News Article

South Korea spar with Japan at WTO over export controls

Vaio and Dynabook brace for fallout

South Korea encouraged Japan to cancel constraints on the World Trade Organization’s imports of semiconductor materials on Tuesday even as the Japanese party strictly refused to impose a trade embargo.

According to a trade representative who visited the conference, Seoul representative, Paik Ji-ah said Tokyo’s step “will disturb the worldwide supply system” and damage South Korean businesses. At the last minute, Paik placed the trade conflict on the meeting’s menu.

In reaction, Japanese official Junichi Ihara said that the steps are “not a trade embargo, but an ongoing assessment needed to implement Japan’s security-based export control scheme properly.” In what is commonly viewed as a retaliatory step, Japan put export curbs on South Korea-based chip manufacturers.

Seoul called the constraints politically driven and said that they had “no foundation” in WTO rules, suggesting that the organisation was officially protesting.

Meanwhile, Japanese Trade Minister Hiroshige Seko said Tuesday at a Tokyo press conference that Japan has no intention of going home down. “It’s not[ with South Korea] subject to negotiations, and it can’t just be removed,” he said.

Countries should attempt to fix trade conflicts among themselves before the WTO establishes a payment committee. Japan does not intend to engage in any formal WTO claims consultations.

Seko said he is looking through working-level discussions to clarify Japan’s situation to South Korea, and South Korean Trade Minister Sung Yun-mo is supposed to join a conference on Friday in Tokyo.

For each agreement concerning shipments to South Korea of three products used in the chipmaking method, the curbs involve Japanese businesses to obtain public permission: withstand, etch gas and fluorinated polyimides. Companies in both countries are now struggling with how the spat could cause long-term chip production havoc.

South Korea’s Samsung Electronics and SK Hynix control the global electronics industry from 50% to 70%. This will have a far-reaching effect on the supply chain, with Japanese software manufacturers ready to catch a strike.

“There will be an effect on the production of components,” said Vaio’s director Kaoru Hayashi. Sony’s software services spinoff has not produced open its roster of chip providers, but Hayashi said the firm would find alternate sources outside of South Korea.

“We’re still not convinced how much impact there will be,” said Kiyofumi Kakudo, chairman and CEO of the Sharp subsidiary laptop manufacturer Dynabook.

To minimise the harm, South Korean chipmakers are scrambling. Recently, Samsung sent production officials to Taiwan, probably to press for higher etching gas deliveries from producers there.

As of July 1, when the Japanese govt chose to import checks, Samsung was believed to have a month’s availability of etching oil.

“It has now secured the value of three months, enough for the moment,” said an insider from the South Korean industry.

Lee Jae-Yong, Samsung Electronics deputy president and de facto leader of the group, reached on Sunday in Japan. He has encountered with managers from megabanks in Japan and, if needed, could contact company associates. The firm also sent messages not affected by the export checks to Japanese vendors, requesting them to guarantee stable deliveries.

Samsung] seems more worried than ever that deteriorating relations between Japan and South Korea would affect manufacturing,” a Japanese chemical manufacturer CEO said.

In the event the conflict extends, LG Chem prepares. Vice-Chairman Shin Hak-Cheol informed journalists Monday that the firm is contemplating situations where more products are subject to comparable constraints in Japan.

Japanese providers of chipmaking equipment also feel the heat.

“Now that every agreement requires to be reviewed, we need to submit more records,” said a delegate at JSR, a withstand producer based in Tokyo.

“We collect the required paperwork to ensure that our requests for exports are in line,” Tokyo Ohka Kogyo said. The business claims it now needs to get an agreement from South Korean customers offering not to resell illegally.

The official position of Japan is that it has withdrawn South Korea’s preferential therapy over national security issues. Applying for authorisation for each agreement only places South Korean importers with their Chinese and Taiwanese colleagues on flat floor, and they should still be prepared to purchase Japanese products as soon as they cross the inspection.

But most of South Korea view the step as retribution for Seoul’s inaction over the rulings of military labour. “There are worries if South Korean companies will face unreasonable choices,” said a chip sector analyst.

The state of South Korea has said it is going to spend 1 trillion earned ($845 million) annually to encourage national chipmaking machinery and materials manufacturing. In the sector, the nations are about 20 years apart, and “it will require us more than one or two years to see any outcomes,” said Ahn Ki-Hyun, a junior executive at the Association of Semiconductor Industry of Korea.

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