‘Japan export curbs will benefit China’
IF JAPAN-IMPOSED restrictions on exports of key tech materials to South Korea are extended in the long term, the curbs would benefit China while hurting both the Korean and Japanese economies, according to experts on Wednesday.
Industr y and economic experts here say that China would benefit the most from the South Korea-Japan spat, as Chinese players would get a chance to step into the broken supply chain of t he globa l electronics industr y t hat has been led by Korean companies.
According to Cho Gyeong-yeob, a senior research fellow at the Korea Economic Research Institute, in the scenario that Japan maintains the export curbs for the next three months, Korea is forecast to see a 4.47 per cent contraction in its gross domestic product (GDP) on average, while Japan’s GDP is predicted to dip 0.04 per cent. China could gain 0.05 to 0.07 per cent.
“Except for the US and China, GDPs of all other regions are estimated to decline, especially those of Asean countries that heavily rely on the Korean and Japanese economies,” Cho said.
While Korea’s and Japan’s electronics industries are projected to plunge 20.6 per cent and 15.5 per cent in production, respectively, China’s electronics sector would increase 2.1 per cent in production and could possibly take over the global market leadership, the researcher said.
Rising chipmakers in China under the government’s initiative to boost the semiconductors industry by 2025 could seize opportunities to catch up with South Korea’s leading chipmakers if the Korean com
panies face the worst-case scenario in which they inevitably reduce the production of memory chips.
China’s etching gas companies could directly benefit from the Japan restrictions, in particular, because the quality of the material is competitive enough in comparison to Japanese products, Cho said. South Korea also has domestic players like Soulbrain and Ram Technology.
“The impact of the export restrictions on the Japanese economy is less severe than on the Korean economy, because Japanese providers of the three curbed materials have bigger overseas customers than Korean companies,” Cho said.
Japan’s exports of photoresists to Korea account for 10.5 per cent of the total, while its fluorinated polyimideexports to Korea stand at 20.7 per cent, according to data from the Japanese Ministry of Finance. Exports of etching gas to Korea account for as much as 89.3 per cent.
However, the three materials take up a mere 0.01 per cent of Japan’s entire exports.
“The Japanese companies that have been selling the products to their Korean customers would see losses, but the losses wouldn’t hit the companies hard,” Cho said.
“They do have bigger customers in China and the US. Only the etching gas prov iders could ta ke some direct impact but it doesn’t seem serious enough.”
‘Taking over market leadership’
Japan seems to be targeting the globa l supply chain of t he electronics industr y by hampering primar y and secondar y suppliers of Samsung Electronics and SK hynix, he said. If Samsung and SK hynix reduce t heir production, suppliers of other chip materia ls and equipment would be hit hard.
“This will give room for Japanese or Chinese electronics parts makers to step into the supply chain and take over the market leadership again,” Cho said.
Chung Min, a research fellow at the Hyundai Research Institute, agreed that if the Japanese government maintains the curbs for the next three months, the global semiconductors and electronics industries may experience unstable supply of major parts needed for high-end digital devices and network infrastructure.
“US IT moguls like Google, Amazon and Apple could feel the impact, if they become unable to procure memory chips from Samsung and SK hynix at the right time,” Chung said.
“Korean chipmakers have some time, because memory chips inventories have been piling up so they could turn the current crisis into an opportunity by reducing the inventories,” he said.
“In this case, memory prices could start picking up ahead of the expected short supply.”
There have been rumours that Samsung and SK hynix are considering curtailing memory production, as Japan’s curbs are projected to become a chronic issue.
Both Samsung and SK hynix have denied the rumours. SK hynix had announced a 10 per cent decrease in wafer input for NAND flash before the Japan issue.
“According to industrial estimates, memory inventories have piled for up around three months,” said a company official.
“For the time being, the companies could expect the inventory prices to go up and [they are] yet uncertain about what will come next.”