Japan tightened restrictions last month on exports of three chipmaking materials to South Korea, home to memory chip titans Samsung (005930.KS) and SK Hynix (000660.KS), threatening to disrupt the global tech supply chain as it provides about 70% or more of the restricted products to the world.

TOKYO/SEOUL: Japan’s curbs on exports of high-tech materials to South Korea could backfire in the long run, eroding its dominance over a key link in the global chip supply chain, suppliers and experts say.

Japan tightened restrictions last month on exports of three chipmaking materials to South Korea, home to memory chip titans Samsung (005930.KS) and SK Hynix (000660.KS), threatening to disrupt the global tech supply chain as it provides about 70% or more of the restricted products to the world.

While the move highlights Japan Inc’s firm place in the industry even after its once mighty giants like Sony (6753.T) lost out to nimble Chinese and Korean rivals, it has fueled concerns that its grip on the niche market for fluorinated polyimides, photoresists and hydrogen fluoride could loosen.

“South Korean companies cite quality and stable supply as reasons for choosing Japanese materials. But this has made them aware of the need for change and they are already taking action,” a source at a Japanese materials supplier said.

“This will hit us like a body blow.”

Samsung, for instance, has stepped up testing of non-Japanese photoresists and hydrogen fluoride, several sources familiar with the chip supply chain said.

Soulbrain (036830.KQ), a supplier of hydrogen fluoride to the Samsung and Hynix - the world’s No.1 and No.3 chip vendor, is aiming to match the purity of Japanese hydrogen fluoride at a plant that is still under construction.

Industry experts, however, note it would take time for South Korean firms to move up the value chain as the three high-tech materials are not easy to replicate.