Gov't to Support Domestic Production of Key Materials

Published on 2019/08/11 | Source

The government will select 100 key goods that are urgently needed by manufacturers here after Japan removed Korea from a "whitelist" of preferential trade partners.

The government will invest W1 trillion in research and development and relax overtime restrictions and other red tape to allow the parts and materials to be manufactured domestically (US$1=W1,200).

Minister of Trade, Industry and Energy Sung Yun-mo on Sunday met with representatives from the semiconductor, display, auto and other industries. A participant said, "The government explained that the key items include those that are essential for production of semiconductors and where Korean manufacturers are highly dependent on Japan". They include photoresist, hydrogen fluoride, fluorinated polymide and wafers.

Japan has not banned export of the goods, but Korean importers must now seek permission on a case-by-case basis, allowing Japanese bureaucrats to sit on the paperwork for as long as they like. That will disrupt the supply chain for just-in-time production, so to stimulate domestic production the government plans to ease various regulations.

Already on Saturday financial authorities promised to extend loan repayment deadlines for companies affected by the trade curbs and a W6.7-trillion package to assist them.

But businesses here are still worried. "Domestic production of these Japanese parts is a difficult project that could take over five years, and we don't even know whether it will be successful", one staffer said. "The bottom line is whether Korean companies will be able to survive until then".

Meanwhile, reports on Saturday said Japan could announce more trade restrictions. According to the Asahi Shimbun daily, a high-ranking official in Japan's Ministry of Economy, Trade and Industry said the ministry will expand the list of items that are restricted for to Korea.

Japan first slapped restrictions on exports of three core items essential to production of semiconductors in Korea on July 4 before removing Korea from the whitelist last Friday, citing spurious security concerns to cover up the fact that it is retaliating in a spat over compensating Korean victims of wartime forced labor.

Major Korean firms like Samsung and SK Hynix are working hard to diversify sources of materials and parts. They are drawing up a list of materials and parts on which Japanese makers have a near-monopoly to figure out what can be produced domestically and what can be sourced from other countries like China, Germany and Taiwan.