Review of the South Korea-Japan Semiconductor War: How did South Korea get rid of Japan’s blockade?
Latest update time：2023-03-20
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The three-year chip war between South Korea and Japan is over. On March 16, South Korea’s Ministry of Industry, Trade and Energy announced that it would hold the ninth Korea-Japan Export Management Policy Dialogue with Japan’s Ministry of Economy, Trade and Industry from March 14 to 16. A unanimous agreement was reached: Japan lifted its export restrictions on three products including hydrogen fluoride, fluorinated polyimide, and photoresist from South Korea, and South Korea lifted the World Trade Organization (WTO) prosecution for export restrictions on three products from Japan. .
Source: Yonhap News Agency
According to the South Korean Ministry of Industry, the two countries discussed the effectiveness of export management during this policy dialogue, including the export management system, system application, and post-management.
On this basis, Japan decided to suspend export restrictions on three semiconductor-related products, including hydrogen fluoride, fluorinated polyimide, and photoresist, by changing export management operations. Regarding the "White Country List" exclusion measures that provide simplified export procedures, it was decided to further negotiate.
In 2019, Japan issued a ban on semiconductor raw materials such as hydrogen fluoride and photoresist, and removed South Korea from the "white list" that enjoys preferential export treatment, targeting South Korea's semiconductor industry.
At that time, more than 80% of the raw materials needed by South Korea were imported from Japan.
In such a crisis, Korean companies actually went against the trend and took the opportunity to put forward the goal of localizing raw materials and accelerating the transition away from dependence on imports. It is amazing.
So, what is the path of semiconductor development in Japan and South Korea? How did South Korea get rid of Japanese control?
One step ahead: Japan takes control of semiconductor market
As one of the leaders in the semiconductor industry, Japan took the express train of the "Cold War" and rushed endlessly on the road of semiconductor research and development.
As a loser in World War II, Japan was not severely punished after the war. The attitude of some of the victors, led by the United States, toward Japan is extremely ambiguous—are they supporting Japan? Or to suppress Japan? Officials in the US White House argue over this issue every day.
While Japan's problem has not yet been resolved, the issue of how to block New China has been put on the table again. In particular, the strong strength and tenacity displayed by the Chinese volunteers during the Korean War shocked the Americans, and they immediately selected Japan as the "forward position to blockade China."
It is precisely because of this that Japan received real money, aid and technical support from the United States. Billions of dollars were shipped to Tokyo, and nearly one hundred tons of heavy paper technical data were personally escorted to Japan by American heavy bombers. .
Japan seems to be really turning around.
With the Korean War, Japan took advantage of the war needs of the United States and vigorously developed heavy industry to produce guns, trucks, and artillery shells to meet the military needs of the United States.
After the Korean War ended, Japan did not stand alone.
In 1957, the Soviet Union launched the first artificial satellite in human history. Looking at the vast space, the satellite is as invisible as a grain of sand in the Sahara Desert, but it is such a gadget that deeply touched the sensitive nerves of Americans.
In the eyes of Americans, the satellite launched by the Soviet Union was not the crystallization of human technology, but a spark that started the war.
In order to check and balance the Soviet Union, the United States shifted its electronics industry related to "nuclear weapons" to the military field early on. This resulted in a market gap in the electronics industry in the civilian field.
The Japanese have also been waiting for the opportunity to enter the U.S. civilian electronics market.
At this time, the Japanese were like a seriously injured snake, waiting for the opportunity to launch a fatal blow at a critical moment.
In 1953, Japan's Tokyo Communications Engineering Co., Ltd. took the lead and introduced the world's most advanced transistor technology at a "cabbage price" of only $25,000.
The so-called "transistor technology" is an electrical component based on semiconductor materials. Relying on a transistor with an area the size of a fingernail, you can realize the functions of reading and processing information, which is almost the most basic "smartphone".
The company that provides this technology to Japan is Westinghouse Electric of the United States. Since the United States has been comprehensively responding to pressure from the Soviet Union, many domestic civilian electronics companies have been unable to receive any orders and can only export technology to sustain themselves.
The method of "selling technology" of American Westinghouse Electric is undoubtedly a poison to quench thirst. Because the core production technology is leaked, it will inevitably be imitated and surpassed in the future.
But at that time, American society was in panic, believing that the Soviet Union would attack the United States in the next few years. Therefore, these companies were very liberal and would sell if they were bought, as long as they were not countries in the socialist camp.
Japan, which had obtained the relevant technology, was so impressed that it developed the world's first pocket recorder in just two years. The Tokyo Communications Engineering Co., Ltd. of Japan also officially changed its name to the later famous "Sony".
Since then, the Japanese government and Japanese companies have joined hands to poach technology and talents from the United States.
In 1957, the Japanese government introduced the "Electronics Industry Promotion Act", which imposed extremely low tax requirements on battery industry companies, and also proactively provided loans to new electronic industry companies to help them tide over difficulties.
In the 1950s, Japan almost launched an upsurge of “semiconductor development for all”.
After entering the 1960s, Japan has developed NEC, a company that can compete with all semiconductor companies in the world. NEC introduced planar lithography production technology from the American Fairchild Company, becoming the second company in the world with the ability to manufacture integrated circuits. .
What kind of person is Fairchild Semiconductor in the United States?
"Silicon Valley Fever" magazine once rated it this way:
"In the entire Silicon Valley, more than half of the companies rely on Fairchild Semiconductor for their survival. In 1969, at the Semiconductor Exchange Conference held in Switzerland, more than 90% of the 400 participants were from Fairchild."
Moore, who invented "Moore's Law", and Grove, who founded Intel, are all employees of Fairchild Semiconductor.
It can be seen that Fairchild, known as the "cradle of talent in Silicon Valley", is a "giant" in the industry.
It is amazing that Japan's NEC is already on an equal footing with such a big-name company.
In comparison, South Korea, which is now a major player in the semiconductor industry, did not even know what a semiconductor was at that time.
It was not until 1965 that South Korea's semiconductor industry started staggeringly. Facing the pressure of Japan and the United States, South Korea used its own strategies to embark on a path of semiconductor development of blood and tears.
South Korea’s pursuit: a shaky start and many difficulties
From the day South Korea developed its semiconductor industry, disputes between Japan and South Korea were destined to continue.
At the beginning, South Korea had no intention of declaring war on Japan. South Korea regarded itself as a "semiconductor production base for multinational companies" and did dirty and tiring work that did not touch core technologies.
However, Japan's semiconductors developed too fast, and the United States, which supported Japan, felt a bit of a crisis and ordered its own semiconductor companies to invest in and establish semiconductor production and assembly plants in South Korea. The semiconductor industry sprouted in South Korea.
After that, semiconductor companies such as Fairchild, Motorola, and Toshiba came to South Korea to invest and build factories, and South Korea became the semiconductor assembly base for large multinational companies.
It's not bad at this time, as Japan and South Korea are not in conflict with each other.
But the Korean government, having tasted the sweetness, thought:
The profits of peripheral industries are already so huge, let alone after mastering the core technology?
Therefore, in the context of the rapid growth of the domestic electronics industry, Korean companies began to try to enter the semiconductor industry.
However, the idea is beautiful, but the reality is very skinny.
South Korea's first domestic semiconductor company, which was just established in 1974, was framed by a Japanese company due to operational problems just one year later, resulting in a financial crisis and was eventually acquired by Samsung.
After the first battle, South Korea's semiconductor industry was severely damaged and failed to recover. It did nothing for nearly ten years.
After entering the 1980s, the United States suddenly tightened its economic assistance to South Korea, and some American semiconductor companies that contributed a lot to South Korea's GDP began to slack off.
At this time, South Koreans realized that it was impossible to achieve sustainable economic development by blindly relying on other countries.
Therefore, in the next thirty years, Koreans used "incredible courage" to seize food from Japan and the United States and invest heavily in semiconductor technology.
Starting in 1982, semiconductor companies represented by Samsung decided to develop 64K DRAM chip technology. This is a kind of memory that can record the operating data of the machine.
At this time, large foreign semiconductor companies began to refuse to transfer relevant technology licenses to South Korea. In order to solve the problem of lack of core technologies, Korean semiconductor companies have turned their attention to some small and sluggish foreign semiconductor companies, obtained technology licenses from these companies, and at the same time established their own technology research and development teams to speed up the independent development of technology.
In 1983, South Korea's technological level lagged behind the United States and Japan by four years; in 1987, South Korea's technological level lagged behind the United States and Japan by one year; in 1988, South Korea's technological level lagged behind the United States and Japan by only six months. Thanks to its efforts, South Korea has quickly narrowed the technology gap with semiconductor companies in the United States and Japan at the same time.
By the end of the last century, Korean companies represented by Samsung had achieved technological catch-up. The Korean semiconductor industry had the ability to export technology to American and Japanese semiconductor companies and began to try to dominate the industry.
In 2017, Samsung surpassed Intel to top the global semiconductor revenue rankings for the first time due to its outstanding performance in the storage business.
However, Japanese companies have been under great pressure. Finally, in 2019, Japan took the initiative to cut off the supply of hydrogen fluoride and photoresist, which hit South Korea hard.
Bans are issued one after another, and the war begins
In 2019, Japan implemented a "semiconductor material ban" and three raw materials, including hydrogen fluoride and photoresist, were banned from exporting to South Korea.
Hydrogen fluoride, which is a gas at room temperature, is used for cutting semiconductor materials.
However, not only were Korean companies at the time unable to produce high-purity, impurity-free hydrogen fluoride, but they also had to rely on Japan for hydrogen fluoride storage technology.
In 2019, Japan is the only country with the highest purity of hydrogen fluoride in the world. Even my country imports high-purity hydrogen fluoride from Japan.
Photoresist is a material that is more difficult to obtain than hydrogen fluoride.
Photoresist is a liquid that is very sensitive to light sources. It can realize the identification and processing of tiny patterns. However, the production process of photoresist is very complicated, and only a handful of countries have mastered this technology.
The CEO of Samsung Group once said: "If the photolithography machine lacks photoresist, then the photolithography machine will be a pile of scrap metal."
Therefore, photoresist is an indispensable key material in the semiconductor field.
At that time, four Japanese companies were among the top five photoresist companies in the world, 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 issued a statement, saying that "if Japan imposes long-term sanctions on South Korea, more than 60% of companies will not survive for half a year."
As the saying goes, "hitting the snake seven inches" has severely suppressed South Korea's trillion-level enterprises, leaving many small and medium-sized enterprises without a way to deal with it.
But will Korean companies really sit still and wait for death?
Fight against Japan and actively save ourselves
As of the summer of 2021, South Korea's Samsung Group has invested in dozens of semiconductor equipment and material manufacturers. And these manufacturers that have received investment from Samsung Group are all Korean local companies.
"Since you can't rely on outsiders, you have to rely on yourself."
Under the order of the CEO of Samsung Group, Samsung's investment strategy has undergone earth-shaking changes.
On the one hand, this is because of Samsung Group’s reflection on Japan’s ban; on the other hand, it is also the key to Samsung Group improving its core competitiveness.
From the beginning of the ban to November 2021, South Korea's Samsung Group has invested more than 380 billion won, approximately 2 billion yuan, in chemical material suppliers, ceramic material suppliers, and precursor material suppliers. Samsung Group is comprehensively breaking the monopoly of Japanese companies.
Take chemical materials supplier Soulbrain as an example. It has been able to produce high-purity hydrogen fluoride independently, allowing Korean companies to no longer rely on Japanese companies.
By the end of 2020, Soulbrain will be able to supply 2/3 of South Korea's hydrogen fluoride demand with its own company.
Under Japan's pressure, Korean companies burst out with amazing adventurous spirit.
The CEO of South Korea's Samsung expressed in an interview that he hopes Samsung Group can become an industry giant like ASML of the Netherlands.
He said:
"Japan's ban has caused us great trouble, but every challenge is the beginning of technological innovation. Although the cost of investment will increase exponentially, in the face of risks, Samsung Group has the courage to do things that Tokyo Electronics is unwilling to touch. Touch new equipment.
Therefore, we will see such a spectacle. After two years of being embargoed by Japan's raw materials, South Korea's Samsung Group announced that it will challenge TSMC's status. It will not only make up for the missing links in its production chain, but also create an ecosystem of its own.
At the same time, the Korean government also fully supports the spirit of Korean semiconductor companies in climbing to new heights.
After the raw materials were banned by Japan, the Ministry of Industry and the Ministry of Energy of South Korea announced a substantial increase in the fiscal budget to be used for industrial development at an annual growth rate of 9%.
South Korean President Moon Jae-in even visited the Samsung Semiconductor Manufacturing Center in Pyeongtaek, South Korea, privately, with only three or two entourages.
Moon Jae-in promised Samsung Group to invest approximately 510 trillion won in the next ten years, and the government will fully support the enhancement of semiconductor strength.
In this way, instead of crushing Korean companies, Japan's ban accelerated the formation and development of its local supply chain, shooting itself in the foot.
Conclusion
Whether it is catching up after facing Japan's raw material ban in 2019, or going against the trend at the end of the last century, the adventurous spirit of Korean companies is indeed commendable.
In 1996, the world semiconductor market entered a "cold winter period" and semiconductor prices plummeted. South Korea's semiconductor industry suffered a huge blow and companies suffered serious losses.
However, the Korean semiconductor industry did not wither. Semiconductor companies represented by Samsung were quite adventurous and carried out countercyclical investments at this stage to further lower market prices, squeeze out competitors and seize market share.
At the same time, Korean companies are accelerating the pace of industrial structural adjustment, divesting bad businesses, and promoting industrial structure upgrading.
After the market recovered, the international status of South Korea's semiconductor industry further improved, and in 1998 it surpassed Japan to become the largest DRAM producer.
Today, Samsung Group has fully promoted the goal of localizing the supply chain with the help of the Japanese ban, but it is also a blessing in disguise.
Source: Comprehensive online content such as Fengyun Shenyou
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