Japan resumes exports of chemicals South Korea’s chipmakers need

Japan has approved the first exports of sensitive materials to South Korea since a trade dispute began last month, but at the same time warned that it could expand curbs on dealings with its neighbor.

The Japanese government on Thursday said it would allow exports of some high-tech materials considered vital to South Korea’s semiconductor industry. Companies such as Samsung use them to make computer chips, among other products.

Tokyo tightened export restrictions on three chemical materials to South Korea in July, citing national security concerns. The curbs require Japanese companies to apply for licenses for each of the products, a process that can take up to 90 days.

The South Korean government — which has called Tokyo’s trade restrictions reckless — confirmed on Thursday that Japanese companies had received the green light to ship one of the chemicals.

The first approvals were granted after Japanese officials carried out strict screenings and confirmed there were no national security concerns, according to Japan’s chief cabinet secretary Yoshihide Suga.

“Such operations show that we’re giving trade permissions for appropriate cases,” Suga said at a press conference, adding that “this is not a trade ban.”

Hiroshige Seko, Japan’s minister of economy, trade and industry, added that the country could expand trade restrictions if “improper [use of exports] are found beyond the three chemical materials,” according to remarks the ministry posted online.

The moves come less than a week after Japan dropped South Korea as a preferred trading partner, escalating a dispute that threatens the global supply chain for smartphones and electronic devices.

Removing South Korea from a so-called white list means that Japanese exports to South Korea now require additional screening to make sure they are not used for weapons and military applications. The new restrictions go into effect August 28.

South Korea immediately threatened retaliation, saying it was taking steps to remove Japan from its own white list that governs trade in “strategic” items.

Seoul holds fire on retaliation

On Thursday, Seoul walked that back, saying it’s postponing a decision to drop Japan as a preferred trading partner.

South Korea buys about $54 billion worth of Japanese goods, including industrial machines, chemicals and cars, according to a tracking tool affiliated with the Massachusetts Institute of Technology.

The restrictions on the three chemical materials are already troubling the global semiconductor industry. South Korea’s Samsung and SK Hynix make nearly two thirds of the world’s memory chips, which are used in everything from smartphones to connected cars. Smartphone makers including Apple and Huawei rely on memory chips from the South Korean companies.

Samsung’s head of investor relations Robert Yi said during an earnings call last week that the company was “facing difficulties” because of Tokyo’s export controls “and the uncertainties that this new process would bring.”

An SK Hynix spokeswoman said last week that “certain difficulties are expected in securing materials” now that South Korea is off the white list. She added that the company is working to stockpile inventories and diversify suppliers.

Yoko Wakatsuki and Yoonjung Seo contributed to this report.