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Home / Business / The suppliers of Samsung and Japan are unshakable for the time being

The suppliers of Samsung and Japan are unshakable for the time being



TOKYO / SEOUL – Samsung Electronics continues to source high-tech materials from Japan, although Japanese and South Korean companies are angered by stricter export controls. State-of-the-art semiconductors – depend on materials made in Japan, and Japanese companies have no good reason to drop their valued customers. The future of the so-called Japan-South Korea semiconductor coalition, however, remains uncertain, as political conflicts illustrate Samsung's dependence on Japan.

The Japanese government announced on July 1

to tighten controls on exports to South Korea for manufacturing semiconductors and displays. On the same day, both vendors of the manufacturers of these materials and other suppliers were swamped by Samsung Procurement Department inquiries.

The South Korean tech giant wanted to know if Japan would actually ban exports and what the Japanese government really thinks.

"We are very interested in what the Abe government is going to do next," said a senior official at Samsung who asked not to be named. "We also wonder what the latest Cabinet transformation means and what impact it has on economic policy."

The Japanese manufacturers, previously informed by the Ministry of Economy, Trade and Industry, told Samsung that the Ministry would issue them permits as long as the papers are ready and Samsung will not stop operating in its plants.

However, Samsung sent the central procurement team to Japan to visit each supplier and review production volumes and inventories.

Samsung relies heavily on Japanese manufacturers to procure chip-making materials. Of the top 100 suppliers, 23 are from Japan, followed by South Korea's 39 companies.

The 23 companies include material manufacturers such as Sumitomo Chemical, SUMCO and Taiyo Nippon Sanso, as well as manufacturers of production equipment such as Tokyo Electron, Canon and Ulvac.

Meanwhile, South Korean suppliers offer, among other things, semiconductor package substrate, microcontroller units and dummy masks.

"Samsung is aware of the risk of switching suppliers," said a senior executive at a Japanese chemical manufacturing company. The production of semiconductors takes two to three months and involves thousands of steps. The same materials also have subtle "characteristics" that vary from manufacturer to manufacturer. The change of suppliers could lead to lower profit rates.

Japanese companies are also major suppliers of core materials for displays and batteries.

"Samsung will not have an easy time changing materials," said Yutaka Shibata, vice president of Japanese chemical maker Asahi Kasei.

"We continue to work with our suppliers and strive to minimize production issues," said a Samsung Electronics spokesman on Friday to Nikkei. Japanese semiconductor material suppliers insisted that Samsung's leading companies continue to source materials from Japan.

Also, when President Moon Jae-in summoned top executives of South Korean conglomerates to a hastily-scheduled meeting on July 10, Samsung Electronics appointed Vice Chairman Lee Jae-yong to travel to Japan for business. He met with leading equipment and material manufacturers to demand cooperation between Japanese and South Korean companies, even in the midst of political conflicts.

Samsung has overtaken Japanese electronics manufacturers in areas such as televisions, cell phones, semiconductors and displays. The South Korean giant has strictly adhered to the management policy of "learning from Japan" to grow.

Founder Lee Byung-chul, his son Lee Kun-Hee and grandson Lee Jae-yong studied in Japan. The three "contracts with Japanese companies closed," said a former managing director of a Japanese electronics manufacturer.

Samsung moved from sugar manufacturing to electronics after establishing a black-and-white joint venture with Japanese company Sanyo Electric in 1969. Since then, it has worked with Japanese manufacturers such as NEC, Toshiba, Toray Industries, Sony and Sumitomo Chemical developed into a giant. In fact, the South Korean company Sanyo thanks the Samsung Innovation Museum at its headquarters in Suwon, south of Seoul.

Samsung has adopted technology from other companies because "it is difficult for South Korean companies – which tend to seek short-term results – to do basic research in the long term," said a Japanese engineer working for Samsung. For Samsung, which has increased its procurement capacity, it is also cheaper to buy materials than to develop them.

Even Japanese suppliers have compelling reasons to put Samsung first. As Japanese electronics manufacturers ceased or shrank, Samsung saw this as an opportunity to become the world's largest device maker, with sales of $ 8 trillion ($ 74 billion) in semiconductors and $ 3 trillion in displays.

"As a result, Samsung has become the biggest customer for Japanese suppliers," said an official from a Japanese manufacturer of manufacturing equipment.

Samsung relies on external sources for advanced parts and materials, while Japanese suppliers do not want to lose their biggest customer. The interdependence between Samsung and Japanese suppliers remains strong, at least for now.

The Japanese government's tightened export controls, however, have triggered a sharp reaction from the South Korean government and the public, who criticized the move as "economic retribution". "

The dispute has led to the strong belief that Japan's heavy reliance on advanced parts and materials poses a risk to South Korea, and Samsung has no choice but to investigate the procurement of alternative suppliers.

The Japanese Government has begun issuing export licenses for three articles that are subject to stricter export controls in the past month.

However, there has been no progress in improving tense relations between the two countries.South Korea has recently decided to finalize the bilateral agreement on the general Security Information in Military (GSOMIA)

Business circles in neighboring countries have been struggling over the lack of intergovernmental dialogue, but if excessive provocative action continues, even the division of labor that Samsung and Japanese suppliers could have for coexistence and deportment n Prosperity, collapse of export controls to South Korea, consent to Seoul's request for consultation in the context of a dispute settlement by the World Trade Organization. However, the discussions are unlikely to solve the problem and are expected to be extended.

The political confrontation between Japan and South Korea is likely to benefit China on an economic level, especially in the semiconductor industry.

Targeting China For hegemony in the high technology industry, including the semiconductor industry, top chip maker Samsung appears to be a target for Chinese companies to overtake sooner or later. These are capital investments in China at the initiative of the Chinese government Amount of several trillion yen a year.

"A shift in China" among chip manufacturers is under way. In China, successive projects are being built for the construction of semiconductors, which will require investments of about 1 trillion yen. This makes the country a promising market for device manufacturers. "Chinese manufacturers will probably need some time to mass-produce advanced semiconductors in a stable manner," said a Tokyo Electron official. However, there is no doubt that Japanese manufacturers of parts and materials will continue to cause "a shift in China" in the future.

In fact, Chinese companies have surpassed their South Korean rivals in terms of liquid crystal panel production capacity. Many industry representatives say the same thing will happen to the semiconductor industry.

Ahn Ki-hyun, a high-ranking employee of the Korea Semiconductor Industry Association, warned, "If barriers arise between Japan and South Korea, this will benefit China's semiconductor industry." Samsung has cornered Japan's electronics industry. "However, it is becoming more and more likely that the South Korean company is overwhelmed by Chinese competitors.

20% of South Korea's total exports are from Samsung, which also accounts for 20% of the country's total market capitalization, and its decline would mean the demise of the entire South Korean economy. 19659002] The South Korean government, which is now worried about its economic slump, may well not be able to continue the political confrontation.


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