Japan allows further exports of high-tech material to South Korea

SEOUL (Reuters) – Japan has approved shipments of a high-tech material to South Korea for the second time since imposing export curbs last month, two sources said, ahead of talks by government officials this week to resolve a dispute stemming from their wartime past.

Relations between the two U.S. allies worsened late last year when a South Korean court ordered Japanese companies to compensate some of their former laborers forced by the firms to work during World War Two.

In early July, Japan tightened controls on shipments to South Korea of three materials used in chips and displays, threatening to disrupt the global tech supply chain. Japan also announced a plan to remove South Korea’s fast-track export status from later this month.

The material cleared for Japan’s exports to Samsung Electronics Co Ltd (005930.KS) in South Korea is photoresists, which are crucial for the tech giant’s advanced contract chipmaking production, the people who were familiar with the matter said on Tuesday.

A Samsung Electronics spokeswoman and a South Korean trade ministry spokeswoman declined to comment. A Japanese official in charge of the issue was not available for comment.

An official at South Korea’s presidential office confirmed the exports at a briefing, but said that “uncertainties” will remain until Japan completely removes the tighter export controls it has instituted.

“Tokyo’s latest export approval is positive for the local industry, but I don’t see Japan’s move as a conciliatory message to South Korea,” another South Korean government official told Reuters, requesting anonymity because of the sensitivity of the matter.

Earlier this month, Japan gave the green light to the export of photoresists to Samsung Electronics for the first time since it imposed the restrictions.

Samsung Electronics shares ended up 1.95% on Tuesday, leading the wider market’s .KS11 gain of 1.05%.

CARBON FIBER

Japan’s latest move comes ahead a meeting between Japanese Foreign Minister Taro Kono and his South Korean counterpart, Kang Kyung-wha, in Beijing on Wednesday.

“This is a signal that Japan would not further escalate tensions. This is positive in that it creates an atmosphere for talks,” said Ahn Duk-geun, a international studies professor at Seoul National University.

But he said he does not expect a breakthrough in the stalemate, citing wide differences over how to resolve forced labor issue between the two neighboring countries. “I hope there will at least be a handshake,” Ahn said.

“We will have to actively express our position, but it is a very difficult (situation),” Kang said at an airport in Seoul on Tuesday before leaving for Beijing.

Separately, South Korean President Moon Jae-in pledged to nurture the local carbon fiber industry, as part of efforts to reduce dependence on Japan imports for high-tech materials.

Moon attended an event by South Korean firm Hyosung Advanced Materials (298050.KS) to announce a total of 1 trillion won ($828.55 million) investment by 2028 in expanding production of carbon fiber, one of the items potentially subject to tighter export controls and used to make parts of hydrogen cars and aircrafts.

Currently, South Korean firms rely on Japan’s Toray Industries (3402.T) and others for carbon fiber supplies, industry officials say.