Japan and South Korea Launch Joint Semiconductor Materials Reserve to Counter Supply Disruption Risks

Japan and South Korea on Monday formalised a joint strategic reserve for semiconductor manufacturing materials, marking the deepest bilateral economic security agreement between the two countries since the 2019 trade restrictions that originally damaged the relationship. The announcement was made jointly by Japanese Prime Minister Shigeru Ishiba and South Korean President Lee Jae-myung at a press conference at the Akasaka Palace in Tokyo, following bilateral consultations focused on supply chain resilience.

The reserve will hold critical strategic stocks of fluorinated polyimide, photoresists, and high-purity hydrogen fluoride — the three materials that Japan restricted exports of in July 2019 in a dispute over wartime labour compensation, which crippled Korean semiconductor production for several months at the time. Under the new agreement, the materials will be stored in jointly-managed facilities in both countries, with each nation able to draw from the reserve under specified emergency conditions.

"This agreement reflects the shared understanding that the global semiconductor supply chain has become more concentrated and more vulnerable than at any point in the last decade," Ishiba said in remarks delivered in Japanese. "The depth of cooperation that this reserve represents would have been politically unimaginable five years ago." Lee Jae-myung, speaking in Korean, characterised the agreement as "a foundation for the next generation of bilateral economic security cooperation."

Industrial backdrop driving the agreement

The joint reserve responds to growing concern about supply chain disruption risks affecting both Korean memory chip giants Samsung Electronics and SK Hynix, and major Japanese materials suppliers including Tokyo Ohka Kogyo and JSR Corporation. According to a joint statement issued by both governments, the reserve will hold approximately 90 days of normal operating supply for each material across the two countries, with provisions for expanded coverage if global supply conditions deteriorate.

South Korea's Ministry of Trade, Industry and Energy estimates the country imports approximately 88% of its photoresist supply from Japanese suppliers as of 2025, with the figure rising to 94% for the highest-grade extreme ultraviolet (EUV) photoresists used in advanced node production. Conversely, Japanese semiconductor manufacturing accounts for around 22% of Korean wafer fabrication services, creating mutual dependencies that the reserve framework formally acknowledges.

The geopolitical context

The agreement comes against the backdrop of escalating US export restrictions on advanced chip technology to China, which have prompted China to accelerate development of domestic alternatives to Japanese and Korean chemical inputs. Analysts at Mizuho Research and Hyundai Research Institute have separately noted that Chinese state-backed firms have made meaningful progress in producing lower-grade equivalents of Japanese photoresists, but remain 18-24 months behind in the highest-purity grades required for sub-5nm production.

"The materials reserve is partly a hedge against a future Chinese supply chain disruption," said Dr. Hyun-Jung Kim, a semiconductor policy researcher at the Korea Institute for Industrial Economics & Trade, in comments to local media following the announcement. "If China pulls forward its capabilities and starts displacing Japanese producers in the regional market, both Tokyo and Seoul want a buffer that protects their existing positions."

Korean conglomerate response

Samsung Electronics shares rose 2.3% in Seoul trading on Monday following the announcement, while SK Hynix gained 2.8%. Both companies issued statements welcoming the agreement, with Samsung specifically referencing the reduction in single-supplier risk for its advanced HBM4 production line at Pyeongtaek. Tokyo Ohka Kogyo shares closed up 4.1% in Tokyo, with JSR Corporation gaining 3.6%.

Implementation of the reserve is scheduled to begin in October 2026, with full operational capacity targeted for the second quarter of 2027. Funding for the initiative will be split equally between the two governments, with reported initial capitalisation of approximately ¥120 billion ($790 million USD) on the Japanese side and an equivalent allocation on the Korean side.

The agreement is the second major bilateral economic announcement in 2026, following an expanded $80 billion currency swap arrangement formalised in late April. Officials in both countries indicated that further cooperation initiatives are under discussion in areas including critical minerals, advanced battery materials, and shared rare earth element processing capacity.