By Nam Hyun-woo
Korea remains reliant on Japan's industrial materials and parts even after Seoul increased localization efforts of the materials over the past year in the wake of Tokyo's export restrictions, a report showed Tuesday.
The report stressed Japan categorized those materials as strategic goods requiring stringent screening prior to export to Korea, which has strengthened its preparedness against additional restrictions by Japan.
According to the report by the Korea International Trade Association (KITA), of 100 items whose import volume from Japan surpasses $1 million and import reliance to Tokyo surpasses 70 percent, 57 percent of them were categorized as semiconductor manufacturing apparatus, plastic materials or petrochemical materials.
Of them, items categorized as petrochemical materials were 94.8 percent from Japanese imports, followed by semiconductor manufacturing apparatus with 86.8 percent and plastic materials with 83.3 percent.
Currently, Japan designates 1,120 items as strategic and controls their export. Of those items, 857 are considered "sensitive," and their exports to countries which are not on Tokyo's list of preferred trade partners require individual licenses, which are subject to a stringent screening process.
In August last year, Japan excluded Korea from its whitelist, after it placed restrictions on three materials ― photoresist, etching gas and fluorinated polyimide ― for export to Korea in the previous month. This was interpreted as a politically motivated action against a Supreme Court ruling here that called for Japanese firms to compensate surviving South Korean victims of wartime forced labor.
"Given the materials affected by Japan's export restrictions for the past year were all categorized as sensitive strategic items, other items in the category could be affected in the event Japan launches additional export restrictions," the report read.
Analysts say Tokyo may still introduce additional export restrictions, as the country continues to snub Seoul's demands to restore its preferred trading partner status. The two countries' trade friction continues to escalate, as Korea resumed its petition procedure to the World Trade Organization on June 18, requesting the WTO open a dispute-settlement panel.
Since Japan began its export restrictions, the Moon Jae-in administration has been encouraging domestic companies' efforts to localize those materials, and the report said the efforts have shown noticeable progress.
According to the report, the reliance of photoresist and etching gas imported from Japan declined 6 percentage points and 33 percentage points, respectively, during the past year, as companies diversified their supply routes to Belgian and Taiwanese firms. Though the import reliance of fluorinated polyimide from Japan remains over 90 percent, the actual impact on domestic businesses is limited because many companies have localized the material, the report added.
"Despite initial concerns, Korea's efforts to diversify trading partners and localize key materials have prevented domestic industries from suffering setbacks in securing materials," KITA analyst Hong Ji-sang said. "However, as the Japanese government continues to show signs of additional restrictions, domestic businesses and the government should closely monitor the situation and make efforts to clear up uncertainties in supply chains."