[News] Japan, South Korea Reportedly Strive to Cut Dependence on China for Tech Materials

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As Donald Trump threatens to impose tariffs on Chinese imports from his first day in office, how to reduce dependence on China’s tech materials becomes a top priority for Asian countries like Japan and South Korea, which are heavily involved in semiconductors. According to a report by Nikkei, both nations have launched policies, ramping up investments to accomplish self-sufficiency in key ingredients, though the results remain to be seen.

Japan Sets Goals for Self-sufficiency by 2030

Japan has been doubling down on its efforts on the semiconductor industry recently. In addition to its support on Rapidus, a chip making company which has received over USD 2 billion in government support to mass-produce 2nm logic chips by 2027, Japan also aims to triple the sales of domestically produced semiconductors to USD 112.55 billion (15 trillion yen) by 2030, according to a previous report by Reuters.

And the goal, for sure, needs to be accomplished by building its own supply chain and securing critical materials used in key sectors. According to Nikkei, the Japanese government is allocating USD 3.42 billion (527 billion yen) to support initiatives focused on establishing domestic production facilities in sectors like digitization and green industries.

Additionally, Japan’s Ministry of Industry has devised a strategy for securing critical minerals, prioritizing battery metals, rare earth elements, gallium, germanium, and uranium, Nikkei notes.

For instance, Japanese trading house Sojitz plans to build a plant in Kyushu, the same region where Taiwanese foundry giant TSMC is constructing its Kumamoto plants, to process fluorspar into anhydrous hydrogen fluoride, a key compound used in the ‘etching’ and ‘cleaning’ steps of the semiconductor process, according to Nikkei.

The aim of the Sojitz project, according to Nikkei, is to supply up to 40% of Japan’s annual demand for this crucial chemical, significantly reducing the country’s reliance on China for both the chemical and its essential components.

South Korea Takes Action on Critical Minerals

On the other hand, South Korea imports almost 95% of its key minerals, with demand rising recently due to the needs of advanced industries such as semiconductors and secondary batteries, according to a previous report by Yonhap. Therefore, it has designated 10 minerals, including lithium and nickel, as “strategic” key minerals last year, with the goal of reducing reliance on any single country from the current 80% to 50% by 2030, according to Yonhap.

Moreover, Seoul has been actively engaging with Canada, Australia, Chile, and several African countries to secure essential minerals like lithium, nickel, cobalt, and copper, Nikkei adds.

Challenges Lie ahead

Meanwhile, China had made its move, raising additional challenges for other nations. According to Nikkei, on November 16, China announced it will impose stricter export restrictions on various materials, including tungsten, graphite, and aluminum.

There is a reason China has become the dominant supplier of so many materials, as it can often provide the same materials at a lower cost. Nikkei further notes that the country is not only a major producer of raw materials but also a key processor of many of them, which makes it so hard to substitute.

For instance, while Australia is the primary producer of lithium, countries like Japan and South Korea rely heavily on China for the majority of processed lithium products, the report indicates.

On the economic front, fluctuating prices present another challenge for companies outside China looking to invest in commodity production, according to Nikkei. To elaborate, the lower market prices make it harder for companies to generate profits from selling commodities.

Certain materials, such as magnesium, are almost entirely sourced from China, with no significant efforts underway to diversify supply chains, the report notes. Citing a Japanese industry ministry official, Nikkei notes that currently, 99% of Japan’s high-concentrate magnesium is sourced from China.

To improve the status quo, more government support, as well as understanding from customers regarding higher prices and companies’ efforts to reduce costs may be needed.

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