The Korea Institute for International Economic Policy said in its recent report that more thorough supply chain risk management is required regarding South Korean industrial items highly dependent on Japan and more long-term efforts are required for source technology development and supply chain diversification.

Last year, South Korea’s semiconductor exports totaled US$95.46 billion with China accounting for 43.2 percent of the exports, followed by Hong Kong (18.3 percent), Vietnam (9.6 percent), the United States (7.9 percent) and Taiwan (7.1 percent).

The exports include US$59.2 billion in memory chip exports, in which China’s and Hong Kong’s ratios are 50.3 percent and 21 percent, respectively.

“South Korean semiconductor companies have manufactured products in China and the products have been supplied to Chinese and multinational companies in China,” the institute said, adding, “This business model is likely to be increasingly affected as the United States is putting pressure on China in the semiconductor industry.”

Last year, South Korea’s semiconductor imports were US$57.03 billion and imports from China, Taiwan, Japan, the United States and Singapore accounted for 31.2 percent, 20.4 percent, 13.6 percent, 11 percent and 6.5 percent of the total, respectively. System-on-chip imports made up 39.1 percent of the total, followed by memory chip (31.7 percent), semiconductor equipment (13.5 percent) and equipment component (5.3 percent).

Semiconductor equipment imports from Japan were US$3.02 billion, followed by those from the United States (US$1.69 billion) and Singapore (US$1.53 billion). Semiconductor material imports from Japan were equivalent to 38.5 percent of the total, followed by those from China (20.5 percent), the United States (11.3 percent), Taiwan (8.3 percent) and Vietnam (4.1 percent).

Last year, South Korea showed a very high level of dependence on Japan as to certain items, examples of which include fluorine polyimide (93.8 percent), photoresists (86.5 percent) and silicon wafers (56.6 percent). In addition, South Korea’s hydrogen fluoride imports from Japanese companies amounted to approximately 74 percent. The institute said that the high levels of dependence may result in serious risks.

“The United States is trying to isolate China in the semiconductor industry by working more closely with allies and Japan and Taiwan are expanding their cooperation in this context,” the institute explained, adding, “Their closer cooperation may lead to a crisis on the part of South Korean semiconductor companies.”

“Japan is likely to keep monitoring the semiconductor industry of South Korea and the alliance of the United States, Japan and Taiwan in the industry will be a challenge,” it said, continuing, “More diplomatic efforts are required along with supply chain management and technological development.”