International Finance

South Korea to invest $854 mn annually to produce micro-chip materials

Korea will develop homegrown materials and equipment used in the production of micro-chips

South Korea is planning to invest $854 million annually to self-develop materials and equipment used in the production of micro-chips, Reuters reported. According to South Korean government officials, a feasibility analysis is already underway.

Japan recently tightened regulations on the export of high-tech materials used in the production of smartphones and micro-chips to South Korea amid wartime labour abuse allegations.

The new restrictions affect fluorinated polyimide, and hydrogen fluoride, as well as the transfer of manufacturing technologies. Japan contributes to about 90 percent of fluorinated polyimides produced globally.

The tightened export regulations by Japan could hurt the production of South Korea’s chip manufacturers such as Samsung Electronics and SK Hynix. According to IHS Markit, Japan’s decision to curb exports would only add to global tension amid a prolonged slowdown of the global electronics sector.

“A reduction or elimination in the availability of these materials will significantly impede the production of memory and other semiconductor chips, impacting major semiconductor manufacturers including Samsung Electronics and SK Hynix,” Len Jelinek, executive director of semiconductor research at IHS Markit told Reuters.

Shares in South Korean chip material manufacturers jumped after the news of the new investment by South Korea in micro-chip materials came out.

Local producers of chemicals used in chip manufacturing such as Ram Technology and Ocean Bridge’s saw their shares jump by 20 percent and 15 percent respectively. Shares of Samsung Electronics, the world’s largest chipmaker, were down by 2 percent.

Stocks in Japanese suppliers have taken a beating after Japan announced the new export regulations. Both Stella Chemifa and Showa Denko’s shares have slipped by 1 percent since the announcement.

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