Depth丨Japanese and Korean semiconductors "bury the hatchet", and the photoresist supply chain enters a new game

In October 2018, the South Korean Supreme Court (Supreme Court) ordered the Japanese companies involved in the case to compensate Korean labor victims who were forcibly recruited during World War II.

Of course, the Japanese government was unwilling, and then launched a killer weapon in July 2019: restricting the export of three key chip materials: fluorinated polyimide, photoresist, and hydrogen fluoride to South Korea.

Photoresist is an indispensable key material in the semiconductor field.

At that time, four of the top five photoresist companies in the world were Japanese companies, accounting for more than 87% of the total. It can be said that [one country dominates].

In 2019, South Korea's hydrogen fluoride imports from Japan accounted for 51% of all imports, and photoresist imports reached an astonishing 94%.

Therefore, the Japanese ban directly blocked South Korea’s semiconductor industry. Since Japan issued the ban, South Korea has suffered an average daily loss of 5 trillion won, which has a huge impact.

At the end of 2019, 269 small and medium-sized semiconductor companies in South Korea jointly stated that once Japan imposes long-term sanctions on South Korea, more than 60% of companies will not survive for half a year.

As the saying goes, "hit the snake seven inches", South Korea's trillion-level enterprises have been deeply clamped, and many small and medium-sized enterprises have no way to deal with it.

The South Korean government made concessions to Japan regarding the South Korean court's ruling on Japan's forced labor during World War II and decided to pay compensation for the defendant Japanese companies through a foundation affiliated to the South Korean government.

South Korea has withdrawn its complaint to the World Trade Organization against Japan's export restrictions.

After five years of fighting, South Korea not only failed to ask for compensation from Japan, but instead paid for it itself.

The Japanese government announced on March 6 that it would initiate consultations on relaxing export controls to South Korea. It has been 3 years and 8 months since Japan strengthened export management in July 2019.

Instead, Seoul will create a government fund to pay victims directly, paving the way for an unwinding of the semiconductor industry.

① The technology has not completely broken through: Although South Korea has achieved localization of some materials, the output is limited, and some need to be imported from Japan; there are also some key materials that South Korea has not yet completely broken through.

South Korea also quickly responded to Japan's move and announced a plan to localize products and technologies for these three materials.

Due to the complex manufacturing process of semiconductors, as long as the supply of one material is stopped, the entire factory will stop, which may cause huge losses.

The one most affected in this case is hydrogen fluoride, which is the subject of regulatory enhancement measures.

Data from the Korea International Trade Association show that South Korea’s hydrogen fluoride imports from Japan dropped significantly in July 2019.

Meanwhile, Korean companies Soulbrain and SK Materials have made great progress in hydrogen fluoride development over the past four years.

As of last year, hydrogen fluoride imports from Japan fell 87.6% in revenue terms compared with 2018.

However, the development of photoresist has mostly ended in failure among Korean companies. However, Dongjin Semiconductor did successfully develop EUV photoresist last year and is developing inorganic photoresist materials.

From July 2019 to March 2023, in more than three years, although South Korea has realized the limitations of relying on other countries in the semiconductor industry, it has also actively promoted the pace of complete localization of semiconductors.

But the reality is that it still cannot get rid of its dependence on Japan's important raw materials.

Therefore, judging from the current development of South Korea's semiconductor industry, the Japan-South Korea reconciliation can ensure that South Korean semiconductor manufacturers will no longer be restricted when purchasing these three key raw materials.

Since global semiconductor production is mainly concentrated in South Korea and Taiwan Province of China, the demand market is so huge.

If South Korea permanently reduces imports or even replaces them with domestic products, Japan's raw material exports will also be significantly reduced. Over time, not only will the products become unsalable, but Japan's entire industrial chain will also be greatly affected.

Therefore, as early as the end of 2019, Japan woke up and stated that it could continue to supply South Korea.

As a result, South Korea disagreed. In order to prevent Japan from getting stuck again, South Korea also tried to replace Japanese products in other fields. It was obvious that it wanted to be self-reliant once and for all.

Japan's trade restrictions have also affected domestic companies, with most Japanese companies that are suppliers to technology giants such as Samsung starting to build production lines in South Korea to avoid restrictions.

Dongyu Precision Chemical, a subsidiary of Sumitomo Chemical, will spend 10 billion yen to build an EUV photoresist production line in 2021 and put it into production in mid-2022.

Just the day before Yin Xiyue left for Japan, that is, March 15, the South Korean government announced that it would build [the world's largest semiconductor cluster] in the capital area, aiming to strengthen South Korea's domestic supply chain and require large South Korean companies such as Samsung Electronics to join in.

In order to build a global semiconductor supply chain highland, the Korean government plans to invest 550 trillion won in fields including chips, batteries, robots, electric vehicles and other fields by 2026.

Samsung Electronics later confirmed that it will invest nearly 300 trillion won by 2042 to implement the world's largest semiconductor cluster planned by the Korean government to promote the development of the Korean chip industry.

Park Ki-soon, former vice president of Samsung Economic Research Institute and president of China Samsung Economic Research Institute and current senior consultant of Dentons Law Firm, said bluntly:

South Korean President Yoon Seok-yue's state visit is expected to lead to reconciliation between Japan and South Korea and accelerate China's marginalization in advanced production and global supply chains.

Park Qishun said: Global semiconductor production is dominated by regions such as the United States, Japan, Taiwan, and South Korea. The semiconductor supply chain in these regions will become more stable, and the Chinese semiconductor market will be isolated.

For China, although it is the world's largest manufacturing country, it is still in the middle and lower reaches of the value chain in advanced manufacturing fields such as semiconductors, and the upstream and core parts of the supply chain are still in the hands of American companies.

The United States not only decouples itself, but also seeks to decouple the supply chain from China.

After the three-year trade war, both sides have been hurt. Japan's exports of semiconductor raw materials have dropped significantly, but South Korea has also failed to achieve large-scale domestic substitution.

Reference for some information: Aijiwei: "Japan and South Korea Semiconductors "Remove the Past"? ", Electronic Engineering World: "How did South Korea escape Japan's blockade? 》

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