S.Korea eyes investing $854 million annually in chip supply chain after Japan's export curbs

Credit: REUTERS/POOL

South Korea will seek to invest 1 trillion won ($854.41 million) annually in developing home-grown materials and equipment used to produce micro-chips, a senior ruling party lawmaker said on Wednesday, after Japan tightened curbs on exports of some high-tech materials to the country.

Corrects third last paragraph to add dropped word "government"

SEOUL, July 3 (Reuters) - South Korea will seek to invest 1 trillion won ($854.41 million) annually in developing home-grown materials and equipment used to produce micro-chips, a senior ruling party lawmaker said on Wednesday, after Japan tightened curbs on exports of some high-tech materials to the country.

Japan said on Monday it would tighten regulations on exports of materials used in smartphone displays and chips to South Korea amid a widening dispute over South Koreans who were forced to work for Japanese firms during World War Two.

"We are doing a preliminary feasibility analysis (on the investment)," Cho Jeong-sik from the Democratic Party told reporters after meeting with officials from the presidential office and government ministries to discuss a response to Japan's decision.

The export curbs could hamper production of South Korea's chip giants Samsung Electronics 005930.KS and SK Hynix 000660.KS as the two chemicals targeted are essential, analysts say.

Data firm IHS Markit said on Wednesday the Japanese trade restrictions against South Korea would add to global trade tensions. Asian exporters are already being strained by a prolonged slowdown in the global electronics sectors.

"A reduction or elimination in the availability of these materials will significantly impede the production of memory and other semiconductor chips, impacting major semiconductor manufacturers including Samsung Electronics and SK Hynix," Len Jelinek, executive director of semiconductor research at IHS Markit, said in a note.

Japan's industry minister said on Tuesday that its decision to tighten controls was not in violation of World Trade Organization (WTO), rebuffing South Korea's earlier claims.

Cho, the South Korean ruling party lawmaker, shrugged off criticism in local media that the government is not laying out countermeasures swiftly. But he did not provide further details on the nature of the spending.

Shares in South Korean chip materials makers jumped after the government's spending plan was made public.

Shares of Ram Technology 171010.KQ and Ocean Bridge 241790.KQ, local firms producing chemicals used in chip manufacturing process, rose as much as 20% and 15%, respectively.

($1 = 1,170.4000 won)

(Reporting by Ju-min Park and Heekyong Yang; additional reporting by Hyunjoo Jin and Hayoung Choi; Editing by Kim Coghill)

((ju-min.park@thomsonreuters.com; +82 2 3704 5650; Reuters Messaging: ju-min.park.thomsonreuters.com@reuters.net))

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