South Korea’s president said on Wednesday Japan’s export curbs on key materials used by South Korean technology firms could be prolonged and his government will sharply boost spending to help reduce their reliance on Japanese suppliers.
Japan said last week it would tighten restrictions on exports of three materials used in smartphone displays and chips, citing a dispute with Seoul over South Koreans forced to work for Japanese firms during World War Two.
The growing row threatens to disrupt supplies of chips and displays by South Korea’s tech giants Samsung Electronics (005930.KS) and SK Hynix (000660.KS), which count Apple Inc (AAPL.O) and other smartphone makers as customers.
“We can’t rule out the possibility that the situation would be prolonged, despite our diplomatic efforts to resolve the issue,” President Moon Jae-in said at a meeting with executives from South Korea’s top 30 conglomerates.
“It is a very regrettable situation, but we have no choice but to prepare for all possibilities,” said Moon, adding that the government will sharply increase spending to help Korean firms source parts, materials and equipment domestically.
He also dismissed reported remarks by a politician in Japan that South Korea illegally shipped hydrogen fluoride imported from Japan to North Korea in violation of international sanctions, calling them “groundless”.
Hydrogen fluoride, a chemical covered by the Japanese export curbs, can be used in chemical weapons.
“It is not desirable at all…that Japan takes measures that deal a blow to our economy because of political purpose and makes remarks that link the measures to sanctions on North Korea,” Moon said.
South Korea’s bread-and-butter chip industry accounts for 20% of its exports.
“We will seek international cooperation as the measures will naturally have an adverse impact on the global economy,” he said.