Japan will impose economic sanctions on South Korea, and South Korea's semiconductor industry may be seriously damaged!

According to Yonhap News Agency and Japan's Sankei Shimbun , the Japanese government will announce on July 1 that from July 4, Japanese semiconductor materials, OLED materials, etc. will be restricted from export to South Korea. The Japanese government has revised its export control regulations to South Korea and decided to implement restrictions on the export of three products to South Korea from July 4, including "fluorinated polyimide" used in OLED display components in TVs and smartphones, "photoresist" and "high-purity hydrogen fluoride" that must be used in the semiconductor manufacturing process. If this measure is implemented, it may have a negative impact on the South Korean economy.

Industry insiders believe that Japan's restrictions on the export of key materials to South Korea will affect South Korea's two core industries - panels and semiconductors, and will affect the related businesses of South Korean companies such as SDC, LGD, SK Hynix, and Samsung Semiconductor, and will have a significant impact on the South Korean economy.

It is reported that senior Japanese and South Korean government officials negotiated again at the G20 summit on the issue of compensation for World War II laborers, but the two sides failed to reach an agreement, which led to Japan taking export restrictions on South Korea. Next, Japanese companies will need to obtain permission from relevant Japanese government departments when exporting goods to South Korea.

Last year, the South Korean Supreme Court ruled in favor of Korean laborers who were forcibly recruited by Japan during World War II, freezing Japanese companies' assets in South Korea and demanding compensation, which led to a further cooling of Japan-South Korea relations and the suspension of many economic cooperation activities between Japan and South Korea. It was previously reported that the Japanese business community was discussing seeking retaliatory measures against South Korea due to political issues.

Regarding the political issues involved in Japan-ROK economic cooperation, Kim Young-geun, a professor at Korea University, pointed out that "political and economic issues should be treated separately, but even the Japanese Ministry of Economy, Trade and Industry, which is responsible for economic policy, has begun to intervene, which is the core of the problem." Kim Young-geun said, "After the South Korean Supreme Court made the forced labor ruling, Japanese officials who had been calm before seemed to start acting emotionally."

It is understood that perhaps because of this understanding, the Japanese financial circles have begun to discuss specific retaliation plans against South Korea, including tariff policies and measures such as delaying the export of raw materials and parts.

It is understood that Japan accounts for 90% of the world's total production of fluorinated polyimide, and 70% of hydrogen fluoride is imported from Japan. Therefore, when Japan imposes export controls on South Korea, South Korean panel companies and semiconductor companies must find another import country.

For Japanese companies, South Korea is a "country where you can make money." According to statistics from the Japan External Trade Organization, among Japanese companies that have set up shop in Asia and Oceania, South Korea has the highest proportion of companies that expect to make a profit in 2018, reaching 85%. China is 72%, and Thailand is 67%.

If the Japanese government takes countermeasures such as restricting exports or imposing high tariffs, companies in both Japan and South Korea will suffer. Executives of Japanese semiconductor-related raw material manufacturers worriedly said, "The industries of Japan and South Korea are horizontal division of labor. If South Korea falls, Japan will also fall, and it will also have a serious impact on the global supply chain."

If South Korea cannot find alternative import countries in time, it will have a direct and significant impact on South Korea's display semiconductor industry, and will also affect Samsung and LG's customers - Apple, Google, Huawei, OPPO, vivo, Sony, etc.

Japan's move may benefit Chinese companies related to the display and semiconductor industries.

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