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Trade spat between Korea and Japan likely to affect global technology value chains: Experts Updated: 2019-07-12 16:12:59 KST

Analysts are concerned about the impact of Japan's export restrictions on global technology value chains.
International trade is structured in so-called 'global value chains', where different stages of the production process are located across the world.
For instance, companies around the world receive raw materials, add value to them through production, manufacturing, and then sell the finished product to customers.
Experts say that in the case of manufacturing IT products such as smartphones and computers, Japan and Korea play a crucial role.

"Let's take a look at Apple's iPhone as an example. Japan exports high-tech materials necessary to make semiconductors to Samsung Electronics. Samsung supplies its chips to Apple. Apple uses various marketing strategies and sells those phones to customers. This is a well-connected global value chain."

The expert added that switching players of the value chain, for instance, Korea trying to find markets other than Japan, is difficult, since firms have spent decades building their production lines.
And major tech giants across the globe are currently relying on Korean firms for chip supplies.
For example, data from DRAMeXchange shows that Samsung Electronics accounted for more than 40 percent of the global DRAM revenue market share in the fourth quarter of last year.
And SK hynix accounted for more than 30 percent.

And its not just the firms in the U.S.
Some analysts say, Tokyo's move will hurt Korea and Japan's economic growth and that it will have a spillover effect in other countries that trade with the two sides.
A researcher at Korea Economic Research Institute said that if Korean companies suffer a 30 percent drop in semiconductor-related supplies, South Korea's annual GDP would drop by around 2.2 percent.
Cho forecasts that Japan's GDP would also edge down zero.zero-four percent.

"Companies in Southeast Asia trading with Korea or Japan will be affected as well. For instance, if the trade spat leads to a fall in Korea's GDP, the firms' exports to Korea might decrease. And some South Korean tech giants' factories are located in Southeast Asia. Workers there might be affected, too."

Analysts added the two sides should solve the problem diplomatically rather than by economic attrition.
Ko Roon-hee, Arirang News.
Reporter : krh@arirang.com
KOGL : Korea Open Government License
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