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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  • 20th Century Boy - Wednesday, July 10, 2019 - link

    Drop it too and move on? why do they have to? I don't think they have to "move on" until they get proper apologies from the insane War Making Country Reply
  • patek - Saturday, July 6, 2019 - link

    The current South Korean government has been demanding unreasonable requests from Japan and its corporations. Their have been many formal apologies and monetary compensations to Korea from Japan for the Japanese occupation of Korea that occurred about 80 years ago. But, every time, a new Korean government comes into power, they create a new request for the same past act. It's mostly because of internal South Korean politics. Nationalistic South Korean politicians use pseudo-patriotism to gain their votes. It's an enormously effective populist politics. Before each election, they make Japanese yet once again as enemy of Korea and proclaims that they would really do justice and get proper apologizes from Japan because whatever past South Korean government got were far inappropriate. They do this in every election, especially nationalistic left-wing party like the current one. Once they got the power, they had to do something to meet what they advertised during the election and, this time, demanded another set of compensations from Japan. Japan decided enough is enough and took an action. South Koreans got what they deserve. The current South Korea government getting blindly friendly with North Korea has become a major threat to Japan's security. Japan removing South Korea from the white list is justified. Reply
  • Lemay - Saturday, July 6, 2019 - link

    It was a South Korean court decision that lead to Japan's removal of Korea from their white list in case you can't differentiate functions of government from those of court. Reply
  • patek - Saturday, July 6, 2019 - link

    Majority of South Korea supreme court judges have been politically appointed by the current Korean regime. The judges and the executive branch officials are political allies. South Korea democracy is not what most westerns think it is. Most of South Korea media is controlled by the regime as their heads have been all appointed by the regime. Reply
  • heartinpiece - Sunday, July 7, 2019 - link

    @Patek,
    No most (9 out of 13 were appointed by Lee and Park, whom are Pro-Japanese. Only five of the judges have been appointed by the current regime. Ref: https://en.wikipedia.org/wiki/Supreme_Court_of_Sou...
    And as for the South Korean media, what you said ('South Korea media is controlled by the regime as their heads have been all appointed by the regime'), that is totally wrong. There are but a few broadcasting and printing press that are government owned (actually only KBS is government owned, and the other are not. Yonhap does receive part of its income from the governement but that is all).

    Also check out the 'freedom of press' index of South Korea: https://rsf.org/en/south-korea
    Title: 'Distinct improvement after a bad decade'
    During the 'bad decade' the index fell by 30 places.
    Reply
  • patek - Sunday, July 7, 2019 - link

    Lee and Park are not Pro-Japanese, they are not anti-Japanese. There has never been a pro Japanese Korean president, ever. Lee and Park in fact had many troubles with Japan during their presidency. Lee by personally visiting the island having a dispute with Japan, and Park intentionally ignoring Abe in multiple public appearances over comfort women issue. There is a big difference between anti-Japanese (Moon) and not pro-Japanese.

    "Only five of the judges have been appointed by the current regime." All newly appointed are Moon's political cronies, ultra nationalists. Out of the remaining 9, 5 are conservatives, 4 are deemed neutral. One needs to understand that in Korea, most people are nationalists and far lefts are ultra nationalists who deem national pride over human rights, thus president Moon's silence over North Korea's atrocious human rights violations. When you throw in 5 ultra nationalists into already nationalistic judges, the result is inevitable, unnecessary conflicts with neighboring countries.

    "There are but a few broadcasting and printing press that are government owned (actually only KBS is government owned, and the other are not."
    2 most dominant broadcasting companies, KBS and MBC heads are Moon regime cronies. They got appointed after Moon came to power. They are supported by violent pro-Moon media labor unions whose violence the police cannot do anything about since they would get demoted or fired if they do something against the people supporting and protected by the Moon regime.

    Most foreigners don't understand how Korean politics and media work. It's very common for a labor union threaten and inflict physical violence on opposing media reporter or even a police without getting arrested.
    Reply
  • 20th Century Boy - Wednesday, July 10, 2019 - link

    Have any idea why they always request apologies? Simple. Because there never have been any proper apologies. Money is not everyth man. Reply
  • automator_devops - Monday, July 8, 2019 - link

    Well, according to the well sourced Wikipedia article, it looks like South Korea has no valid claims and pretty much bully Japan at this point. Japan already paid through their nose and their money made South Korea what it is today.

    https://en.wikipedia.org/wiki/Treaty_on_Basic_Rela...

    Excerpts:
    "There has been a constant call from the South Korean public (and to some extent, Japanese with left or liberal political leaning) that Japan should compensate Korean individuals who suffered from Japanese colonial rule."

    "In January 2005, the South Korean government disclosed 1,200 pages of diplomatic documents that recorded the proceeding of the treaty. The documents, kept secret for 40 years, recorded that the Japanese government actually proposed to the South Korean government to directly compensate individual victims but it was the South Korean government which insisted that it would handle individual compensation to its citizens and then received the whole amount of grants on behalf of the victims"

    "South Korea agreed to demand no further compensation, either at the government or individual level, after receiving $800 million in grants and soft loans from Japan as compensation for its 1910–45 colonial rule in the treaty"

    "Most of the funds from grants were used for economic development,[15] particularly on establishing social infrastructures, founding POSCO, building Gyeongbu Expressway and the Soyang Dam with the technology transfer from Japanese companies.[16] Records also show 300,000 won per death was used to compensate victims of forced labor between 1975 and 1977"
    Reply
  • quote - Tuesday, July 9, 2019 - link

    In this case, the cause is not only problems between Japan and South Korea.
    South Korea is suspected by US and UN about illegal export of hydrogen fluoride to North Korea and Iran, that is necessary to enrich uranium and make nuclear weapons.
    Actually, export from Japan to South Korea is

    https://twitter.com/yatacrow5/status/1148427741865...
    Reply

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