South Korean companies produce 70% of the world’s DRAM, about a half of 3D NAND, and a significant share of OLED and LCD displays on the planet. Meanwhile, Japanese suppliers make 70% - 90% of three materials crucially required for manufacturing these components. As the two countries have a multi-decade-long dispute over compensation for World War II, Japan recently implemented new export rules that could disrupt supply of the important materials to South Korea, which in turn could hurt supply of DRAM, NAND, and various types of displays.

Japan-based JSR, Showa Denko (SDK), and Shin-Etsu Chemical control 70% - 90% of the global supply of polyimides (used both for LCDs and OLEDs), photoresists, and high-purity hydrogen fluoride (used to make chips, such as LSI, DRAM and NAND devices). Starting July 4, Japanese producers must get approval for individual exports of these chemicals to South Korea. Export reviews may take up to three months, whereas South Korean companies typically only keep one to two months' worth of materials in stock.

If South Korean companies cannot procure enough chemicals from their Japanese partners or their competitors in other countries, they will have to curb production, which will have a drastic effect on global supply of DRAM, 3D NAND, chips by Samsung Foundry, LCDs, and OLEDs.

According to Nikkei and Reuters, SK Hynix only has enough materials to keep production going in the short-term future, or for the next couple of months. Samsung is reportedly trying to deal with the situation, but nothing is clear at this point. Both South Korean giants have manufacturing plants in China, which could partially offset a potential disruption of supplies by domestic fabs. Meanwhile, LG Display and Samsung Display only make their products in South Korea and have to source fluorinated polyamide from Japan (despite the fact that LG controls LG Chem, the largest chemical company in South Korea).

The heart of the conflict itself lies with World War II, where as part of the Japanese occupation of Korea, Japan used forced South Korean labor at many of its factories, with the survivors demanding compensation. Late last year South Korean court ordered Japan’s Nippon Steel & Sumitomo Metal as well as Mitsubishi Heavy Industries to pay compensations to South Korean plaintiffs, verdicts criticized by Japan as ‘unthinkable’ because the issue was settled in 1965.

In addition to new export controls, Japan reportedly plans to exclude South Korea from the whitelist of 27 friendly countries. If this happens, export of all items that can be potentially used for military applications will require appropriate government approvals, which will further slowdown business between the two countries.

Components made in South Korea are then used by various companies across the world, including Apple, Dell, HP, Lenovo, Panasonic, Sony, and so on. As a result, if supply is indeed disrupted, Japanese companies will be hurt too.

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Sources: Nikkei Asian Review, Reuters, OLED-Info

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  • Andy Chow - Friday, July 12, 2019 - link

    The opium war was a UK deal. UK != US. Reply
  • Calin - Friday, July 5, 2019 - link

    The US, South Korean, Taiwanese and North Korean. Not to mention Phillipines, Indonesia, and China (Japan had a million men army on Chinese soil in the second world war). Reply
  • APK000 - Friday, July 5, 2019 - link

    The left wing government of Korea started anti-Japanese propaganda again from 2018 for their approval rate as well as distracting people from noticing that it is ruining the economy, diplomacy and national security lol. Some citizens think the current government is committing collusion with North Korea Kim Jong-Un. The government even started Https Blockage with ISPs on their citizen lmao. No one else on the earth except China and North Korea would do this. South Korea has already got tremendous money from Japan in the past 70 years but they are still trying to get more despite that this issue was already settled many years ago. Japanese government is angry about them using anti-Japanese, anti-US, pro-North Korea propaganda for the approval rate of the corruptive left wing party. Reply
  • krydres - Wednesday, July 10, 2019 - link

    Disclaimer: I've just registered to reply to this comment. I am Korean. Please bare with my poor English.

    Well, I don't know who you're, but I think it is possible that some Japanese people think in that way. Of course, there are, for sure, a few brain-washed Korean who might think in that way. But in general, in Korea, we think that this situation will help Abe maintain his popularity in Japan. Just the same mechanism you postulated: setting an external enemy to make the nation more unified. Whatever the truth to Japan is, I wanted to point out that you're mostly wrong about Korean internal affair. I admit the government made a bit mistake regarding Https blockage. Now we cannot access pornhub without a VPN (thank god I am living abroad this year!). Other than that, well... The thing is that we don't even talk much about the ugly, sad history of WWII in connection to this situation. We think that's only a pretty wrapping of the ugly gift. Do any Japanese people really think this trade dispute started because of the historical thing? (Still, I like that now many more western people will learn what kind of tragedy Japan did to the rest of Asia during WWII) But, I think this situation is all about a politician trying to get more vote even by disrupting a huge industry that we all Anandtech users care a lot.
    Reply
  • krydres - Wednesday, July 10, 2019 - link

    And, it's bit too much to call the current Korean government "left wing". There are one major more left-wing party, and many more minor ones. Current government and the leading party is definitely not right-wing. But they're in the middle. We Korean citizen taken down the useless previous president (who gave Japan an Indulgence of the "sex slavery" crime for a tiny amount of money, as small as any single random millionaire would donate this Christmas with NO official words of apology nor any detailed action list) with our hands, and then elected Moon. No president can go that much wrong in just two years. How come a anti-US, pro-North Korean president and US president can meet at DMZ with Jung-Un Kim?

    It was quite an emotional comment, sorry. I am mad not because I guess APK is a Japanese, but a "brain-washed" Korean. I'd never hear this kind of argument on Korean streets, but only scarcely on the web.
    Reply
  • Surfacround - Monday, July 8, 2019 - link

    like that is going to happen...
    what about the two Atomic bombs the US dropped on japan... did the US compensate Japan for that?
    Reply
  • rrinker - Tuesday, July 9, 2019 - link

    Yes, we rebuilt their entire damn country, to the detriment of many of our own heavy industries like steel. Reply
  • evernessince - Thursday, July 11, 2019 - link

    You can rebuild the structures but what about the hundreds of thousands of dead citizens and irradiated land?

    And please, America did not rebuild Japan alone. Give the Japanese some credit from their own revival. They worked their asses off for decades to turn the country into the world's 3rd largest economy.
    Reply
  • evernessince - Thursday, July 11, 2019 - link

    lol, that's rich.

    America has zero ground to stand on when the land they own now was stolen from the natives.

    How about America stays out of disputes that have nothing to do with it for once.
    Reply
  • zodiacfml - Friday, July 5, 2019 - link

    LOL. "Toshiba & WD NAND Production Hit By Power Outage: 6 Exabytes Lost" Reply

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