07-16-2019, 10:07 PM
*** 17-Jul-19 World View -- Japan - South Korea trade dispute worsens
This morning's key headlines from GenerationalDynamics.com
****
**** Japan - South Korea trade dispute worsens
****
![[Image: g190119b.jpg]](http://Media.GenerationalDynamics.com/ww2010/g190119b.jpg)
Japanese patrol plane launches anti-missile flares during a fleet review in 2015 (AFP)
Korean chip and display manufacturers, including Samsung Electronics, SK Hynix, and LG Electronics, are scrambling to recover from being hit with a one-two punch -- first the US-China trade war, and then Japan's export restrictions on needed materials.
The US-China trade dispute has roiled supply chain relationships
throughout Asia. Officials in many companies are moving factories
and finding new suppliers, hoping that the dispute will end soon or
that, at worst, Donald Trump will lose the next presidential
election and the trade dispute can then be settled.
So a lot of people are shocked and surprised that there's suddenly a
new trade dispute, this time between Japan and South Korea, and this
one may be as intractable as the US-China dispute.
Starting in July, Japan tightened restrictions on the export of three
materials used in manufacturing chips and displays, citing what it has
called “inadequate management” of sensitive items exported to South
Korea, as well as a lack of consultations about export controls. The
three materials are EUV photoresist, hydrofluoric acid (etching gas)
and fluorinated polyimide.
It's believed that Samsung's existing inventory of EUV photoresist is
not large, since stocks can expire within a few weeks, and require
demanding storage conditions.
It's going to be difficult to find alternate suppliers since Japan
controls 92% of the global resist supply and 94% of fluorinated
polyimid.
Two South Korean companies, Dongjin Semichem and Foosung Co,
do manufacture the restricted materials, but not in the
quantities needed by Samsung and SK Hynix.
****
**** Chips -- the law of supply and demand
****
Both Samsung and SK Hynix have announced 10% cuts in DRAM production,
and probably the same in NAND memory production, because of the
restrictions announced by Japan on July 1.
Perhaps counter-intuitively, this has benefited both companies, with
Samsung's stock shares increasing 2% since July 1, and SK Hynix shares
up 8%. This is despite a general fall in Seoul's stock market.
The reason is that the production cuts are reducing the supplies of
these chips, while demand remains the same, and so prices are going
up, and so profits at Samsung and SK Hynix are also going up. In
fact, the prices of DRAM chips have been falling in the last year, and
are now returning to their former levels.
The shortages of these chips will mean higher prices for consumers
wanting to buy iPhones and other electronic devices, but what is bad
for consumers in this case is good for the manufacturers.
****
**** Roots of the Japan-Korea dispute
****
The mutual hatred of the Japanese and Korean people goes very deep.
Korea has been the staging ground for earlier invasions by both China
and Japan against one another — for example, Kublai Khan's invasions
of Japan in 1274 and 1281 or Toyotomi Hideyoshi's attempts to invade
Ming China via Korea in 1592 and 1597.
During much of the last two millennia, Korea has been a vassal state
of China, in a tributary relationship, meaning that Korea paid China a
great deal of money, usually gold and slaves, in return for guarantees
of defense from outsiders (i.e., Japan).
Since Korea lies between Japan and China, there have been many wars
fought between Japan and Korea, or between Japan and China on Korean
soil. In my opinion, the most important and significant battle in
east Asia during the last millennium, prior to World War II, was the
Battle of Myongnyang (Myeongnyang) on October 26, 1597. The Koreans
won a brilliant naval victory against the Japanese navy, using
technologically advanced "turtle ships," believed to be the world's
first ironclad warship. A Korean contingent of 12 ships lured a
Japanese force of hundreds of ships into a narrow channel and
destroyed 133 Japanese vessels without any Korean losses. Even today,
the battle is described in mythic terms, as an almost miraculous
victory.
Japan finally achieved its revenge in the first Sino-Japanese war
(1894-95), which was a victory of Japan over China. China
relinquished all claims of influence over Korea, which became a
Japanese protectorate until it was annexed outright in 1910. Japan
also took control of Taiwan, the Penghu Islands, and the Liaodong
Peninsula. Korea was a Japanese colony until 1945, when Japan was
defeated in World War II.
Those interested in understanding the millennia of east Asian history
should read my book, "World View: War Between China and Japan: Why
America Must Be Prepared" (Generational Theory Book Series, Book 2)
Paperback: 331 pages, with over 200 source references, $13.99
https://www.amazon.com/dp/1732738637/
****
**** Korea-Japan flareups
****
So with those centuries of history, nobody should be particularly
surprised when differences between the two countries are flaring up
again. There have been two major flareups in the last year, and
neither of them appears close to resolutions.
During World War II, Japanese soldiers used Korean girls, both
prostitutes and civilians, as "comfort girls." Korea has demanded
reparations for the use of the comfort girls, and for other slave
labor performed by the Koreans.
The Japanese claim that all such awards were already paid in a
settlement concluded in a 1965 treaty.
Then, in 2015, Japan and Korea concluded a bilateral agreement which
was intended at the time as the “final and irreversible” resolution of
the comfort women issue. However, that turned out not to settle the
issue after all. South Korea is now saying that demands from the
victims are causing the agreement to "wither," and on October 30 of
last year, South Korea's supreme court awarded compensation to four
Korean citizens forced to work for the Japanese during World War II,
an award that the Japanese are refusing to acknowledge. This is
still an explosive issue with vitriolic views on both sides that are
unlikely to be settled in the near future.
A second dispute is related to a military issue that occurred late
last year.
According to Japan, on December 20 a South Korean warship locked its
fire-control radar onto a Japanese patrol plane, as if preparing to
shoot it down. Japan made a formal protest to South Korea, claiming
that it was a "hostile act." South Korea denied that the radar lock
had occurred. In the vitriolic talks that have occurred since then,
Korea has claimed that Japanese Self-Defense Force planes have
deliberately flown at low altitude near South Korean naval vessels
multiple times, terming the acts a "clear provocation."
This brings us back to Japan's announcement that it was restricting
sales of the three materials needed by South Korean firms to
manufacture chips. Japan has never given a reason for the
restriction, except to make some vague claims about national security.
At a meeting of the World Trade Organization (WTO), the Japanese
representative said the measures are "not a trade embargo but an
operational review necessary for proper implementation of Japan's
export control system based on security concerns," whatever that
means. But it's believed that the Japanese are retaliating for the
comfort girl and radar lock issues.
Japan and South Korea are US and Western allies, and have common
enemies -- North Korea and China. After centuries of war, there's
little chance that the people of the two countries will ever love each
other, or even that the current disputes will ever be completely
settled. All that we can hope for is some sort of ceasefire.
Sources:
Related articles:
KEYS: Generational Dynamics, Japan, South Korea,
Samsung Electronics, SK Hynix, LG Electronics,
Battle of Myongnyang, Sino-Japanese war,
comfort girls, radar lock
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
This morning's key headlines from GenerationalDynamics.com
- Japan - South Korea trade dispute worsens
- Chips -- the law of supply and demand
- Roots of the Japan-Korea dispute
- Korea-Japan flareups
****
**** Japan - South Korea trade dispute worsens
****
Japanese patrol plane launches anti-missile flares during a fleet review in 2015 (AFP)
Korean chip and display manufacturers, including Samsung Electronics, SK Hynix, and LG Electronics, are scrambling to recover from being hit with a one-two punch -- first the US-China trade war, and then Japan's export restrictions on needed materials.
The US-China trade dispute has roiled supply chain relationships
throughout Asia. Officials in many companies are moving factories
and finding new suppliers, hoping that the dispute will end soon or
that, at worst, Donald Trump will lose the next presidential
election and the trade dispute can then be settled.
So a lot of people are shocked and surprised that there's suddenly a
new trade dispute, this time between Japan and South Korea, and this
one may be as intractable as the US-China dispute.
Starting in July, Japan tightened restrictions on the export of three
materials used in manufacturing chips and displays, citing what it has
called “inadequate management” of sensitive items exported to South
Korea, as well as a lack of consultations about export controls. The
three materials are EUV photoresist, hydrofluoric acid (etching gas)
and fluorinated polyimide.
It's believed that Samsung's existing inventory of EUV photoresist is
not large, since stocks can expire within a few weeks, and require
demanding storage conditions.
It's going to be difficult to find alternate suppliers since Japan
controls 92% of the global resist supply and 94% of fluorinated
polyimid.
Two South Korean companies, Dongjin Semichem and Foosung Co,
do manufacture the restricted materials, but not in the
quantities needed by Samsung and SK Hynix.
****
**** Chips -- the law of supply and demand
****
Both Samsung and SK Hynix have announced 10% cuts in DRAM production,
and probably the same in NAND memory production, because of the
restrictions announced by Japan on July 1.
Perhaps counter-intuitively, this has benefited both companies, with
Samsung's stock shares increasing 2% since July 1, and SK Hynix shares
up 8%. This is despite a general fall in Seoul's stock market.
The reason is that the production cuts are reducing the supplies of
these chips, while demand remains the same, and so prices are going
up, and so profits at Samsung and SK Hynix are also going up. In
fact, the prices of DRAM chips have been falling in the last year, and
are now returning to their former levels.
The shortages of these chips will mean higher prices for consumers
wanting to buy iPhones and other electronic devices, but what is bad
for consumers in this case is good for the manufacturers.
****
**** Roots of the Japan-Korea dispute
****
The mutual hatred of the Japanese and Korean people goes very deep.
Korea has been the staging ground for earlier invasions by both China
and Japan against one another — for example, Kublai Khan's invasions
of Japan in 1274 and 1281 or Toyotomi Hideyoshi's attempts to invade
Ming China via Korea in 1592 and 1597.
During much of the last two millennia, Korea has been a vassal state
of China, in a tributary relationship, meaning that Korea paid China a
great deal of money, usually gold and slaves, in return for guarantees
of defense from outsiders (i.e., Japan).
Since Korea lies between Japan and China, there have been many wars
fought between Japan and Korea, or between Japan and China on Korean
soil. In my opinion, the most important and significant battle in
east Asia during the last millennium, prior to World War II, was the
Battle of Myongnyang (Myeongnyang) on October 26, 1597. The Koreans
won a brilliant naval victory against the Japanese navy, using
technologically advanced "turtle ships," believed to be the world's
first ironclad warship. A Korean contingent of 12 ships lured a
Japanese force of hundreds of ships into a narrow channel and
destroyed 133 Japanese vessels without any Korean losses. Even today,
the battle is described in mythic terms, as an almost miraculous
victory.
Japan finally achieved its revenge in the first Sino-Japanese war
(1894-95), which was a victory of Japan over China. China
relinquished all claims of influence over Korea, which became a
Japanese protectorate until it was annexed outright in 1910. Japan
also took control of Taiwan, the Penghu Islands, and the Liaodong
Peninsula. Korea was a Japanese colony until 1945, when Japan was
defeated in World War II.
Those interested in understanding the millennia of east Asian history
should read my book, "World View: War Between China and Japan: Why
America Must Be Prepared" (Generational Theory Book Series, Book 2)
Paperback: 331 pages, with over 200 source references, $13.99
https://www.amazon.com/dp/1732738637/
****
**** Korea-Japan flareups
****
So with those centuries of history, nobody should be particularly
surprised when differences between the two countries are flaring up
again. There have been two major flareups in the last year, and
neither of them appears close to resolutions.
During World War II, Japanese soldiers used Korean girls, both
prostitutes and civilians, as "comfort girls." Korea has demanded
reparations for the use of the comfort girls, and for other slave
labor performed by the Koreans.
The Japanese claim that all such awards were already paid in a
settlement concluded in a 1965 treaty.
Then, in 2015, Japan and Korea concluded a bilateral agreement which
was intended at the time as the “final and irreversible” resolution of
the comfort women issue. However, that turned out not to settle the
issue after all. South Korea is now saying that demands from the
victims are causing the agreement to "wither," and on October 30 of
last year, South Korea's supreme court awarded compensation to four
Korean citizens forced to work for the Japanese during World War II,
an award that the Japanese are refusing to acknowledge. This is
still an explosive issue with vitriolic views on both sides that are
unlikely to be settled in the near future.
A second dispute is related to a military issue that occurred late
last year.
According to Japan, on December 20 a South Korean warship locked its
fire-control radar onto a Japanese patrol plane, as if preparing to
shoot it down. Japan made a formal protest to South Korea, claiming
that it was a "hostile act." South Korea denied that the radar lock
had occurred. In the vitriolic talks that have occurred since then,
Korea has claimed that Japanese Self-Defense Force planes have
deliberately flown at low altitude near South Korean naval vessels
multiple times, terming the acts a "clear provocation."
This brings us back to Japan's announcement that it was restricting
sales of the three materials needed by South Korean firms to
manufacture chips. Japan has never given a reason for the
restriction, except to make some vague claims about national security.
At a meeting of the World Trade Organization (WTO), the Japanese
representative said the measures are "not a trade embargo but an
operational review necessary for proper implementation of Japan's
export control system based on security concerns," whatever that
means. But it's believed that the Japanese are retaliating for the
comfort girl and radar lock issues.
Japan and South Korea are US and Western allies, and have common
enemies -- North Korea and China. After centuries of war, there's
little chance that the people of the two countries will ever love each
other, or even that the current disputes will ever be completely
settled. All that we can hope for is some sort of ceasefire.
Sources:
- Japan's export curbs on South Korea: 5 things to know (Nikkei, 9-Jul-2019)
- Samsung's advanced chip debut risks delay after Japan crackdown (Nikkei, 15-Jul-2019)
- SK Hynix surges to top Asia300 company rankings as trade war takes toll (Nikkei, 15-Jul-2019)
- The top 100 Asia300 Power Performers (Nikkei, 15-Jul-2019)
- South Korea and Japan spar over export controls at WTO (Nikkei, 15-Jul-2019)
- South Korean companies stock up as Japan's export curbs kick in (Nikkei, 15-Jul-2019)
- Japan-South Korea feud deepens with disputed accounts of trade meeting (Reuters, 13-Jul-2019)
- Tall Fences Make Bad Neighbors Out of Japan and Korea (BB, 12-Jul-2019)
- Japan Saw ‘Serious Inappropriate Incidents’ by S. Korea: Hagiuda (BB, 13-Jul-2019)
- South Korea Warns Japanese Economic Blow Could Backfire (BB, 15-Jul-2019)
- Samsung obtains key supplies from Japan (StraitsTimes/BB, 15-Jul-2019)
- Samsung to prepare contingency plans for Korea-Japan trade scuffle (ZDNet, 15-Jul-2019)
- A backgrounder on Extreme Ultraviolet (EUV) lithography (Medium, 18-Jan-2018)
- Japan hits South Korea with controls on key electronic materials (ChemicalAndEngineeringNews, 9-Jul-2019)
- Chaebol bracing for worsening business outlook (KoreaTimes, 15-Jul-2019)
- Concerns grow over Japan's move to expand export control (KoreaTimes, 3-Jul-2019)
- Japan Releases Audio of Alleged Radar Lock-On Incident With South Korean Warship (Diplomat, 22-Jan-2019)
- Japan hints at ending talks about radar lock-on with South Korea (Kyodo, 1-Jun-2019)
- Foosung Co / Samsung, SK Hynix ask Korean firm to boost chemicals supply amid Japanese curbs (Reuters, 16-Jul-2019)
- Why are foreigners buying Samsung, SK hynix shares despite Korea-Japan row? (Korea Times, 16-Jul-2019)
- Profile: Foosung Co Ltd (093370.KS) (Reuters)
- Company Overview of Dongjin Semichem Co., Ltd. (Bloomberg)
- Dongjin / Foosung / Japan’s sanction lifts Korean stocks of component material makers (Pulse News, Korea, 16-Jul-2019)
- Fitch / Japan has “much to lose” in trade dispute with Korea: Fitch report (Pulse News, Korea, 16-Jul-2019)
Related articles:
- Book Announcement: World View: War between China and Japan - by John J. Xenakis (28-Jun-2019)
- South Korea vs Japan military 'radar lock' feud continues to escalate (20-Jan-2019)
- Japan-Korea relations worsen over 'comfort women' issue (17-Dec-2018)
- China funds unauthorized anti-Japan comfort woman statue in Manila, Philippines (28-Dec-2017)
- Japan and China in confrontation over comfort women (07-Mar-2007)
- China and Japan really DO hate each other (30-Aug-2013)
KEYS: Generational Dynamics, Japan, South Korea,
Samsung Electronics, SK Hynix, LG Electronics,
Battle of Myongnyang, Sino-Japanese war,
comfort girls, radar lock
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
