5 trillion won planned to reduce reliance on Japan

The government will invest over 5 trillion won ($4.1 billion) in research and development (R&D) in key industrial materials and equipment over the next three years to combat against the latest export restrictions from Japan that went into effect Wednesday.

According to the Ministry of Trade, Industry and Energy, the government will use the fund to foster local production of 100 key industrial materials that will likely be most impacted by Korea’s removal from Japan’s so-called white list of preferential trade partners.

Tokyo’s move, passed by a cabinet meeting on Aug. 2, allows authorities to tighten export processes to Korea for over 1,100 product categories that could be used for military purposes, including high-tech materials used in semiconductor production.

Japan has yet to announce which items will be included in tightened export processes through the white list removal, according to Korea’s Trade Ministry.

Seoul plans to use the 5 trillion won to help small- and medium-sized companies develop technologies to manufacture materials traditionally dependent on Japan and supply companies like chipmakers Samsung Electronics and SK Hynix with a high demand.

Trade Minister Sung Yun-mo had expressed earlier this month that the government will establish the stable supply of the 100 key industrial materials by 2024 through local production and alternate supply lines away from Japan. The latest announcement clarifies the government strategy to place the focus on R&D and expedite local production of materials.

A Trade Ministry official said that the government could not disclose what the 100 materials are due to concerns of repercussion from Japanese companies against existing supply lines.

The white list removal follows Tokyo’s measure on July 4 to strengthen controls on exports to Korea of three materials - photoresists, hydrogen fluoride and fluorinated polyimide - used in semiconductor and display production.

Despite concerns of supply lines being completely severed, Japan has approved exports of photoresists to Samsung Electronics twice since the measure took effect. The approval process has reportedly caused delays to exports of photoresists by around 20 days.

Trade organizations urged Japan to reconsider the decision.

“The trade industry expresses deep regret at the Japanese government’s decision to […] remove Korea from its white list of countries receiving preferential status,” said the Korea International Trade Association in a statement. “If Korea is unable to import semiconductor materials in a timely manner, there will be disturbances to supply chains and inevitable losses to countries of upstream and downstream industries.”

“[We] strongly urge the Japanese government […] to withdraw the export restrictions and conduct dialogue in good faith to prevent further escalation and restore relations.”

Local stock markets didn’t react to the white list removal on Wednesday. The Kospi ended the day up 0.86 percent at 1,941.09. Samsung Electronics shares edged up 0.23 percent.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]