Japan restricts exports of high-tech materials to Korea, affecting the global supply chain as well as Samsung, LG, SK Hynix, etc. But for their part, Japan is not affected. What negative?
In the past days VnReview has many articles updated and analyzed for readers about Japanese – Korean stress. Mainly revolves around how Korean firms depend on technology and materials. To bring more multi-dimensional perspective, we continue to translate for you another article by author Takashi Yunogami, head of the Institute of Technology, Enterprise and Competitiveness (ITEC) under Doshisha University , published in magazines EE Times.
How limited is it?
On July 4, 2019, the Japanese government issued an export restriction order against South Korea, for raw materials including plastic, HF, and contrast. These are the most basic materials for the production of electronic devices.
Japan restricts exports of high-tech materials to protest the Korean Supreme Court's ruling
Japanese companies that want to sell to Korean customers need to apply for a license, which can take up to 90 days. According to data from the Korea International Trade Association in 2018, Korea imported 84.5% of plastic sheets from Japan (worth 19.7 million USD). At the same time, buying 93.2% of contrast material worth nearly 300 million USD, 41.9% of HF gas is worth nearly 67 million USD, out of the total materials needed for semiconductor and screen production.
Looking at these numbers, it seems that limiting the contrast and plastic sheets will affect Korean companies more. These are Samsung, SK Hynix and LG. This is what Korean media has warned, translated by VnReview for readers here and here. But it is only based on the scale of dependence on high quality materials from Japan, but according to Yunogami's perspective, in terms of nature, HF gas itself – which is least dependent – has the most profound influence. to Korean firms.
Korean media said that interrupting the supply of contrast material would cause the greatest damage
Moreover, Yunogami also believes that this restriction not only affects Korea but also Japanese companies. In his view, the Abe administration has "dug its own pit", and the relationship between the two countries is hard to come back to, never even.
Plastic sheet and contrast material
Pi resin is an important part of OLED panels. LG is the largest OLED panel manufacturer for the largest TV, while Samsung is the largest mobile OLED platform. If the restriction makes their supply of this component low, it will have a profound impact.
Meanwhile, the reported contrast material is limited including the type used for EUV photolithography. An advanced technology semiconductor process, began mass production this year. This has a clear impact on Samsung's most modern 7nm chip manufacturing technology, intended for use by orders from Qualcomm, NVIDIA, etc. It also affects 16nm DRAM chip production but The company is planning to increase capacity. In addition to Samsung, another company, SK Hynix, will also feel "painful" because of the ban.
Japanese embargo has an impact on Samsung's 7nm chip production plans
According to experts, Samsung is operating a factory just "in-time" (right product – the right amount – at the right time – the right place), Toyota completed the theory in 1970. This production system keeps the inventory level of ingredients, materials and components to a minimum. It is forecasted that Samsung has EUV contrast material about a month, with similar HF gas.
When materials are exhausted …
The most advanced semiconductor products are considered application processors (APs), for example SoC Exynos on Galaxy phones. Samsung is the largest smartphone company in the world, with last year's delivery of more than 292 million units. Coming soon Galaxy Note 10 will be equipped with new SoC 7nm EUV process, and Samsung will also produce many such chips with this process. With just one month of inventory of contrast material, they will have to stretch the production schedule and accordingly reduce the amount of smartphones produced.
Restrictions can hinder Korea's DRAM production
Worse, if EUV is also used to make DRAM, the consequences will be even greater than the Galaxy phone to cut production. By Samsung and fellow countryman SK Hynix are two leading companies in the DRAM market. According to statistics in the first quarter of 2019, Samsung holds 42.7% of the market, SK Hynix 29.9%, a total of 72.6%.
With control of up to two-thirds of the market, Samsung and SK Hynix's losses will spread to their customers as well. With the amount of electronic devices delivered in 2018 including 1.4 billion smartphones, 300 million PCs, 150 million tablets, 11.75 million servers by IDC statistics, the number of influences will be huge. The global electronics industry will be angry with Japan for indirectly causing chaos in the supply chain.
And HF substances
After a closer assessment of chip production, the author recognized a new HF shortage that had a tremendous impact on companies like Samsung and SK Hynix.
HF is used more than 10% over the entire semiconductor process
Hydrofluoric acid solution is used in a mass cleaning system capable of handling hundreds of wafers at the same time. This chemical is diluted with a very high purity water, called deionized water (DI water) according to the fixed mixing ratio. Next, the hydrofluoric acid solution is then mixed with ammonia solution (NH4OH) to clean the wafer batches after the above stage. Next, use the original hydrofluoric acid solution for a mass wet corrosion system. And finally, clean the wafer's back, each plate will be cleanly sprayed with solution.
Semiconductor manufacturing process can range from 500 to 1000 steps, but wet cleaning and corrosion are applied for more than 10% of the whole process. And with the current trend of shrinking, cleaning is more important. Clean and re-clean, remove any impurities to achieve high quality products. Each semiconductor factory has a unique blending formula for their cleaning solution, quantifying each component very strictly. Because it affects the productivity of each batch of chips.
HF is essential for cleaning wafers in semiconductor manufacturing processes
What if HF in the depleted warehouse?
As mentioned above, HF is used more than 10% over the entire semiconductor process. It is an essential chemical for any chip, especially when it comes to mass production. In addition to DRAM, application processor, scale of Galaxy smartphone production, even NAND flash memory is affected.
In the first quarter of this year, Samsung led the market with 39.4%, while SK Hynix ranked 5th with 9.5%, totaling South Korea accounted for approximately 40% of the entire NAND flash market. Followed by the SSD market, Samsung led with 33.4%, SK Hynix ranked 3rd with 9.9%, combined they accounted for 43.3% of the market. Samsung's SSD not only provides PC, but also Microsoft, Google, and Amazon servers. So when Samsung gets into trouble, the domino effect will spread to American companies as well.
Can they replace HF source from Japan?
Samsung led the way with 39.4%, SK Hynix ranked 5th with 9.5% of the NAND flash market
Korea imported 41.9% from Japan, 45% from China and 10% from Taiwan. If the supply of Japanese firms interrupts, they will tend to switch to China and Taiwan to make up for it. In addition, there is information that the Russian company has made a proposal to supply HF gas instead of Japan. However, things will not happen so quickly, at least within the next three months because firms from China and Taiwan cannot increase such folding capacity.
Next, as mentioned above, the HF mixing ratio with other chemicals is carefully calculated. Technology secret and assigned to each process of each factory of each company. Therefore, China and Taiwan need time to adjust to Korean requirements. If rushed to the point that they demand indiscriminately, not the original formula. There is a high probability that the finished product of DRAM, NAND flash will drop sharply.
And in the SSD market, Samsung leads the way with 33.4%, SK Hynix comes in third with 9.9%.
That's the worst scenario. When the supply is cut off and the alternative source fails to respond promptly – "the distant country cannot save near fire". Consequently, even if you want to produce a small amount of high quality finished product as before, it may be impossible.
After all, the Japanese government has "dug its own pit"
But bad news for Japan, then after two or three years or maybe longer, the supply chain also adjusts itself to adapt to new circumstances. Logistics issues will be resolved gradually, semiconductor companies can make any components they want, with HF sources from China and Taiwan.
The Korean government has announced the launch of a $ 850 million budget package, which supports local material manufacturing companies. This policy means that Korea will gradually reduce its dependence on raw materials from Japan. They could not let the two key semiconductor industries and screens be so easily "strained" by foreign countries.
South Korea cannot let semiconductors and screens are so "tightened" by Japan
In the long term, Korea will systematically eliminate the use of chemicals from Japan, possibly including semiconductor manufacturing equipment. As such, high-tech materials such as optical barriers, chemicals, wafers, semiconductor devices manufactured in Japan will be removed from shopping orders. At that time, Korean companies would reuse old tricks in the past: actively recruiting and enticing Japanese engineers to work. In the 1980s, Korea was very eager to acquire highly qualified Japanese engineers in DRAM design, so that the latter could rise to control 4/5 markets.
The final consequence for Japan, companies that produce materials, machinery and equipment, may lose business relations with market leaders such as Samsung, SK Hynix, LG. But the loss of business is not all. It is the response to orders for leading companies in the industry such as Samsung, which helps to sharpen advanced manufacturing techniques. If there is no more, the possibility that Japan's competitive advantage will be diminished. While China and Taiwan are pumped with "stimulant drugs" to help bridge the gap.
Did Abe's government "dig a hole" when restricting exports to South Korea?
Even when Abe's government lifted export restrictions, everything was too late. Damage has occurred. Once it has lost confidence, it is difficult for the two sides to rebuild their old business relations. The Japanese government's actions have caused irreparable harms to the global electronics industry. But the price to be returned cannot be calculated, and it is not necessary.