SEOUL (REUTERS) – South Korea will seek to invest 1 trillion won (US$854.41 million/S$1.2 billion) annually in developing home-grown materials and equipment used to produce micro-chips, a senior ruling party lawmaker said on Wednesday (July 3), after Japan tightened curbs on exports of some high-tech materials to the country.

Japan said on Monday it would tighten regulations on exports of materials used in smartphone displays and chips to South Korea amid a widening dispute over South Koreans who were forced to work for Japanese firms during World War Two.

“We are doing a preliminary feasibility analysis (on the investment),” Cho Jeong-sik from the Democratic Party told reporters after meeting with officials from the presidential office and government ministries to discuss a response to Japan’s decision.

The export curbs could hamper production of South Korea’s chip giants Samsung Electronics and SK Hynix as the two chemicals targeted are essential, analysts say.

Data firm IHS Markit said on Wednesday the Japanese trade restrictions against South Korea would add to global trade tensions. Asian exporters are already being strained by a prolonged slowdown in the global electronics sectors.

“A reduction or elimination in the availability of these materials will significantly impede the production of memory and other semiconductor chips, impacting major semiconductor manufacturers including Samsung Electronics and SK Hynix,” Len Jelinek, executive director of semiconductor research at IHS Markit, said in a note.

Japan’s industry minister said on Tuesday that its decision to tighten controls was not in violation of World Trade Organisation (WTO), rebuffing South Korea’s earlier claims.

Cho, the South Korean ruling party lawmaker, shrugged off criticism in local media that the government is not laying out countermeasures swiftly. But he did not provide further details on the nature of the spending.

Shares in South Korean chip materials makers jumped after the government’s spending plan was made public.

Shares of Ram Technology and Ocean Bridge , local firms producing chemicals used in chip manufacturing process, rose as much as 20 per cent and 15 per cent, respectively.

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