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Japan and South Korea's ongoing dispute could disrupt global flash memory supply

By Kenny Yeo - on 9 Jul 2019, 11:01am

Japan and South Korea's ongoing dispute could disrupt global flash memory supply

The global supply of flash memory could shrink in the near future as Japan has just announced that it would stop "preferential treatment" of shipments of three key materials to South Korea.

As a result, exporters looking to ship these materials would need to get permits, which typically takes around 90 days.

The dispute stems from longstanding unresolved tensions between the two countries due to the Japanese occupation of the Korean Peninsula between 1910 and 1945. During this period, many Koreans were forced to work for Japanese firms, and perhaps more crucially, many Korean women were forced to work as comfort women in wartime brothels.

The curbs apply to three materials which are essential for making semiconductors and smartphone displays. They are photoresists, hydrogen fluoride, and fluorinated polyimides.

Photoresists are used to transfer circuit patterns onto semiconductor wafers. Hydrogen fluoride is used as an etching gas to make chips. Finally, fluorinated polyimides are crucial in the production of smartphone displays.

This would impact Samsung and SK Hynix's abilities to make memory — both flash and dynamic random access memory. Together, the two companies account for nearly 40% of the world's flash memory market share and nearly 70% of the world's DRAM market.

The Yokkaichi plant, which is jointly operated by Toshiba and Western Digital, was hit by a power outage weeks ago. (Image source: Anandtech)

This is not helped by the fact that Toshiba and Western Digital's Yokkaichi facility was affected by a power outage just weeks ago. Reports say at much as 15 exabytes of memory could be lost, which is roughly 16.5% of the world's global NAND supply.

If the ongoing dispute persists, there's a real fear that the production of smartphones and notebooks could be affected. This would have far-reaching implications on the market as we brace ourselves for Samsung's upcoming Galaxy Note 10 and Apple's new iPhones.

As it stands, Samsung and SK Hynix are said to be in hurried talks with Japanese suppliers and suppliers from elsewhere. Samsung's vice chairman, Jay Y. Lee, reportedly traveled to Tokyo on Sunday.

A source said:

These materials, they are not something that we can find at another store and buy quickly. Even if we find alternatives to Japan, we have to conduct tests to make sure the quality is good enough to make chips at a high yield.

Stockpiling is also said to be out of the question as hydrogen fluoride is highly toxic and photoresists deteriorate quickly.

South Korean President Moon Jae-in has said that he preferred a diplomatic settlement but warned that South Korea could take countermeasures.

He said:

But if real damage occurs to South Korean companies, it would force the government’s hand and the government would have to take necessary countermeasures. I don’t want to see this happen. I urge Japan to withdraw the curbs and call for sincere talks between the two countries. I hope Japan return to the principle of free trade that it has always been emphasizing.

Source: Reuters, South China Morning Post

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