An existing trade dispute between Japan and South Korea will affect the global supplies of memory chip, CNN reported.
The decision to restrict exports to South Korea taken by Japan is a huge blow to South Korea’s economy and by extension, this would deter global supplies of memory chips. The country’s president, Moon Jae-in on Wednesday expressed displeasure stressing on the economic effect the restriction would cause.
Japan announced the restriction earlier this month. Materials like the fluorinated polyamides, photoresists, and hydrogen fluoride would require a license from the government before they can be exported. Meanwhile, these materials are used to produce smartphones and memory chips.
The restrictions are a let down for tech companies like SK Hynix and Samsung. According to the most recent survey from the Korea International Trade Association, both companies control over 63% global memory chip production in the market. The data further reveals that South Korean firms sourced a large chunk of these materials from Japan- 94% of fluorinated polyamides, 92% of photoresists and 44% of hydrogen fluoride were sourced in the first quarter of the year.
Samsung is currently the biggest seller of smartphones globally. The export controls would have a major impact on production. In retrospect, the company told CNN that the company was considering a couple of measures to minimise the impact of the controls on the production of mobile phones.
The tension between both countries can be traced as far back as the early 20th century. South Korea’s top court recently issued a verdict that its citizens have the license to sue Japanese companies for a crime they committed during the second World War. Japanese companies were accused of using forced Korean labour. This court ruling undoubtedly will lead to a turn of events for both parties. The ruling could be perceived as an indication that South Korea is rejecting friendly ties between both counties thereby disrupting the long-standing “relationship of trust” that has lingered over the years.
Japan’s Chief Cabinet Secretary, Yoshihide Suga referred to this in a press conference, following the announcements on the restrictions. He didn’t mention the export controls as a retaliatory move.
The South Korean Ministry for Trade, Industry and Energy accused japan of violating World Trade Organisation regulations. However, Japan’s deputy cabinet secretary kicked back in defence saying that the export controls were only security measures “necessary for the proper operation of the export control system for security.”
Tensions are still high for both warring factions. While they are planning to have bilateral talks to reach a compromise, Japan insists that withdrawing the measures are not under consideration.