This archive report was first published on 11 July 2019.
South Korea's world-leading chip and smartphone industry is facing a crisis due to a decades-long dispute with Japan over forced labour during World War II.
On July 11, 2019, Tokyo announced that it would restrict exports of three chemicals vital to South Korea's chip and smartphone industry, escalating the diplomatic row.
The restrictions, which apply to the transfer of manufacturing technologies as well as the three chemicals, will significantly impede production, according to Len Jelinek, executive director of semiconductor research at IHS Markit.
South Korean President Moon Jae-in has described the situation as an 'unprecedented emergency' and has called on business leaders to prepare for a drawn-out crisis.
Top market players Samsung Electronics and SK Hynix, which supply tech titans Apple, Huawei, and Amazon, are likely to be severely affected by the restrictions.
Analysts warn that the crisis could delay the rollout of 5G technology and futuristic folding screens, and could also lead to a stagnation or regression of the world's most cutting-edge technology.
South Korea holds stockpiles, but shortages could set in after three months, according to Avril Wu, senior research director at Taipei-based market intelligence firm TrendForce.
Japan reportedly produces some 90 percent of the world's fluorinated polyimide, making it difficult for Korean companies to find alternatives elsewhere.
LG Display, a key manufacturer, is testing fluorinated polyimide made in China and Taiwan to see if it can replace Japanese supplies if needed.
