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Japan warns of stricter checks on exports to S.Korea, grants 1st nod since July

SEOUL/TOKYO: Japan warned it could expand strict checks on exports to South Korea, after earlier granting approval for the shipment of a high-tech material to its neighbour for the first time since imposing tighter curbs last month.

The news, which comes as the export curbs on three high-tech components have sparked a diplomatic crisis between the U.S. allies, shows that while Japan is doubling down on pressure, it is also not keen to unilaterally stop exports.

“We are stepping up our diplomatic efforts to make Japan retract its economic attack,” South Korean Prime Minister Lee Nak-yon told government officials as he announced Japan’s decision to allow the export of EUV photoresists, crucial for Samsung’s advanced contract chipmaking production.

Top Japanese officials said the approval followed “strict examination” and cautioned the country could consider expanding its controls beyond the three high-tech materials.

“If improper use of exports are found beyond three high-tech materials, we will implement thorough steps to prevent recurrence including expanding application examination,” Industry Minister Hiroshige Seko said.

Samsung declined to comment.

Approval of exports for three materials could take up to 90 days, slowing but not halting shipments.

Seko added that Japan does not usually announce each export approval but did so this time after South Korea described Japan’s recent curbs as an “embargo” on shipments.

Shares of Tokyo Ohka Kogyo rose 5.6% and Stella Chemifa surged 6.1% after the approval was announced. Tokyo Ohka Kogyo makes photoresists and Stella Chemifa produces hydrogen fluoride, both materials affected by the export curbs.

However, it is unclear if the first approval from Tokyo signals a breakthrough in trade relations.

“They approved only one out of a number of items, and they said they would approve exports for pure civilian purposes,” a South Korean senior trade ministry official told Reuters.

Japan has removed South Korea from the “white list” of countries with fast-track trade status. It has also asked exporters to go through a lengthy permit application process each time they want to ship restricted items to South Korea.

That covers a broad range of items, including those applicable to weapons production and machine tools.

Japanese officials have cited unspecified security reasons for the export curbs.

But they have pointed to an erosion of trust after South Korean court rulings last year ordered Japanese firms to compensate wartime forced labourers, a matter Tokyo says was settled by a 1965 treaty normalising bilateral ties.

South Korean chipmakers are hitting a dead end in their quest to find alternatives for key Japanese materials that have been hit with export restrictions, raising the prospect of major disruption to their operations in coming months.

The curbs for three high-tech materials apply on EUV photoresists, used in producing chips based on an advanced technique known as extreme ultraviolet lithography.

That could hobble Samsung’s efforts to use the technology to catch up with rival Taiwan Semiconductor Manufacturing in the booming business of building advanced chips. – Reuters

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Samsung profit slumps more than half as chip market weakens

SEOUL: The world’s biggest smartphone and memory chip maker Samsung Electronics on Wednesday reported second-quarter net profits slumping by more than half in the face of a weakening chip market, and as a trade row builds between Seoul and Tokyo.

The flagship subsidiary of the sprawling Samsung Group has enjoyed record profits in recent years despite a series of setbacks but is now struggling with chip prices falling as global supply increases.

Net profits in the three months to June were 5.18 trillion won ($4.38 billion), Samsung Electronics said in a statement, down 53 percent year-on-year.

“The weakness and price declines in the memory chip market persisted… despite a limited recovery in demand,” it said.

In mobile phones, it achieved “stronger shipments on new mass-market models but was overall weighed down by slower sales of flagship models and increased marketing expenses”, it added.

The results come hours after Apple, one of Samsung’s main rivals, delivered better-than-expected results as growth from services helped offset weak iPhone sales.

The US firm has been shifting focus to digital content and services as sales of its flagship device weaken.

Facing hardware challenges of its own, Samsung launched its top-end S10 5G smartphone earlier this year after South Korea won the global race to commercially launch the world’s first nationwide 5G network.

But in April it was embarrassingly forced to delay the release of its new and hotly anticipated Galaxy Fold phones after reviewers provided with early devices reported screen problems within days of use.

A simmering dispute between South Korea and Japan, which has seen Tokyo impose restrictions on chemical exports crucial to the South’s world-leading chip and smartphone companies — is also expected to affect Samsung Electronics’ key products.

“The company is facing challenges from uncertainties not only in business areas but also from changes in the global macroeconomic environment,” it said.

Two of the chemicals and materials targeted by Tokyo, hydrogen fluoride gas and photoresists, are essential to making memory chips, while the third, fluorinated polyimide, is used for high-spec TV screens and smartphone displays, including folding models.

In the second half, Samsung Electronics said it “expects persistent uncertainties in the memory business”, while “overall sluggish demand in the broad smartphone market may limit upside potential” as competition increases.

Q2 profits were ahead of expectations, HMC Investment Securities analyst Greg Roh told AFP, although smartphone sales lagged behind consensus forecasts.

He expected similar profits in the July-September period before sales pick up in the fourth quarter, but added: “One big variable is the trade spat with Japan.”

Supply chains

The South Korean firm had spent nearly eight years developing the Fold as part of its strategy to propel growth with groundbreaking gadgets.

While the model was not the world’s first folding handset, the smartphone giant hoped it would help spark demand and potentially revive a sector that has been struggling for new innovations.

The firm earlier this month announced it has “made improvements” to the device and would release it in September, but analysts say its delivery is likely to be affected by the Seoul-Tokyo trade dispute.

“Because of the volume of chemicals required within the semiconductor manufacturing process, it is unlikely that the major chip suppliers will be able to find suitable quantities from suppliers outside of Japan,” said Len Jelinek, executive director of semiconductor research at IHS Markit.

Tokyo’s move has raised international concern about the effect on global tech supply chains and the possibility of price hikes for consumers worldwide.

Samsung is by far the biggest of the family-controlled conglomerates that dominate business in the world’s 11th largest economy, and it is crucial to South Korea’s economic health.

Operating profits plunged 56 percent to 6.6 trillion won in the second quarter, the firm said, while sales fell four percent to 56.13 trillion won.

Samsung Electronics shares were down 2.7 percent in morning trade. – AFP

Samsung Electronics Q2 net profit slumps 53pc

SEOUL, July 31 — The world’s biggest smartphone and memory chip maker Samsung Electronics saw net profits slump by more than half in the second quarter, it said today, in the face of a weakening chip market and a trade row building between Seoul…