Samsung To Prepare Contingency Plans For Korea-Japan Trade Scuffle

Samsung boss JY Lee has ordered the conglomerate's semiconductor and display businesses to draw up contingency plans in case the trade dispute between South Korea and Japan becomes dragged out, according to South Korean media reports.

The de facto leader of Samsung Group, JY Lee, reportedly convened a meeting on Sunday with senior executives of Samsung Electronics' display and semiconductor businesses upon his return from Japan, ordering them to come up with plans that took into account Japan's trade restrictions, a Hankyung report said. 

JY Lee left for Tokyo last week to meet with local business leaders to discuss how to move forward after Japan's announcement to impose trade restrictions on South Korean companies in relation to key materials that go into producing displays and semiconductors.

Japan has so far singled out three materials -- fluorinated polyimide, resist, and hydrogen fluoride -- in its trade restrictions. Japanese companies require government approval before they can export these materials to South Korean companies. 

As Japanese companies are the main manufacturers of these materials, the restrictions have had direct implications on the chip and display production of Samsung Electronics, as well as its compatriots SK Hynix and LG Display.

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Following Lee's orders, Samsung is now reportedly looking to diversify its suppliers as well as foster local competence with the expectation that the trade dispute will likely be prolonged.

The South Korean conglomerate has also reportedly secured emergency chip and display materials from the US, China, and Taiwan to keep production going but long-term risk to the company remains high.

Japan is also planning to remove South Korea from its "white country list", which would further impact the South Korean electronics industry. White-listed countries are able to trade technology with minimal restrictions in Japan. If South Korea is removed from the list, its impact would likely expand beyond key component to also affecting end products. 

The diplomatic dispute between the two countries began late last year when South Korea's highest court ordered Japan's Mitsubishi to provide compensation for its use of South Korean slave labourers during World War Two. Japan disputes the court decision, saying it had already made full reparations in an earlier agreement between the countries.  

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