South Korea’s semiconductor equipment imports from Japan increased by approximately 80 percent from a year ago in spite of efforts to reduce its reliance after Japan’s export restrictions implemented in July last year.
The Korea International Trade Association announced on Sept. 6 that South Korea imported US$1.7 billion, up 77.2 percent from a year earlier, of semiconductor equipment and electronic integrated circuit manufacturing machinery from Japan for the first seven months of this year. In addition, processor and controller imports and photosensitive semiconductor device imports rose 8.6 percent and 3.7 percent, respectively. For reference, South Korea's total imports from Japan fell about 10 percent year on year during the same period.
The increase in semiconductor equipment imports has to do with Samsung Electronics’ large-scale investment. The company announced in May this year that it would set up NAND flash production lines in Pyeongtaek and is planning to expand its facilities in the city next month. Although it was pointed out after the restrictions that new equipment and machinery suppliers were necessary, Samsung Electronics’ and many other South Korean companies’ reliance on Japanese semiconductor equipment is still as high as 25.7 percent, not that different from last year’s 27.4 percent.
The South Korean government and enterprises have made efforts to become more competitive in the material, component and equipment industries and counter the restrictions. However, changes at industrial sites are still slow. This is because it is hard for companies in the industries to meet the technical demands of Samsung Electronics, SK Hynix and the like in spite of the government's support and any change in supplier cannot but be somewhat burdensome for those clients. Also, it is far from easy to maintain the same level of efficiency while replacing Japanese equipment with that from another country.
In the Trade, Industry and Energy Ministry's semiconductor and display performance evaluation support project launched after the export restrictions, only 19 out of 130 participating companies succeeded in obtaining a quality certificate from a client such as Samsung Electronics and SK Hynix until June this year. Besides, just three out of the 19 succeeded in signing a supply contract with a client.
This dependence on Japanese equipment has led to South Korea’s dependence on Japanese engineers. In many cases, new Japanese equipment in South Korea is installed by Japanese engineers sent from the manufacturers as the buyers lack expertise. This led to self-quarantine exemption for Japanese engineers in July this year against the principle of reciprocity. Although the principle was broken and there was a very high risk of COVID-19 inflow, the government could not ignore companies’ concerns over production setbacks. In short, the South Korean semiconductor industry is still heavily dependent on Japan despite its restrictions that have targeted the industry for more than one year.