The Samsung headquarters in Seoul's ritzy Gangnam district. Photo: AFP

South Korea’s Hankyoreh newspaper reported what it said was a suggestion by Russia that it wants to supply etching gas, one of the chemicals needed to make semiconductors but whose export Japan threatens to restrict in retaliation for a Korean court’s ruling on colonial era forced laborers.

“Russia has recently told the government through diplomatic channels that it can supply hydrogen fluoride [technical name for etching gas] to South Korean companies,” the left-wing paper reported, quoting an unnamed Korean government official. “Our government has also continued to seek a route to replace imports from Japan since November last year when Japan temporarily suspended the supply of etching gas.”

Kim Yang-paeng, a semiconductor researcher at the Korea Institute for Industrial Economics and Trade (KIET), commented: “If we use Russian products, we need to test them. So, it will take time to normalize the production.”

An industry source added, “There is no information at all about the quality of Russian products and what materials they are using. Therefore, we don’t know how long it will take to normalize chip production until we test it.”

Korea chip makers are trying hard to expand their import lines for those materials. “There are some Korean companies that import raw materials from Taiwan or China and produce high-purity etching gas, so we are contacting these companies,” said an industry source.

If locally made etching gas is used, there may be a quality problem with it. Using poor quality etching gas may lead to low productivity.

Photoresist, another chemical used in making memory chips, so far is being imported normally from Japan, but etching gas imports have stopped.

Japanese and South Korean officials held hours of talks Friday to discuss a worsening diplomatic row that has prompted Washington to offer to mediate between the US allies.

The meeting between representatives from Japan’s trade ministry and South Korea’s foreign ministry ran hours longer than expected but there was no sign of a detente in the simmering dispute.

Japan last week ramped up long-running tensions over the use of forced labour during World War Two by announcing restrictions on exports used by South Korean chip and smartphone companies.

Tokyo says the constraints, which apply to three chemicals as well as technology transfers, were made necessary by a “loss of trust” in relations with Seoul, but also accuses South Korea of improperly handling exports of sensitive materials from Japan.

And Japanese officials said they defended their decision in Friday’s talks.

“We confirmed Japan’s safety management system on exports,” a spokesperson from the Ministry of Economy, Trade and Industry told reporters, speaking on condition of anonymity.

“We answered all their questions in a careful manner and explained that this is based on international rules. It is not a World Trade Organisation violation, and it is not a countermeasure.”

But earlier in Seoul, President Moon Jae-in’s office said South Korea had done nothing wrong and called for a third-party investigation into Japan’s claims.

The brief glimpse given to media of the meeting suggested an environment that was anything but warm – the two Japanese officials remained stony-faced and sitting at a table when their South Korean counterparts arrived, offering no apparent greetings or handshakes before reporters were ushered out.

The new restrictions, which significantly slow exports, took effect from July 4.

Japanese officials are weighing additional measures including removing South Korea from a “white list” of countries that face minimal constraints on technology transfers with national security implications.

Seoul has threatened to take the issue to the World Trade Organization and also urged Washington to intervene.

US officials said they would “do everything we can” to ease tensions, without offering a specific opinion on Japan’s measures.

Relations between the American allies have long been strained over issues related to Tokyo’s brutal 1910-45 colonial rule over the Korean peninsula.

But ties have been further hurt by a series of rulings from South Korean courts ordering Japanese firms that used wartime forced labour to compensate victims.

Experts said there was little hope of either side backing down quickly, with both Moon and Japan’s Prime Minister Shinzo Abe unlikely to offer concessions.

“As the dispute deepens, it is increasingly difficult for either Moon or Abe to yield,” wrote Tobias Harris, an analyst at the Teneo consultancy group, in a note.

Any compromise by Moon “would likely be seen as capitulation to Japanese economic coercion and could trigger a backlash,” Harris wrote.

“Meanwhile, the South Korean reaction has likely convinced Abe that he has hit a pressure point,” he added, and it “could encourage his administration to intensify the pressure to goad Moon into surrendering.”

Japanese officials appeared to rule out further talks.

“We think we fully answered all the questions,” the spokesperson from Japan’s Ministry of Economy, Trade and Industry said.

“We will accept emails if they have technical questions.”

–With additional reporting by AFP–

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