South Korean Semiconductor Manufacturers Highly Dependent on Japanese Equipment

The Korea International Trade Association said on July 14 that South Korea imported semiconductor manufacturing equipment worth a total of US$1.212 billion from Japan for the first five months of this year and the amount is equivalent to 33.8 percent of South Korea’s total semiconductor manufacturing equipment imports during the same period. When it comes to silicon wafers, which are a key material for semiconductor production, the figures are US$385 million and 38.7 percent.

This is because Japan is extremely competitive in terms of semiconductor materials and equipment. In 2017, supplies from Japan accounted for 28.2 percent of the South Korean semiconductor equipment market, second only to those from the United States. In addition, Shin-Etsu’s and Sumco’s global silicon wafer market shares currently amount to 30 percent and 27 percent, respectively.

From January to May this year, South Korea’s total silicon wafer imports fell 6.1 percent from a year ago, yet its silicon wafer imports from Japan rose 12.5 percent. This means South Korean semiconductor manufacturers became more dependent on supplies from Japan. During the period, South Korea’s semiconductor manufacturing equipment imports from Japan fell 58.1 percent while its total semiconductor manufacturing equipment imports fell 60 percent. This implies Japanese equipment and materials are highly competitive and irreplaceable.

Meanwhile, some experts are pointing out that Japan’s current semiconductor material export restrictions targeting South Korea can have a negative impact on Japanese companies in the long term. “Except for irreplaceable equipment such as extreme ultraviolet lithography equipment, South Korea can develop its own equipment or find other supply sources and the same applies to wafers,” one of them explained, adding, “For example, SK Siltron, which currently accounts for about 10 percent of the domestic silicon wafer market, can boost its production by using the restrictions as an opportunity to work more closely with Samsung Electronics and SK Hynix.”

On the equipment side, which is being dominated by Japanese companies such as Tokyo Electron, their South Korean counterparts including Jusung Engineering, Eugene Technology and Wonik IPS are deemed to be capable of competing with the Japanese companies with the government backing.