SOUTH KOREA’S president said yesterday Japan’s export curbs on key materials used by South Korean technology firms could be prolonged and his government will sharply boost spending to help reduce their reliance on Japanese suppliers.

Japan last week tightened the approval process for Japanese shipments of photoresists and other sensitive materials to South Korean companies, which need the chemicals to produce semiconductors and display screens used in TVs and smartphones.

Japanese officials say such materials can be exported only to trustworthy trading partners, hinting at security risks without citing specific cases. Japan hasn’t elaborated but Prime Minister Shinzo Abe and his conservative aides have hinted there may have been illegal transfers of sensitive materials from South Korea to North Korea.

The growing row threatens to disrupt supplies of chips and displays by South Korea’s tech giants Samsung Electronics and SK Hynix, which count Apple Inc. and other smartphone makers as customers.

“We can’t rule out the possibility that the situation would be prolonged, despite our diplomatic efforts to resolve the issue,” President Moon Jae-in said at a meeting with executives from South Korea’s top 30 conglomerates.

“It is a very regrettable situation, but we have no choice but to prepare for all possibilities,” said Moon, adding that the government will sharply increase spending to help South Korean firms source parts, materials and equipment domestically.

“The Japanese Government’s move to inflict damage on our economy to serve political purposes and link [the issue] with sanctions against North Korea without any evidence is surely not ideal for the friendship and security cooperation between the two countries,” Moon said.

He called for the government and private companies to form an “emergency response system” to deal with the impact of the Japanese trade curbs and prepare for the possibility that the dispute drags over an extended period.

Moon spoke hours after South Korean officials told a World Trade Organization meeting in Geneva that the Japanese measures would have repercussions for electronics products worldwide and called for their withdrawal. Japanese officials countered that the measures didn’t amount to a trade embargo, but rather a review of export controls based on security concerns.

Japan’s moves spotlight its sway over a vital part of the global supply chain that the government is now using as a bargaining chip.

(SD-Agencies)