A deepening row between South Korea and Japan has put Samsung’s money makers under threat. Japan has imposed tough economic sanctions on South Korea to protest a ruling from the latter’s Supreme Court. The ruling held that Japanese companies have to pay compensation to individual victims of forced labor during Japan’s occupation of Korea.
Samsung Electronics Vice Chairman Lee Jae-yong, the defacto head of the conglomerate, has gone to Japan to meet with local business leaders. Seoul’s response to the sanctions will no doubt come under discussion during those meetings.
Japan’s export restrictions spell trouble for Samsung
The sanctions enforce strict restrictions on the export of three key items to South Korea. These items are used for producing smartphone displays and semiconductors. Both are crucial businesses for Samsung which generate a significant chunk of its profits. Samsung and other Korean companies are now finding it hard to lock down alternative suppliers. Japan accounts for up to 90 percent of the global production of these materials.
While Samsung Electronics hasn’t confirmed Lee’s schedule, local reports suggest that he will be meeting several Japanese business figures during his visit. Lee may call on the Japanese businesses to lean on their government to relax the export restrictions. Under the current regime, Japanese exporters would require government approval before they can ship the products to Korea. The approval process takes 90 days which will significantly impact the production capabilities of companies like Samsung and SK Hynix.
South Korea previously had preferential treatment from Japan for export of these materials. The country is now leveraging its monopoly to disagree with the Korean Supreme Court’s ruling. South Korea’s Minister for Economy and Finance Hong Nam-ki has called on Japan to revoke the trade restrictions as it would negatively impact the global economy.