The high-tech trade dispute rooted in Japan’s wartime history

The export curbs highlight how Japan, the world’s third-largest economy, continues to hold sway over a vital corner of the global supply chain. It remains a major player in specialised chip components, even though it was overtaken as a chipmaker years ago by South Korea.

Below are some details about the materials targeted, the companies involved, the outlook for further curbs and the row itself:

The tighter export curbs target three materials: fluorinated polyimides, used in smartphone displays; photoresists, used to transfer circuit patterns on to semiconductor wafers; and hydrogen fluoride, used as an etching gas when making chips.

Japan produces about 90 percent of fluorinated polyimides and about 70 percent of etching gas worldwide, Japanese media have said. It produces around 90 percent of photoresists, according to a government report. That makes it difficult for South Korean chipmakers to find alternative sources of supply.

South Korea imported $144 million of the three materials from Japan in the first five months of this year, accounting for 94 percent of its fluorinated polyimides, 44 percent of its etching glass and 92 percent of its photoresist, Korean industry data showed.

A source at one of South Korea’s top memory chipmakers said chipmakers would have to try to build stockpiles.

South Korean tech giants such as Samsung Electronics, SK Hynix and LG Display are all expected to be hit.

Japanese suppliers include JSR, Tokyo Ohka Kogyo Shin-Etsu Chemical and Stella Chemifa. Other suppliers include Showa Denko KK and Kanto Denka Kogyo, analysts say.

South Korean chip giants Samsung Electronics and SK Hynix rely on Japan for most of the materials, although they source some hydrogen fluoride from China.

They have up to four months of stockpiles for some of the materials, according to experts.

“The materials are hard to build stockpiles of because photoresists, for example, can deteriorate over time,” said Nomura analyst Shigeki Okazaki. Likewise, etching gas is hard to store in high volumes, he said.

Japan is stopping preferential treatment for shipments of these three materials to South Korea and will require exporters to seek permission each time they want to ship, which takes around 90 days, a government official said.

South Korean chipmakers are now seeking to buy more from elsewhere, such as China or Taiwan, where Japanese jurisdiction can’t reach, according to Park Jea-gun, a semiconductor engineering expert who heads the Korean Society of Semiconductor & Display Technology.

Japan also plans another round of export curbs for South Korea that could target a broader range of items applicable to weapons production, including machine tools, the government says.

Specifically, it plans to remove South Korea from a “white” list of countries with minimum trade restrictions, requiring Japanese exporters to go through a lengthy permit application process each time they want to export restricted items to South Korea, it said.