restrictions were tightened, when they were expected to lead domestic production in South Korea in response to Japan's stricter export rules.

The report pointed out that since August 2019, in about three years and seven months, the index of these stocks has risen 2.3 times, surpassing the benchmark KOSPI. This is thanks to the significant growth in performance during this period. During the period, the combined sales of the industry's 16 stable-earning, comparable companies halved between 2018 and 2022 to 19.45 trillion won ($15 billion), with operating profit at 1.67 trillion won, an increase increased by 2.5 times.

Ahn Ki-hyun, vice president and chief operating officer of the Korea Semiconductor Industry Association, said, "Export restrictions have not caused any real damage to Korean companies, which may be harder for Japanese companies because of stricter scrutiny of Korean exports. More red tape has to be dealt with."

It is reported that in July 2019, due to the Korean labor compensation dispute, Japan began to restrict the export of three key semiconductor materials, high-purity hydrogen fluoride, fluorine-containing polyimide, and photoresist, to South Korea in that month, and moved South Korea out of the country in August of the same year. Simplified "white list" of trade procedures. In September of the same year, South Korea filed a complaint with the WTO and also removed Japan from the trade "white list".

During the recent meeting between the prime ministers of the two countries, Japan promised to lift some restrictions on the export of high-tech materials to South Korea by the end of March. Before Japan's action, South Korea took the lead in withdrawing its complaint at the WTO and proceeded to put Japan back on the "white list".