No winners here
The author is the head of the industry 2 team of the JoongAng Ilbo.
July 4 will mark a year since Japan abruptly imposed an export ban on Korea. In July 2019, Japan penetrated the vulnerable points in Korea’s key industries. Exports of three core materials that Korea depends on Japan for 90 percent of its imports for were banned. Naturally, Koreans were worried about potential disruption in semiconductor and display production and angry about Japan’s betrayal. But the JoongAng Ilbo reported that Japanese companies — not Samsung Electronics or SK hynix — will suffer a backlash for not being able to export to Korea. The report predicted that Samsung Electronics and SK hynix would overcome the crisis by producing the materials domestically and diversifying suppliers.
“Abe Bankruptcy” became reality. Japan’s Stella Chemifa, the world’s biggest hydrogen fluoride supplier, saw a 30 percent decline in shipment volume compared to a year ago. In the past year, the Nikkei 225 Index rose by 5.8 percent, but stocks of Stella Chemifa and another producer Showa Denko fell by 19.6 percent and 22 percent respectively. In contrast, SoulBrain and Ram Technology, which succeeded in domestic production of hydrogen fluoride, enjoyed a 103 percent and 100 percent increase, respectively, in stock price in the same period. Stock price for Dongjin Semichem, which produces photoresists, surged 168 percent in a year. Japan’s Tokyo and Mainichi newspapers recently reported that Korea’s semiconductor production did not suffer and only Japanese companies suffered.
The Korean government and companies seem confident that they have blocked Japan’s offensive well. But if you take a step further, they are short-sighted and deluded. Domestic development of hydrogen fluoride is noteworthy, but the reality is that the crisis was overcome by buying EUV photoresists for photo exposure equipment from Belgium. If you look at the shareholder structure of the companies in Belgium and elsewhere, you can easily find the names of Japanese and American companies. While the Korean government and industries are working hard to domestically produce 100 key materials, parts and equipment, Japan still has hundreds of dominant technologies.
Lately, the Covid-19 pandemic is shaking global supply chains. Samsung and SK hynix are supposed to be world’s best, but they can fall into the bottomless pit the moment they break away from Japan, the United States, the Netherlands and China. Japan is a close neighbor and a country that has what we need. “Abe bankruptcy” is not something to celebrate. Restoring bilateral relations is win-win. It is enough to keep the lesson that meddling with the market with political intention ends in bankruptcy.