China’s export restrictions rattle local chipmakers, display firms

China has started restricting exports of key materials used in the manufacturing of chips and displays, a decision intended to hurt the United States, but with the potential to disrupt the supply chains of Korean chipmakers.

The flag of China is placed next to the elements of Gallium and Germanium on a periodic table. [REUTERS]

China has started restricting exports of key materials used in the manufacturing of chips and displays, a decision intended to hurt the United States, but with the potential to disrupt the supply chains of Korean chipmakers like Samsung Electronics.

China accounted for 39 percent of Korea's gallium imports last year, according to the Korea Institute of Geoscience and Mineral Resources. This made it Korea's second-largest source after the United States, which accounted for 46 percent.

As for germanium, China accounted for 89 percent of Korea's imports last year, followed by Russia, Germany and the United States.

The restrictions mean that exporters need specific approval to export gallium and germanium from China and must apply for special state permits. China cited national security as the motivation behind the move.

However, the Korean government predicts Beijing's latest export sanctions on key minerals will have a limited impact on the Korean economy, but chip and display companies are worried about risks to their supply chain if the restrictions grow protracted.

Korea has started to enhance the monitoring of the supply chains of key metals for chipmaking and high-tech industries in response to China's export controls and is seeking measures to minimize industrywide impacts, the Ministry of Trade, Industry and Energy said Tuesday.

The impacted materials are crucial for making a range of major products, including chips, solar panels and electric vehicles, and China is a major producer and exporter of the materials.

Korea's Industry Ministry held a meeting with the associations of chipmakers, display firms and other related sectors in Seoul on Tuesday and discussed ways to protect the supply chains of the metals alongside any related circumstances.

The Chinese move is expected to have a limited impact in the short run, but the Korean government and private sectors agreed to jointly enhance market monitoring and devise responses in a swift manner.

The government will set up consultation bodies to be in charge of sharing information on global supply situations and developing technologies for replacement.

In a recent survey of 400 major domestic importers and users of the materials, companies voiced concerns about price hikes and clearance delays and called for the need to diversify import channels, the ministry said.

"The government will extend support for companies in ensuring the stable supplies of the materials," a ministry official said.

Korea is heavily dependent on China and a handful of resource-rich nations for their supplies of key minerals for manufacturing.

China's export restriction is seen as an apparent retaliation for Washington restricting chip exports to China amid the intensifying Sino-U.S. rivalry, and some have pointed to the likelihood of further tit-for-tat moves by the United States and other nations.

BY PARK EUN-JEE, YONHAP [park.eunjee@joongang.co.kr]