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| Employees of partner firms of Samsung Electronics join Samsung's Semiconductor-facilities Technology Academy to learn semiconductor fabrication technology in Pyeongtaek, Gyeonggi Province, June 13. / Courtesy of Samsung Electronics |
Chipmakers speeding up localization of high-tech materials
By Jun Ji-hye, Baek Byung-yeul
Samsung Electronics has asked its local partners to secure stock piles of all Japanese materials supplied to the company in preparation for the Japanese government expanding the list of items subject to export restrictions, industry officials said Friday.
The Korean tech giant sent letters to its partners related to the production of TVs, consumer electronics and smartphones, asking them to secure 90 days-worth of Japanese components by the end of the month, or before Aug. 15 at the latest.
Samsung said it would bear all prices associated with securing stock.
The Japanese government tightened rules on exports to Korea of three materials ― photoresist, hydrogen fluoride, also known as etching gas, and fluorinated polyimide, beginning July 4 ― amid a deepening diplomatic row between the two countries over historical issues. The materials are mainly used in the semiconductor and display sectors to Korea.
In its letters, Samsung reportedly said Tokyo is moving to remove Seoul from its whitelist of countries that have fewer restrictions on transfers of technology having national security implications. Once this is concluded, Japan is expected to expand the targets of its export control to other materials and electronic components, the company said.
Samsung Electronics and SK hynix are also trying to lessen their dependence on Japan for key materials by helping their part suppliers in the semiconductor industry develop source technologies and thus locally produce these materials.
The two semiconductor giants have reportedly used locally produced etching gas in their semiconductor fabrication processes. Though company officials denied to confirm this, an industry official said this was a desirable consequence of diversifying their supply chains for high-tech materials.
"Under the circumstances where Japan has tightened restrictions on exports of materials to Korea, semiconductor companies here have to find ways to diversify their supply chain," the official said. "Due to technological limitations, it will take a long time to fully replace Japanese-produced materials, but the Korean chip makers are trying to localize as many core materials as possible."
Though the localization rate of chip-making materials is only at 15 percent, analysts say Samsung and SK hynix will conduct more R&D activities together with small- and mid-sized companies because they are losing their confidence in partnering with Japanese firms.
They added the efforts to localize key materials needed to produce chips will eventually encourage other local companies to locally produce materials used for other electronic devices such as smartphones and display panels.
"Korean semiconductor firms are recognizing that Japan is a potential risk and they will conduct more R&D activities with local companies to develop materials that are critical in producing chips," Do Hyun-woo, an analyst an NH Investment Securities, said.
The analyst added Japan's export restrictions are unfavorable to Korean companies in the short run, but the trade dispute between the two countries could become a chance to nurture a semiconductor industry ecology here over the long term.
Lee Jong-wook, an analyst at Samsung Securities, said Korean companies are accelerating their efforts to localize chip-making materials noting that companies such as SK Materials, Soulbrain, Foosung ENF Technology and Ram Technology are receiving more orders.
"Korean companies are increasingly trying to localize chip-making materials. It is still too early to determine how fast or what percentage of materials they can localize, but it is an undeniable fact that these firms are receiving more orders for chip-making materials since Japan started restricting Korea's imports of high-tech materials," Lee said.
Lee predicted high-purity hydrogen fluoride or etching gas used in chip cleansing will be the first item to be localized; but added it would take two months or a year to reach the point where producers can make significant profits.
"It will take two months to a year for the companies to see significant profits from the high-tech materials," the analyst said.
