South Korean electronics companies reaffirmed this week that production of computer memory and displays could be disrupted because of ongoing trade dispute between the country and Japan. Both SK Hynix and LG Display said that they were looking towards expanding the network of suppliers they use in acquiring three crucial materials required for product manufacturing.

Having started on July 4, Japanese producers must now get approval for individual exports 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) to South Korea. These export reviews may take up to three months, whereas South Korean producers usually only keep one to two months' worth of materials in stock because they are highly toxic and uneasy to store. Meanwhile, Japanese companies — JSR, Showa Denko (SDK), and Shin-Etsu Chemical — control 70% - 90% of the global supply of these chemicals, and if they cannot supply materials to their South Korean partners on time, production of 3D NAND, DRAM, LCDs, and OLEDs at LG, Samsung, and SK Hynix will be disrupted.

Polyimides, photoresists, and high-purity hydrogen fluoride are produced not only in Japan, but also in South Korea as well. However ramping up local production on short notice to satisfy the demand from the South Korean giants is pretty hard. Meanwhile, both LG Display and SK Hynix are looking towards other vendors simply because they have no other choice.

Speaking about the matter yesterday to investors and financial analysts, Jin-Seok Cha, the executive vice president and head of finance and procurement at SK Hynix, stated:

“We are trying to secure inventories of chip materials as much as possible ... but we cannot rule out production disruption if Japanese export controls drag on, so we are keeping a close eye on that.”

Executives from LG Display also confirmed earlier this week that the company intended to procure required chemicals from different suppliers

Switching suppliers of chemicals is an uneasy task, and it is also hard for producers to ramp up production quickly. Considering the vast production capacities that the South Korean chaebols run in the country and their requirements for supplies, it remains to be seen whether they can get enough to keep their plants running at full capacity.

Earlier this week South Korea failed to gain support from the World Trade Organization in its dispute with Japan. The latter plans to remove South Korea from the 'white list' of countries that have minimum trade restrictions, which will make life of Korean manufacturers even harder.

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Sources: Reuters, Reuters

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  • Rookierookie - Friday, July 26, 2019 - link

    The occasional typo may be excusable, but please avoid making them in the title. Reply
  • PeachNCream - Friday, July 26, 2019 - link

    In "...and uneasy to store," consider replacing uneasy with the word difficult. Reply
  • quantumshadow44 - Monday, July 29, 2019 - link

    lol, he is russian. Reply
  • Arsenica - Friday, July 26, 2019 - link

    Finding alternate photoresist suppliers for advanced nodes is going to be a challenge Reply
  • Duncan Macdonald - Friday, July 26, 2019 - link

    This will hurt the South Korean firms in the short term - then badly damage the Japanese firms. If the SK firms cannot rely on Japan then they WILL produce their own supplies. This will cost the SK firms several billion dollars but will end up destroying the Japanese firms. It will take a few years for this to happen but any shareholders in these Japanese companies would be wise to sell. Reply
  • dropme - Friday, July 26, 2019 - link

    The Japanese firm don't solely rely on the SK firms since they have broad product lines and customers in many continents. Think about it - Dow Chemical won't go bankrupt even if Intel and Micron stopped buying their chemicals. Reply
  • dropme - Friday, July 26, 2019 - link

    Is Mircon a buy? Reply
  • s.yu - Saturday, July 27, 2019 - link

    This started with SK's laughable acts of extortion. Reply

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