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Japan’s controls on the exportation of semiconductor materials are causing increased uncertainty for the global IT industry in general, with growing concerns that the export controls are poised to undermine stability in the global semiconductor supply network.

According to accounts from industry sources on July 21, major US IT companies such as Apple, Amazon, and Google have recently been speaking with Samsung Electronics to ask whether any difficulties are occurring in shipments of DRAM and other semiconductors due to Japan’s export controls. The companies represent Samsung Electronics’ top customers: Amazon receives server DRAM and other supplies from the company, and its memory semiconductors are used in Apple’s iPhone. Data from the global market research firm IHS Markit showed Samsung Electronics and SK Hynix holding a 64% market share for global DRAM production equipment and a 43.2% share for NAND flash memory in the first quarter of 2019.

With growing predictions that the conflict could drag into the long term, semiconductor-related businesses in other countries have also been getting visibly antsy. In a July 18 announcement of performance projections for the second half of the year, Mark Liu – co-CEO of Taiwan’s TSMC, which could be seen as a competitor of Samsung Electronics in the global foundry (commissioned semiconductor production) industry – rated Japan’s recent export controls as the “biggest uncertainty.” Liu also said the South Korea-Japan conflict made it “difficult to offer any precise projections for the fourth quarter.”

With TSMC holding the first-place position ahead of Samsung Electronics in the foundry market, some are predicting Japan’s controls on exports to South Korea could be a boon to the company – yet the remarks suggested concern about a possible negative impact instead. From the standpoint of a company that produces semiconductors to order, TSMC will inevitably fear a drop in orders from major clients such as Qualcomm and Apple if semiconductor supply troubles result in a generally poor situation for the IT industry. In other words, far from looking forward to reflexive gains, competitors in Taiwan and elsewhere are voicing worries about the damage that could occur as the crisis ripples throughout the industry.

“The situation is fanning market anxieties because it is breaking down the cooperative relationships among global businesses and unsettling the overall semiconductor supply network,” explained one industry official.

Samsung Electronics is currently conducting a review after sending a notice to partner companies asking them to stockpile 90 or more days’ worth of all Japanese material and component items. At the same time, it is focusing on establishing potential replacements, including testing of hydrogen fluoride produced by South Korean companies. Lee Seok-hee, CEO of SK Hynix, departed for Japan on the afternoon of July 21 to meet with local partner companies there and discuss supplies of semiconductor raw materials.

Spot prices for DRAM and NAND flash transactions have been rising amid concerns over production setbacks once the Japan export controls begin taking full-scale effect. The spot price for DDR4 8-GB DRAM – chiefly used in PCs – averaged US$3.736 on July 19, an increase of 14.6% from a week earlier.

With the July 24 deadline approaching for a Japanese public comment period on amending laws to remove South Korea from its white list, the South Korean government planned to submit an official opinion to Tokyo around July 22 to 23. Seoul also plans to focus on explaining about the unfairness of the Japanese export control measures during a WTO General Commission meeting in Geneva on July 23.

By Song Gyung-hwa, staff reporter

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