Japan’s Economic Retaliation Likely to Cover Semiconductor Manufacturing Equipment

Japan’s economic retaliation against South Korea is expected to expand to cover semiconductor manufacturing equipment as well as semiconductor materials. The semiconductor industry of South Korea will take a direct hit in that case with both Samsung Electronics and SK Hynix making new investments in semiconductor production facilities.

The Hana Institute of Finance said in its report on July 22 that the Japanese government’s next target is likely to be semiconductor and display manufacturing equipment in that South Korean semiconductor and display manufacturers are heavily dependent on Japanese equipment.

At present, Japanese wafers account for more than 50 percent of those used by South Korean semiconductor manufacturers such as Samsung Electronics and SK Hynix, which means production setbacks will arise once the Japanese government restricts the export of wafers. Those in the semiconductor industry have pointed out the possibility since the Japanese government initiated its retaliation on July 4.

They are saying that problems will arise in terms of equipment procurement as well. South Korean semiconductor manufacturers have imported a lot of equipment, ranging from exposure and deposition to etching and testing, from Tokyo Electron, Canon, Nikon, and so on. According to the Hana Institute of Finance, Japanese equipment accounted for 32 percent of the imported equipment used by the South Korean companies last year.

“Domestically produced equipment represents only 20 percent of their equipment and the degree of dependence is as high as 46.9 percent except for those imported from Dutch suppliers, which are dominating the lithography equipment market,” the institute pointed out, adding, “Besides, the degree amounts to 80 percent to 90 percent when it comes to wet etching, cleaning and transport equipment.”

Things are even worse in the display sector, where the ratio of Japanese equipment to total imported equipment amounts to 82.9 percent. The degree of dependence is 100 percent in the case of dry etching equipment and OLED pattern forming equipment.