[One Year After Japan's Export Restrictions] No Major Damage Reported... Ultimately, Both Countries Lose the Game

Increased Costs for Localization and Supplier Changes
Corporate Damage Assessments Also Emerge in Japan

An SKC employee is inspecting a prototype of a blank mask, a key material in the semiconductor photolithography process.

[Asia Economy Reporter Dongwoo Lee] "The scale of manufacturing value-added creation resulting from the global division of labor in materials, parts, and equipment (SoBuJang) between Korea and Japan reaches 136 trillion won. The collapse of the global value chain (GVC) between the two countries means a loss of this much profit. The SoBuJang industries in both Korea and Japan have stronger GVCs than any other industry."

Lee Hong-bae, professor of Trade at Dong-Eui University and president of the Korean Northeast Asian Economic Association, emphasized this in a phone interview with Asia Economy on the 29th, stating, "Close cooperation with Japan is not an option but a necessity." Looking back at Japan's export restrictions one year later from the perspective of Korea-Japan trade changes and economic viewpoints, the general opinion is that it is negative for companies in both countries in the long term.

According to the Korea International Trade Association, last year Korea recorded a trade deficit of $19.163 billion (23.01 trillion won) with Japan. This is the lowest trade deficit with Japan in 16 years since 2003 (-$19 billion). This is analyzed as a result of increasing domestic parts self-sufficiency in the SoBuJang industry triggered by Japan's export restrictions.

Since Japan implemented export restrictions in July last year on the three major items considered key materials for semiconductor production, the import amount of hydrogen fluoride from Japan decreased by 87.1%, from $5.29 million in June last year to $680,000 last month. Domestic companies such as Soulbrain and Ram Technology succeeded in localization and mass production, replacing Japanese products.

The deterioration of Korea-Japan relations is directly harming companies from both countries operating locally. According to the Federation of Korean Industries, more than two out of three Korean companies in Japan (69.1%) reported that the business environment in Japan worsened after Japan's export restrictions last year. The prolonged export restrictions amid the COVID-19 pandemic made it difficult to visit business sites and communicate with clients.

In Japan, there is also an evaluation that the export restrictions rather hindered domestic companies. The Tokyo Shimbun pointed out in a column on the 23rd that "export restrictions on Korea negatively affected Japanese companies." The export restrictions, which started with the three major semiconductor items, ultimately caused a decrease in transaction volume due to Korea's diversification of import sources and the spread of boycotts against Japanese products, resulting in adverse effects on domestic companies.

Experts emphasize the government's role along with the diagnosis that the prolonged export restrictions between the two countries will increase uncertainty in securing demand and supply sources and lead to increased costs for rebuilding the GVC. Park Jae-geun, president of the Semiconductor Display Technology Society, advised, "To strengthen SoBuJang competitiveness, support beyond supply chain management, such as mergers and acquisitions (M&A), is also necessary," adding, "Especially, it is most important that the government continues the support it has provided so far without change."

This content was produced with the assistance of AI translation services.