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Replacing Japanese imports not easy: Panel

July 11,2019
Experts at a seminar hosted Wednesday by a local think tank were pessimistic about Korea being able to localize supplies of key materials for semiconductors and displays that are normally imported from Japan.

Even if such materials are locally produced, big companies will be highly likely return to made-in-Japan products if Tokyo eases new export restrictions in the near future, said Lee Joo-wan, a researcher from the Hana Institute of Finance.

He was speaking at the Korea Economic Research Institute’s seminar on “Effects and Solutions of Japan’s Economic Restrictions.”

“Materials with the same specification may have minute difference according to producers and the differences could make it impossible to proceed with manufacturing or could result in defective products,” Lee said. “To replace materials 100 percent by sourcing from alternative producers is impossible.”

In addition, localizing premium Japanese materials on which Korea relies will be difficult due to patent protection, according to Greg Roh, head of research at HMC Investment and Securities.

“Korean companies have been struggling to secure as much supply as possible from Japan starting earlier this month, but additional procurement won’t be that easy,” he said.

Cho Kyung-yup, a senior researcher from the Korea Economic Research Institute (KERI), warned that any Korean move to retaliate against Japan’s export restrictions would only boomerang.

“If the semiconductor materials supplied to Korea are trimmed by 30 percent, Korea’s gross domestic product [GDP] will go down by 2.2 percent, whereas Japan will only see a 0.04-percent reduction in GDP,” he said. “But if Korea copes with the situation by also slapping export bans on Japan, Korea’s GDP will fall by 3.1 percent, with Japan seeing a retreat of only 1.8 percent.”

Any restrictions on Korean exports to Japan are likely to fail because Japanese companies can source most materials domestically or from China, he said.

“If the export ban spreads into a trade war between Korea and Japan, the biggest beneficiary would be China,” he said.

Kwon Tae-shin, president of KERI, noted that Koreans should refrain from reacting emotionally to Japan’s move such as waging an anti-Japanese product campaign.

“The ripple effect of the export ban by Japan will reach not only Samsung Electronics and SK Hynix but the overall corporate ecosystem,” he said. “That will weigh on the Korean economy, which is already experiencing stagnant growth from the trade war between the United States and China, and worsened productivity.”

BY SEO JI-EUN [ebusiness@joongang.co.kr]