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Moody’s says Tokyo trade measures are a credit issue

July 04,2019
The decision by Japan to tighten rules on exports to Korea of key materials used in semiconductors and displays is a credit negative for Korean technology firms, such as Samsung Electronics and SK Hynix, ratings agency Moody’s said in a statement.

In a major escalation of a long-simmering diplomatic row over compensation for wartime forced labor, Japan abruptly announced earlier this week that it will tighten regulations on exports to Korea of high-tech chemicals used in semiconductor and display production.

“The Korean manufacturers heavily rely on Japanese producers for input materials,” Moody’s Investors Service said in a statement released Tuesday.

Citing data compiled by the Korea Trade Association, Moody’s said Korea imported 92 percent of its photoresists, 44 percent of its etching gas and 94 percent of its fluorinated polyimide from Japan in the first five months of 2019.

“However, Moody’s does not expect the export controls to escalate to an extent that will cause a material impact on the operations of the Korean manufacturers,” it said.

Many analysts have voiced worries that the negative impact of the Japanese export curbs is likely to spread beyond Seoul and Tokyo to electronics manufacturers around the world because Samsung and SK Hynix account for more than 70 percent of global memory chip output.

According to industry researcher DRAMeXchange, Samsung’s global market share in computer memory chips stood at 42.7 percent in the first quarter, while SK Hynix accounted for 29.9 percent of the market.

“As a result, any material disruption in their production would have serious implications for global supply chains and technology and electronics companies, including Japanese ones,” Moody’s said.

Yonhap