As Japan has excluded Korea from the "White List" (a country that simplifies export procedures), concerns are growing over the extent of the damage. Industry sources expect local companies to face a major setback in procuring 83 key items.
Korea's annual income from Japan is more than $10 million. These 83 items import more than 50 percent from Japan. Parts equipment in the semiconductor and display sectors, which serve as a mainstay of the Korean economy, account for nearly half of the total.
Among the strategic items listed under the control of Japan's Export Trade Management Ordinance, 1,383 items are said to have been imported from Japan. As Japan decided to exclude South Korea from its whitelist list today, each and every import to Japan has to be approved.
Materials, parts, and equipment in semiconductor display field are estimated at 37 (44.6%) including major materials such as silicon wafers and blank masks. These are items used in almost all manufacturing processes, including cleaning, exposure, phenomena, etching and inspection. It also includes eight petrochemical and chemical products, seven machine tools and seven steel and aluminum.
South Korean Foreign Minister Kang Kyung-wha held a 55-minute meeting with her Japanese counterpart Taro Kono in Bangkok, Thailand, on July 1, but nevertheless Japan decided to exclude South Korea from the whitelist during a Cabinet meeting on Aug. 2.
"About 80 items were analyzed that Korean companies would suffer from additional export restrictions," said an official from the semiconductor industry.
Among the items in the high-risk group are machining centers, computer numerical control (CNC) shelves and grinding machines. If export regulations are enforced on such equipment, it is expected that South Korean machine tool companies as well as cars, shipbuilding and construction equipment that use a lot of related equipment will inevitably be hit.
In the field of petroleum and chemical products, a number of basic materials for synthetic resins such as xylene and toluene were included. "We can deal with these materials by increasing the amount of imports from other countries, but the problem is that they take time to replace their import destinations," a chemical industry source said.
Ammonium fluoride, which accounts for 68.0 percent of Japan's imports, is widely used in etching processes that corrode only necessary parts like hydrogen fluoride. In the case of steel, intermediate goods in the special steel sector were classified as high-risk items. Several mineral products were also found to be heavily dependent on Japanese imports.
Japan imported $147.8 million worth of "separator" last year and 83.4 percent of the country's second-generation battery.