November 24, 2024

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South Korea said Aug. 5 it will spend 7.8 trillion won ($6.50 billion) over the next five years to nurture its materials, parts and equipment sectors and trim its dependence on Japanese imports in the latest move to cope with the neighbor’s economic retaliation.

The move to boost research and development in the affected sectors came after Japan decided last week to remove Korea from a whitelist of countries subject to preferential trade status.

The massive spending is also aimed at promoting R&D activities for 100 key strategic items, according to the Industry Ministry.

“We will upgrade the competitiveness of the materials, parts and equipment industries,” Minister of Economy and Finance Hong Nam-ki said in a meeting with officials in Seoul.

In July, Japan also imposed tighter regulations on exports to Korea of three materials -- resist, etching gas and fluorinated polyimide -- that are critical for the production of semiconductors and flexible displays.

Japan’s export curbs have prompted Korea to diversify supplies of key industrial materials and boost their localizations to reduce heavy reliance on Japan. Korean companies have also been scrambling to find alternative suppliers of key items.

Of the 100 key strategic items, the Industry Ministry said it plans to secure supplies of 20 items within a year by reaching out to suppliers in other countries, including the United States and China.

The 100 items were selected from the list of around 1,100 industrial materials vulnerable to being affected by Japan’s removal of Korea from its whitelist, along with other key products vital for the country’s top six industries, namely chips, displays, cars, electronics, machines and chemicals.

The government will lower barriers for imports of such materials, including the three materials whose imports were restricted by Japan last month.

Korea will also help local firms seek acquisitions of foreign rivals that hold high-level technologies by providing them with financial and tax incentives estimated at around 2.5 trillion won.

“(The blueprint) focuses on finding solutions for South Korea’s weakness in the materials, parts and equipment industries, including its heavy dependency on a certain country,” Industry Minister Sung Yun-mo said in a briefing.     

“From R&D projects to verification, the government will build a system in which the companies can work closely, and Seoul will provide supports including facility investment.” 

By Ram Garikipati and newswires (ram@heraldcorp.com)