Japan to toughen restrictions on exports to South Korea | AP business

Japan to toughen restrictions on exports to South Korea | AP business

While all eyes remain on the global trade war involving the Chinese giants such as Huawei and ZTE, Japan comes out of the blue with a decision that will make like harder for the South Korean tech companies that are now importing various materials used in making chips and smartphones.

"With South Korea, the trust which is the very foundation of the export control has been undermined", Jun Iwamatsu, the official in charge of export control at the trade ministry, told AFP. The report said the Korean companies could take this opportunity to streamline their inventories, as the chip and display industries are in a supply glut.

"The government will seek stern measures including legal measures in terms of worldwide and domestic laws, including filing a complaint with the WTO." said Trade Minister Sung Yun-mo after holding a ministerial meeting upon Japan's move.

A worker at a Japanese company that exports the material to South Korea bemoaned the time and effort it would take to file individual applications, saying it could lead to a drop in sales.

Until now, South Korea and Japan had an agreement in place that simplified the export procedure.

South Korea's exports decreased 13.5 percent in June from a year earlier, extending their on-year fall for the seventh consecutive month, data showed on July 1, due mainly to the prolonged trade row between the world's top two economies.

Three chemicals will be subject to the move: fluorinated polyimide, which is used in smartphone displays and other components; photoresist, a light-sensitive material used in semiconductor substrate; and hydrogen fluoride, which is used to wash semiconductors. Japan argues that the matter of forced labor was settled in 1965 when the two countries restored diplomatic ties.

"It is not a retaliatory measure", Deputy Chief Cabinet Secretary Yasutoshi Nishimura said, noting the measure came about because of overall difficulties in "maintaining a relationship of trust with South Korea in carrying out export controls". The three materials to be restricted are fluorinated polyimide, resist and high-purity hydrogen fluoride.

Japan produces about 90% of fluorinated polyimides and resists worldwide as well as about 70% of etching gas, making it hard for chipmakers to find alternatives, said the Sankei newspaper, which reported the plans on Sunday.

Lawyers for the plaintiffs have seized the Japanese firms' assets in South Korea through local courts, and are threatening to sell them if they continue to refuse to engage in compensation talks. Korea's major chipmakers and display manufacturers including Samsung Electronics, SK hynix, Samsung Display and LG Display are likely to be affected.

"As soon as we heard that the USA and China might ease the trade tensions, we are now faced with another risk from Korea-Japan relations", said an industry insider. South Korean exporters and experts urged the administration of President Moon Jae-in to step in and resolve the tension.

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