South Korea strike disrupts shipments of key cleaning agent for chipmaking

SEOUL, June 14 (Reuters) – A nationwide strike by truck drivers in South Korea has disrupted shipments to China of a key cleaning agent used by makers of semiconductor chips, the Korean International Trade Association (KITA) said on Tuesday.

It was the first sign the eight-day-old strike was affecting chip production’s global supply chain. It has already cost South Korea’s industry more than $1.2 billion in lost output and unfilled deliveries, according to the industry ministry. read more

KITA said a Korean company that produces isopropyl alcohol (IPA), a chemical used in the cleaning of chip wafers, faced difficulties in shipping to a Chinese company that in turn supplies wafers to chipmakers. It did not name either company.

About 90 tonnes of the material, or a week’s worth of shipments, have been delayed, the trade body said in a statement.

It corrected an earlier statement that had wrongly said production was disrupted, and added that the Chinese firm did not supply wafers to Samsung Electronics Co Ltd’s (005930.KS) chip production operations in China.

A major South Korean petrochemical company was also facing problems sending out IPA shipments from its plant in the port city of Yeosu, according to a person familiar with the matter who asked not to be named.

Only an “essential amount” is being let through, they said, declining to identify the company because of the sensitivity of the matter.

The truckers’ union, which is protesting against soaring fuel prices and demanding guarantees of minimum pay, vowed to continue the strike after four rounds of talks with the government failed to find a resolution.

Transport Minister Won Hee-ryong ruled out accepting any demand that sought to use the national economy as a hostage.

“The government will continue to listen to reasonable arguments but strictly respond to illegal actions in accordance with laws and principle,” Won said, according to a ministry statement.

The two sides plan to resume talks at 7 p.m. (1000 GMT) on Tuesday, the transport ministry said, an hour earlier than previously announced by the union.

Analysts expect the strike’s impact on domestic chipmakers to be limited, saying that both Samsung and the world’s second largest memory chip maker, SK Hynix (000660.KS), usually keep enough material on hand for three months or more.

“Both drastically increased inventory since Japan’s export curbs on chip material in 2019 highlighted the issue,” Ahn Ki-hyun, senior executive director of the Korea Semiconductor Industry Association, said.

Small business owners voiced concern about the havoc a lengthy strike could have on the recovery from the COVID-19 pandemic, as the truckers launched their action less than two months after social distancing norms were lifted.

“Small business owners are waiting helplessly,” a dozen lobby groups representing such businesses said in a joint statement, adding that shipments of liquor, food, farm and fisheries products had been blocked.

An official from HiteJinro Co Ltd (000080.KS), the biggest brewer of soju, the South Korean liquor, said its shipments were cut by about 40% by the strike.

Reporting by Byungwook Kim and Joyce Lee; Additional reporting by Heekyong Yang; Editing by Stephen Coates, Clarence Fernandez and Andrew Heavens

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