Samsung’s money makers under threat as Japan implements sanctions

Much has been made of Huawei’s ongoing troubles with the United States but it seems now that Samsung has something to worry about too. It’s not under threat from the United States but a deepening row between South Korea and Japan could have a negative impact on the two divisions which make Samsung a lot of money.

Japanese newspapers are reporting that the country is planning to impose tough economic sanctions on South Korea. It’s a sign of protest against the recent ruling from Korea’s Supreme Court which held that Japanese companies have to pay compensation to individual Korean victims of forced labor during Japan’s occupation of its country.

Japan’s sanctions could hit Samsung’s core businesses

From 1910 through 1945, South Korea was under the colonial rule of Japan. The two countries restored diplomatic ties in 1965 and Japan maintains that the issue of forced labor had been fully settled back then. However, South Korea’s Supreme Court ruled last year that Japanese companies like Nippon Steel and Mitsubishi must pay individual South Koreans for forced labor during that period. Japan says that the ruling is “unthinkable.”

According to reports, the Japanese government will now impose economic sanctions against South Korea. This entails stricter restrictions on exports of three items fluorinated polyimide, resists and etching gas used for making smartphone displays and semiconductors. Resists are thin layers used to transfer a circuit pattern to the semiconductor substrate while hydrogen fluoride is used to etch silicon materials. Samsung makes a significant chunk of its revenues from displays and semiconductors.

Japan previously extended preferential treatment for exports of these three materials to South Korea. Following the economic sanctions, exporters in the country will have to apply for export permission from the government if they want to send them to South Korea. The permits will take about 90 days to come through.

Japan has a virtual monopoly on fluorinated polyimide as it produces about 90 percent of it and the resist globally. It also accounts for 70 percent of the etching gas production. This will make it difficult for companies like Samsung to find alternate supply sources if shipments from Japan slow down.

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