The trade dispute between South Korea and Japan

South Korea and Japan: Trade Dispute

The global economic problems are getting worse as after the U.S.-China trade war; another dispute is unfolding between South Korea and Japan. The reason for the dispute dates back to the 1940s when the Japanese military forced Korean women to become sex slaves. There are other problems that started several decades ago, but neighbors were unable to solve their disagreement.

The ongoing trade dispute will have a negative influence not only on South Korean and Japanese companies but on the global economy in general. Japan imposed restrictions on the goods which are crucial for Samsung and Hynix. According to these new restrictions, three classes of materials used in the production of semiconductors and cutting-edge screens will be affected.

It is a big problem for Samsung, which is the biggest smartphone maker in the world. Together with another Korean company Hynix, they produce 60% of memory chips around the globe. The damage is already substantial as Samsung, which is the biggest Korean company, lost 13$ billion in market value. This happened during the first week of this month. Hynix is also struggling as the company lost 1.5 billion won in market value.

These restrictions went into effect on Thursday, and from that period, Japanese companies should obtain export licenses for shipments in South Korea. The list of these exports includes chemicals used for making refrigerants, metals manufacturing, and so on. However, the biggest problem for South Korean companies is the components for producing smartphones.

This new reality is affecting not only South Korean companies but foreign companies as well. For example, flexible screens for iPhones, memory chips that HP is using are just several products that will lose from this trade dispute.

The situation is quite difficult for Samsung because it will be hard to find other companies outside of Japan to solve the shortage of components. According to several sources, Samsung can keep the production without any delays for one month. Samsung and Hynix are trying to solve this problem, but it will take time. Right now, more than 90% of fluorinated polyimide and 44% of hydrogen fluoride comes from Japan.

Japan will remove South Korea from the list of “white countries” in late August. It means that it will become more difficult for South Korean companies to obtain the components made in Japan.

The current situation is harmful to both countries. South Korea and Japan used to have disagreements, but what is happening now is not a typical case. They should work together to solve their problems. Global supplies of smartphones and other products are at risk because of this trade dispute.