Samsung Electronics Co., the world’s largest memory chipmaker, is already reeling from Japan’s export curbs on three key materials needed to make semiconductors. An expanded list that includes machine technology could make it even harder for Samsung and South Korean carmakers to make their chips and cars.
The list of products being exported to Korea that could meet with tougher restrictions includes CNCs, which function as computers for machine tools and are effectively monopolized by Japan’s Fanuc Corp., according to Jeong Dong-ik, an analyst at KB Securities in Seoul.
As CNCs are highly specialized, swapping the gear with another manufacturer’s would be highly difficult, said an official at a mid-sized machine tool maker based in Seoul, who asked to remain anonymous because of the sensitivity of the issue. Shifting to other manufacturers like Siemens AG could mean an overhaul of operating systems and procedures, the official said.
In Changwon, where many South Korean machinery makers are based, the local chamber of commerce is checking potential losses at companies, according to a statement issued on Friday. Spokespeople at Doosan Machine Tools Co. and Hyundai Wia Corp, which make machine tools in South Korea, weren’t immediately reachable by Bloomberg.
Shares of Hyundai Wia fell 3.9% on Monday. Fanuc dropped 2.5%. Doosan Machine is unlisted. The benchmark Kospi index slid 2.6% heading to its lowest level since November 2016.
The timing of the export restrictions couldn’t have come at a worse time. Just last week, South Korea reported its exports fell for an eighth month in July, with overseas chip shipments sliding 28% year-on-year.
While the export restrictions aren’t an outright ban, they may slow the bureaucratic process of sending those Japanese machine tools over to South Korea, said KB Securities’ Jeong. Japanese makers like Fanuc also wouldn’t want to lose their Korean customers, he said.
Semiconductor production equipment makers may be asked to strengthen export control operations as a result of Japan’s move, Jefferies analyst Masahiro Nakanomyo wrote in a report. While noting that Hitachi High-Technologies Cop. and Advantest Corp. both have Korean sales weightings over 30%, Nakanomyo cautioned against knee-jerk reactions.
“While there is a possibility of a major impact on exports to Korea depending on the application of export controls, we believe this scenario should not be discussed lightly,” the Jefferies analyst said.