Three key suppliers of photoresist chemicals to Samsung's newest and most cutting-edge chipmaking project - Tokyo Ohka Kogyo, Shin-Etsu Chemical and JSR - told Nikkei they were not sure whether their supplies could continue as normal following the introduction of the new controls on July 4.

 

A senior government official explained Nikkei that Japanese companies had been demanded to halt all shipments until they receive a government license for each order. This may take as long as 90 days or even longer, depending on each case, he said.

 

One person close to the company's advanced chipmaking plans said elements of Samsung's research program had already been afflicted. 'The company has to put on hold some part of EUV [extreme ultraviolet]-related chip development for the moment in order to make sure the important photoresist supply can be secured in the future,' the person said.

 

Any disturbance in the supply of EUV photoresist - a coating product used in the extreme ultraviolet lithography vital to the most complex semiconductors - could set back Samsung's plans to come out its 7-nanometer chips around the turn of the year.

 

The advanced mobile and networking processors are important to Samsung's flagship smartphone rollout next year, and in addition its 5G telecom equipment. But they are also fundamental to the company's ambition to more than double its advanced contract chipmaking share to 25% from less than 10% by 2023, in a bid to take on market leader Taiwan Semiconductor Manufacturing Co.

 

Industry sources said the severity of the disruption relied on the length of the dispute between Seoul and Tokyo, which has acknowledged that it is concentrating on South Korea's core industry in retaliation for that country's inaction on court rulings over wartime compensation claims.

 

Japan's surprise crackdown this month on the export of three semiconductor-related materials - photoresist, fluorinated polyimides and etching gas - has generated doubts over the impact on the global economy. Samsung Electronics and SK Hynix, the world's two largest memory chip providers, handle more than 70% of the world's market for dynamic random-access memory and more than 40% of global NAND flash market. They both depend seriously on Japanese suppliers for the vast majority of these crucial chipmaking materials.

 

Shin-Etsu, which also supplies EUV photoresist to Samsung, told Nikkei that it only produced the product in Japan and so it was applying for an export license. This could take 90 days, a spokesperson acknowledged.

 

While Samsung is thought to have built up three months' stock of etching gas, used for making both memory and non-memory chips, it's more difficult to hold inventories of the EUV photoresist coating crucial to advanced chipmaking, different sources said. It expires within weeks of opening and requires such demanding storage conditions that it is unrealistic to stock vast quantities for the long term, the sources said. 'It's very rare for chip manufacturers to stockpile those things,' one chip industry executive said.

 

Replacing Japanese suppliers of EUV photoresist with alternative sources was also improbable in the short term. 'It is not totally impossible to replace those Japanese suppliers, but it would take one year to achieve that, as the chip manufacturing process together with chip designs have to be tested all over again,' said one person familiar with the matter. Only a few big chipmakers such as Samsung and TSMC have the costly and complex technology to make the 7-nm chips. TSMC is set to be the first to bring a chip using EUV technology to market by the end of this year.

 

Even so, its ambitions to challenge Taiwan's TSMC as the world's biggest contract chipmaker across the board could be delayed by the controls if the situation persists and approvals are not rapidly given, said several sources. The South Korean company in April published it intended to invest 133 trillion Korean won ($113 billion) by 2030 to strengthen its non-memory logic chip business, a move frequently seen as a challenge to TSMC's global position.

 

The two finest semiconductor manufacturers in the world - Samsung and TSMC - have long competed to build the most advanced chip production technology to support cutting-edge processors, artificial intelligence and modems.

 

Chip designers for example Apple, Huawei Technologies, Samsung, Qualcomm and Nvidia have tended to line up in different camps as they prepare for new technologies such as 5G, AI and autonomous driving. Apple and Huawei are TSMC customers, while Qualcomm and Nvidia have tended to place orders with both TSMC and Samsung, sources said.

 

Samsung did not respond to the Nikkei Asian Review's request for comments. Nikkei previously reported that Lee Jae-yong, vice chairman of Samsung Electronics and the group's de facto chief executive, traveled to Japan on Sunday to meet executives from Japan's megabanks and business partners. South Korean President Moon Jae-in on Wednesday told executives from 30 South Korean conglomerates, including Samsung, that 'we can't rule out the possibility that the situation would be prolonged, despite our diplomatic efforts to resolve the issue,' Reuters reported.

 

Source: TRONSERVE