How Will Korea's Removal from Japan's White List Affect the Semiconductor Industry?

According to media reports, starting in July, Japan will include the 193-nanometer and below photoresist used by Samsung Electronics and SK Hynix in the production of next-generation flagship products—application processors (AP) or LSI system semiconductors—on its export control list. Now, Japan plans to further restrict the export of sub-245-nanometer photomask equipment and circuit boards used in the production of their current main products: D-RAM and NAND flash memory semiconductors.

Consequently, the South Korean semiconductor industry is increasingly concerned that "Japan's export controls aim to strangle the future development of the South Korean semiconductor sector, while the latest measures are intended to cripple its current production."

After removing South Korea from its "whitelist," Japan listed over 1,100 items for export restrictions, including four categories directly related to semiconductor production: semiconductor equipment, photomask equipment, photomasks, and wafers. However, Samsung Electronics and SK Hynix had already made substantial investments in semiconductor equipment during the boom period of semiconductor exports over the past two to three years, establishing relevant production lines, so they are unlikely to be significantly affected in this regard.

However, the situation with photomasks is entirely different. Photomasks are glass substrates that carry the transmission of microscopic circuit patterns for semiconductors, and Japanese optical companies HOYA and Shin-Etsu Group nearly monopolize the supply of photomasks. In particular, sub-245-nanometer photomasks are essential for producing D-RAM and NAND flash memory semiconductors at around 14 nanometers. This means that if Japan restricts the export of 245-nanometer photomasks to South Korea, the production of D-RAM and NAND flash memory semiconductors by Samsung Electronics and SK Hynix could be impacted.

Last year, Samsung Electronics and SK Hynix held over 70% of the global D-RAM market share, with Samsung Electronics recording sales of $43.747 billion (approximately 49.1 trillion KRW, 43.9% share) and SK Hynix sales of $29.409 billion (approximately 33.1 trillion KRW, 29.5% share). In the global NAND flash memory market, Samsung Electronics and SK Hynix also accounted for 46% of the market share.

The automotive and chemical industries are also expected to be significantly affected. In particular, the battery and carbon fiber sectors used in electric vehicles are likely to face immediate impacts. Carbon fiber is a core material for manufacturing hydrogen fuel storage containers in hydrogen-powered electric vehicles. While South Korean companies such as LG Chem, Samsung SDI, and SK Innovation possess world-leading technologies in the electric vehicle battery field, they still rely on imports from Japan for these core materials.