Japan-Korea tech war may result from US-China tariff row

July 03, 2019 10:55
Japan and South Korea have long been arch rivals in the technology sector. Photo: Reuters

The Japanese government announced on Monday that it would restrict the supply of three substances needed for making displays and semiconductors to South Korea.

Japan controls 70 to 90 percent of the supply of these vital materials. The move is set to badly hurt South Korean tech giants like Samsung and LG.

The new export restrictions will cover fluorinated polyamide, photoresists and hydrogen fluoride etching gas.

Fluorinated polyamide is used in making flexible organic light-emitting diode displays for television sets and smartphones. And the other two materials are required in the semiconductor fabrication process.

Though Japan’s technology sector has gradually lost its leading status to rivals such as Apple, Samsung and Huawei, some Japanese companies continue to invest in research and development, and have become top players in numerous niche areas.

Under the new rule, Japanese exporters have to apply each time they want to sell the three substances to Korean clients. The approval process could take as long as 90 days.

Tokyo also said it’s considering removing South Korea from a list of 27 “white” countries, which, if implemented, could mean prior approvals would be needed for technology transfers to the recipient country.

On the surface, the move is intended to retaliate against a recent ruling by South Korean courts that Japanese companies must compensate Korean victims forced to work in their factories before and during World War II.

But Japan’s true intention could be about competing for business opportunities.

Given the uncertainties surrounding the US-China trade talks, not a few manufacturers are looking to shift part of their production lines out of China. Japan and South Korea would both want to benefit from the trend. By restricting the supply of core materials, Japan would be at an advantage.

The two Asian countries have been long-time arch rivals in the technology sector. Let’s see whether Japan will strictly implement the new measures. And would South Korea retaliate?

This article appeared in the Hong Kong Economic Journal on July 1

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist