#July 2019, there was a sigh of relief from some in the industry when Japan regulated the export of materials necessary for semiconductor and display production. It was a fact that Japan's sudden 'material weaponization' alert emergency on Korean companies; however, it was not a 'fatal' to the extent of halting production. A high-class official in the display industry said, “Domestic OLED factories would have really stopped production completely if Japan were to cut off the fine metal mask (FMM) in 2019. If we really were not able to make make memory or OLED products, the outcome would have been too much for Japan to pull out such moves.” FMM is a key material for the OLED deposition process, and is 100% supplied by Japan's Dai Nippon Printing (DNP).
It has been three years since Japan's export regulations realized the importance of high-tech industrial supply chains. The Korean government and the industry have combined strengths amid national interest, and promoted diversification and localization of core materials. The results were not insignificant. The three major materials regulated by Japan, △hydrogen fluoride, △fluorinated polyimide, and △extreme ultraviolet (EUV) photoresist (PR), achieved diversification and localization. It was told that EUV PR is most difficult to develop, and domestic companies were able to apply in mass production process.
But was this the end? The status of semiconductors, displays, and batteries has been increasing as key national strategic industries. Accordingly, powerful countries such as the United States, China, and Europe are promoting to reorganize high-tech industries centered on their own countries. This will allow the countries to secure technological leadership while reorganizing its supply chain centering on its own country to avoid facing second or third export regulations.
The electronic newspaper investigated materials and parts that are close to 100% depending on overseas supply with experts such as Stone Partners, focusing on the three major fields of semiconductor, display, and battery. This will allow to diagnose the supply chain. Excluding widely known and trade secret parts, the electronic newspaper have focused on materials that have high dependency on overseas supply. Despite that, the items were numerous.
◇Semiconductor
Semiconductor packaging materials are dominated by domestic materials and parts companies such as Duksan Hi Metal, Doosan, Samsung SDI, and Haesung DS. However, it is urgent to expand the product portfolio to stabilize the supply chain since only certain items have been commercialized. Being highly depend on Japan’s items, it is expected that supply chain crises such as the 2019 export restrictions will reappear in the event of diplomatic conflicts between Japan.
Buffer coat and rewiring materials are used in high-tech semiconductor packaging such as memory and logic. They are widely used for fan-in-wafer-level packaging (FI-WLP) in Korea. HD Microsystems is the No. 1 supplier in the market, and it is a 50-50 joint venture between Japan’s Showa Denko and US’ DuPont. Japan’s Asahi Kasei preoccupied fan-out-wafer-level packaging (FO-WLP), which TSMC was leading in the packaging market.
Sintering paste is a semiconductor die attach material that are special for heat resistance and heat dissipation. The application range is growing as it replaces solder. It is widely used in power semiconductors according to automobile electrification. Sintering paste is divided into a pressurized type used for inverter modules, and a non-suppressed type used for power integrated circuits (ICs) and high-output LEDs.
US’ MacDermid have the rights to supply pressurized type sintering paste, since MacDermid took over 70% of the world market. The company is expected to further expand its leadership in the market with the recent increase in production capacity. The non-pressurized type depends on imports from American and Japanese companies such as Kyocera, MacDermid, and Tanaka Precious Metals.
Interlayer insulation film is also an item experiencing a supply shortage. It is used for the insulating layer for semiconductor packages. It is mainly applied in flip chip-ball grid array (FC-BGA) in which Samsung Electro-Mechanics and LG Innotek recently made a large-scale investment. If the supply of interlayer insulation film materials becomes tough, it may cause setbacks in FC-BGA production that domestic companies put main focus on. The average annual growth rate of interlayer insulation film is expected to be 13%.
Interlayer insulation film is virtually monopolized by Japan's Ajinomoto Fine-Techno. Ajinomoto Fine-Techno secured a majority of market share up to upper 90% range. Sekisui Chemical is also a Japanese company that supplies small quantities of interlayer insulation film. Considering that companies that are challenging the development of interlayer insulation films, such as JSR, Showa Denko, and Sumitomo, are all Japanese companies. This will only intensify the dependence on imports from Japan.
Copper plating solutions are used for through-silicon vias (TSVs) for three-dimensional (3D) stacked semiconductor structures. Germany's Atotech and the US's DuPont and MacDermid are dominating in the market.
◇Display
The display also revealed a low self-sufficiency rate for key materials. The localization rate of materials and parts is around 60% according to the Korea Display Industry Association. There are more than 5 items with 100% dependence on supply from Japanese, American and European companies. Many materials, such as photoresist, depend on absolute quantity imports. The domestic companies could face an immediate production crisis when a supply chain problem occurs in these items.
Fine metal mask (FMM) is absolutely dependent on Japan’s DNP. FMM is a metal plate that allows organic light emitting diode (OLED) light emitting materials to be deposited only in the display pixel area. Some domestic companies have succeeded in localization, but the supply is insignificant. It is an item that DNP continuously demands a price increase from domestic display manufacturers.
Oxide semiconductor-based IGZO is entirely supplied by a Chinese company, Vital Materials. IGZO is a display material made of indium (In), gallium (Ga), zinc (Zn), and oxide (O). It is used in the active layer of a display thin film transistor (TFT).
Vital Materials was found in 1995, and is a company specializing in rare metal-based high-tech materials. The core materials are produced in China. Vital Materials acquired Samsung Corning Advanced Glass in Gumi in the past, which was a joint venture established by Samsung Display and Corning in the US.
Polyimide is 100% supplied by Japan’s Toray. The core materials are produced in Japan. Polyimide is a key material used for substrates or cover windows in display manufacturing, and has high thermal stability. Display substrates must withstand high-temperature manufacturing processes, and polyimide is able to do so. Mid-sized domestic companies have localized polyimide, but Toray dominates the production.
An official from the display industry said, “Not many companies are entering into the localization of materials since the display market is small compared to semiconductors and the growth rate is slow. It is necessary to stabilize supply by attracting joint ventures with foreign companies and diversifying global customers.”
◇Battery
It is difficult to avoid a crisis as domestic batteries become more dependent on foreign materials and minerals. There is an increase in demand for Korean batteries in the global EV market, but these batteries cannot be produced without Japanese materials and Chinese minerals. This is the situation that need to find a way to respond to the battery supply chain. Electrolyte is one of the four major battery materials, and its raw material is lithium salt. Lithium salt is mostly imported from China. The scale of imports from China's Tinz and Capcam amounts to KRW 2 trillion. Producing lithium salt locally, China ultimately has the right to decide the price of the mineral.
Additives that determine the performance of the electrolyte are 100% imported from Japan. These additives include LiPO2F2, WCA2, LiFSI, SN, and PS. Japanese companies such as Mitsubishi and Central Glass own original patents. The electrolyte factory for Central Glass is located in Korea, but additives are produced only in Japan. It is part of the item that is listed in export regulations.
Single-walled carbon nanotubes (SWCNT) for anode materials are all imported from OCSiAl in Russia. SWCNT wraps the silicon anode material to control the volume expansion. Silicon anode materials enhances the safety issue of volume expansion while adding silicon to increases battery charging performance.
Korea has experienced difficulties from the exclusion of Chinese battery material products by the US. EVs equipped with Korean batteries using Chinese materials was restricted with the goal to increase American EVs in the US. Hence, the localization of battery materials is urgent.
An industry insider said, “It is necessary for the government and companies to speed up product development. The Ministry of Trade, Industry and Energy needs to increase the tasks of developing the four key materials for batteries, and encourage more domestic battery companies to be demand companies.”
By Staff Reporters Dong-joon Kwon, Ji-woong Kim, So-ra Park (djkwon@etnews.com, jw0316@etnews.com, srpark@etnews.com )