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South Korean Entrepreneurs Striving to Deal with Japan’s Export Restrictions
Samsung Vice Chairman Lee Visiting Japan
South Korean Entrepreneurs Striving to Deal with Japan’s Export Restrictions
  • By Jung Suk-yee
  • July 8, 2019, 09:57
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Samsung Electronics vice chairman Lee Jae-yong (left in the front row) and SoftBank chairman Masayoshi Son (right in the front row) arrive together at the Korean Furniture Museum in Seoul on July 4 for dinner with Korean business leaders.

Samsung Electronics vice chairman Lee Jae-yong went on a business trip to Japan in the evening of July 7 with the company trying to deal with Japan’s semiconductor material export restrictions and tensions over the issue escalating between the South Korean and Japanese governments. The vice chairman is likely to have meetings with Japanese hydrogen fluoride, photoresists and fluorine polyimide suppliers and local financial companies.

The vice chairman obtained a master’s degree in business administration at Keio University. He is good at Japanese and has built a close rapport with a number of Japanese entrepreneurs. His father, Samsung Electronics chairman Lee Kun-hee, studied at Waseda University, too. The vice chairman frequently visited Japan these days. He visited Japan twice last year and met with the top executives of NTT DoCoMo and KDDI in Tokyo in May this year.

At present, Samsung Electronics is taking the export restrictions very seriously. Immediately after the Japanese government announced the restrictions late last month, the company sent teams to Japan and Taiwan for smooth procurement. On July 4, the vice chairman discussed the matter with SoftBank chairman Masayoshi Son in Seoul.

Samsung Electronics’ seriousness is because the matter is directly related to its reliability as a business partner. Samsung Electronics currently has a three-month memory chip inventory and no immediate problem is likely to arise from the restrictions in Samsung Electronics’ memory chip business, which accounts for more than 95 percent of the operating profit of the company’s semiconductor business unit. Still, the issue can affect its system-on-chip business, on which the vice chairman is concentrating.

Photoresists, in particular, are a material indispensable for extreme ultraviolet (EUV) lithography equipment, which is the core of Samsung Electronics’ foundry business. The company is currently trying to overtake industry leader TSMC with its EUV lithography technology. Samsung recently signed an application processor supply contract with Qualcomm and a graphic processing unit supply contract with Nvidia. The contracts may be affected with 90 percent of the photoresists South Korea uses imported from Japan.

Foundry business is characterized by customized and order-specific production and, as such, trust is everything in that type of business. If Samsung Electronics disappointed the clients by breaking the contracts, its plan to dominate the global system-on-chip industry in 2030 might be thwarted.

In the meantime, Lotte Group chairman Shin Dong-bin also recently flew to Japan to discuss the same issue. Earlier, the Federation of Korean Industries (FKI) joined the B20 Summit in Tokyo in March this year, seeking a breakthrough for better relations between South Korea and Japan. The FKI held an emergency meeting on April 15 to stress the importance of preventing further deterioration of the relations.

LS Group chairman Koo Ja-yeol, Hyosung Group chairman Cho Hyun-joon, Samyang Group chairman Kim Yoon and Toray Advanced Materials chairman Lee Young-kwan are expected to play an important role in dealing with the issue, too. The chairman of LS Group has visited Japan in every April and May to have talks with local business partners. He worked as the head of LG International Japan from 1992 to 1995, building a close rapport with local politicians and entrepreneurs. He is currently an expert member of the Korea-Japan Vision Forum.

The Hyosung Group chairman worked for Mitsubishi Corporation and Morgan Stanley Japan for five years from 1992 and obtained a master's degree in political science at Keio University Law School. His father, honorary chairman Cho Seok-rae, chaired the Korea-Japan Economic Association for nine years. The Samyang Group chairman is the current chairman of the association.