It is expected that Japanese Government’s regulation will spread to other key materials, parts, and equipment as Japanese Government is considering removing South Korea from its list of white countries. Japanese Government gave a ‘jab’ to South Korean Government in early July by deciding to regulate three key materials. However, there is a high chance that Japanese Government will consider regulating semiconductor equipment, which is heavily owned by Japanese businesses, as well. South Korean industries are observing every move of Japanese Government very carefully as display shadow mask, sensor, carbon fiber, and fuel cell have become possible subjects of future regulation. Some believe that such senseless regulation will ultimately harm Japanese businesses.
In July, Japanese Government designated EUV (Extreme Ultraviolet) photoresist, hydrogen fluoride, and fluorine polyimide, which are three key items used for semiconductor and display production, as subjects that would be under regulation during exportation.
Regulation of EUV photoresist and hydrogen fluoride can also cause an issue to supply and demand of materials for next-generation semiconductor processes.
If South Korea is removed from Japanese Government’s list of white countries, there is a chance that semiconductor equipment that can cause a setback to next-generation processes will be regulated as well. Track is an example. This equipment is used during ‘photolithography’ process that prints the image of a circuit onto a wafer using light. It evenly applies photoresist that must be spread before a wafer goes through a photolithography equipment.
Track equipment market is led by a Japanese semiconductor equipment manufacturer called TEL (Tokyo Electron). TEL practically monopolizes the market for EUV Track equipment. Samsung Electronics is extending its EUV process line according to a trend that has EUV process seen as the next-generation semiconductor process.
“If Japanese Government regulates exportation of TEL’s equipment, it indicates that Japanese Government’s will to completely shut down production of next-generation semiconductors by South Korean businesses.” said a representative for the industry. “Although there are domestic companies that produce Track equipment, their influence within EUV Track equipment market is insignificant.”
Japanese businesses such as DNS (Dainippon Screen) and TEL also own large shares of the market for wet cleaning equipment that washes oxide films that are on the surface of a semiconductor through liquid hydrogen fluoride. Market for SEM (Scanning Electron Microscope), which is an electronic microscope that examines the width of a semiconductor circuit, is basically monopolized by Hitachi.
“Although Japanese Government’s regulation will not have immediate impact on semiconductor processes, it may impact supply of semiconductors in the future by negatively affecting possible plans for extension.” said a representative for the industry.
There are also concerns about supply and demand of wafer market where more than 50% of the shares are owned by Shin-Etsu and SUMCO. However, level of concerns is not too high due to recent trend of reduced production and extension of wafer production lines due to booming semiconductor industry that had continued until last year.
“There are many stocks of accumulated wafers.” said a representative for the industry. “However, we still cannot relax as Japanese businesses are leading businesses within markets for high-value wafers that are used for automotive PMIC (Power Management Integrated Circuit).”
It seems that there may be little bit of a setback to supply of shadow masks within display industry. Shadow mask, which is also called FMM (Fine Metal Mask), is a key component that is absolutely needed to produce small and medium OLEDs. Shadow mask is one of key factors that determine high resolution of a Smartphone.
Shadow mask is manufactured from invar that is thinner than a sheet of paper and it has many small holes that are not seen with a naked eye. Pixels are formed when organic matters that are evaporated from a high-temperature depositor pass through a shadow mask and attach themselves to a substrate. Thickness of a shadow mask and angles of formed holes all affect formation of a pixel.
Shadow mask market is basically monopolized by DNP. Although Toppan also manufacture shadow masks, they seem to have low performance than that of DNP.
DNP’s dominance within the shadow mask market is one of the reasons why South Korean industries have had difficult time to localize their own shadow masks. Because there is a chance that DNP, which is the only shadow mask supplier for South Korean businesses, may limit supply of its shadow masks if South Korean businesses attempt to localize shadow masks, South Korean businesses have been passive about attempting to develop their own shadow masks.
It is expected that Japanese Government’s regulation will have huge impact on sensors as most of them are imported from Japanese businesses. South Korean businesses are highly dependent on Japanese businesses for sonar system, photodetector, optical fiber for sensors, electronic camera, and aerospace photodetector. However, impact will be limited as most of strategic goods are related to national defense and aerospace and they can also be imported from the U.S. and Germany.
Carbon fiber industry that is led by Japanese businesses is also within the range of Japanese Government’s regulation. Many believe that South Korean businesses must focus on securing manufacturing technology for high-performance carbon fiber as they currently lack groundwork for such manufacturing technology.
South Korea’s energy industry is also heavily dependent on Japanese businesses for separation membrane that is used for hydrogen fuel cell.
“Because most of materials that are used for manufacturing hydrogen fuel cells are imported from the U.S., we have yet to detect any direct impact from Japanese Government’s regulation.” said CEO Jeon Young-taek of Incheon Fuel Cell. “However, we are still observing trends within industries with much attention.”
However, industries believe that this crisis can be an opportunity to diversify materials, parts, and equipment. As they have quickly looked for alternatives ever since Japanese Government started regulating three key semiconductor materials, they believe that they can strengthen their supply network even more even if Japanese Government decides to expand the range of its regulation.
Some believe that Japanese Government cannot prolong its decision on whether to exclude South Korea from its list of white countries or not.
“American and Chinese businesses that use our semiconductor products will not stand still.” said CEO of an equipment manufacturer. “As Japanese Government decides to limit key materials with a political intent, Chinese businesses that are seen as alternatives for South Korean businesses will seize an opportunity and cause Japanese businesses to lose their competitive edge.”
Staff Reporter Kang, Hyeryung | kang@etnews.com & Staff Reporter Bae, Okjin | withok@etnews.com & Staff Reporter Jung, Hyeonjung | iam@etnews.com & Staff Reporter Choi, Jaepil | jpchoi@etnews.com