Ja­pan-sk feud dis­rupts sup­ply chain

Es­ca­lat­ing ten­sions sound alarm for Chi­nese firms

Global Times US Edition - - BIZUPDATE - By Wang Yi and Wang Cong

An es­ca­lat­ing tech­nol­ogy bat­tle be­tween South Korea and Ja­pan will cause dis­rup­tions of com­po­nents needed by tech­nol­ogy com­pa­nies, but the episode could mean op­por­tu­ni­ties for Chi­nese tech­nol­ogy com­pa­nies to move up the in­dus­try chain, an­a­lysts said on Sun­day.

As Us-led re­stric­tions on tech­nol­ogy ex­ports to China have in­ten­si­fied, Chi­nese com­pa­nies have been fo­cus­ing more on in­ter­nal de­vel­op­ment, and they are well-po­si­tioned to plug po­ten­tial gaps left by South Korean and Ja­panese en­ter­prises be­cause of their con­flict, they noted.

The feud be­tween South Korea and Ja­pan is run­ning high, af­ter the Ja­panese gov­ern­ment im­posed re­stric­tions on ex­ports of ma­te­ri­als for high-tech­nol­ogy equip­ment such as semi­con­duc­tors and dis­plays for elec­tronic de­vices to South Korean com­pa­nies, cit­ing “sig­nif­i­cantly un­der­mined” diplo­matic trust.

South Korean of­fi­cials have vowed to re­tal­i­ate if Ja­pan does not lift the re­stric­tions.

The re­stric­tions have had neg­a­tive im­pact on the sup­ply chain for semi­con­duc­tors, and if their ten­sions worsen and more re­stric­tions are im­posed, “it could cause a very bad im­pact” on the in­dus­try, Xiang Li­gang, direc­tor-gen­eral of the Bei­jing-based In­for­ma­tion Con­sump­tion Al­liance, told the Global Times on Sun­day.

He said that China, South Korea and Ja­pan have formed a closely in­ter­twined tech­nol­ogy sup­ply chain. Ja­pan pro­vides ma­te­ri­als, South Korea makes semi­con­duc­tors and dis­plays, and China as­sem­bles the fi­nal de­vices us­ing those in­puts, which are sold around the world.

“The cut on sup­plies for South Korean chips will not only have an im­pact on Chi­nese com­pa­nies, but also the global in­dus­trial chain,” Xiang said.

The two coun­tries are far from re­solv­ing their trade ten­sions, ap­par­ently rooted in a decades-old dispute over com­pen­sa­tion for South Korean work­ers forced to work for Ja­panese com­pa­nies dur­ing World War II.

Af­ter a meet­ing in Ja­pan on Fri­day failed to make any progress, Ja­panese and South Korean of­fi­cials traded ac­cu­sa­tions about whether Seoul had de­manded Tokyo drop the re­stric­tions at the meet­ing.

The es­ca­lat­ing ten­sions should sound the alarm for Chi­nese com­pa­nies in the up­stream of the in­dus­try chain to rise to the chal­lenge and move for­ward, said Fu Liang, a Bei­jing-based in­de­pen­dent in­dus­try an­a­lyst.

“[Chi­nese com­pa­nies] are po­si­tioned to fur­ther move up and they should seize the op­por­tu­nity,” Fu told the Global Times on Sun­day, not­ing that Chi­nese com­pa­nies’ ca­pa­bil­i­ties have im­proved sig­nif­i­cantly.

Amid grow­ing re­stric­tions on sourc­ing for­eign ma­te­ri­als and equip­ment, Chi­nese tech­nol­ogy com­pa­nies such as Huawei have been investing heav­ily to re­duce their reliance on for­eign sup­plies.

Chi­nese com­pa­nies in var­i­ous parts of the sup­ply chain are co­op­er­at­ing to cope with ex­ter­nal pres­sures and find al­ter­na­tives, ac­cord­ing to Xiang.

For ex­am­ple, South Korea’s ex­ports of chips to China fell 15.9 per­cent year-on-year in May, ac­cord­ing to South Korean of­fi­cial data.

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