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Japan-South Korea rift

Automakers stockpile nuts and bolts amid Japan-South Korea feud

Intertwined industry fears chip export controls expanding to cars

Hyundai Motor apparently looks to buy components from Japanese suppliers ahead of schedule, seeking three months of inventory.   © Reuters

TOKYO/SEOUL -- Automakers and parts producers in Japan and South Korea are stocking up on items procured from the other country, fearing that the bilateral trade restrictions that hit chipmakers could spread to the automotive sector.

Tensions have grown as Japan imposed stricter export controls on chipmaking materials and removed South Korea from its so-called whitelist of trusted trade partners. Seoul responded by kicking Tokyo off its own trade whitelist, a move that takes effect Wednesday.

The frantic efforts by manufacturers on both sides suggest that the trade dispute that began in July is beginning to affect the two countries' deeply intertwined automotive supply chains. 

Hyundai Motor asked several Japanese parts makers to increase shipments, a source familiar with the matter said. Though no export controls on auto parts have been announced, the South Korean company is believed to be building enough inventory to last three months.

Japanese parts supplier Denso apparently has responded by delivering more electronic components to Hyundai. Piolax, which does about $1 million in business yearly with the car company, "is expanding exports" of springs used in transmissions, an executive said. Wire harness maker Yazaki is bolstering shipments as well.

Hyundai told Nikkei that the automaker does not comment on its purchasing strategies.

The two countries are deeply reliant on each other for their automotive supply chains. Japan imported 78.5 billion yen ($727 million) in components from South Korea last year while exporting about 70.1 billion yen, the Japanese Finance Ministry says.

Japanese parts makers are taking precautions as well. Alpha sources key cylinder parts from South Korea totaling a few hundred thousand dollars per year. It began purchasing these parts ahead of schedule in August to build two months of inventory. Topre is considering buying two or three months' worth of components for parts used in car frames.

Parts suppliers in both nations have a reputation for quality, thanks to their collaboration with major automakers. Though companies can find alternative sources in China and elsewhere should the trade feud extend into the automotive sector, making that switch likely will take time.

Japan's removal from Seoul's whitelist means that South Korean companies face more complicated procedures in shipping 1,735 strategic products to the country, including telecommunications servers and petrochemicals. Memory chips will not be subjected to additional scrutiny.

South Korea previously placed export destinations into one of two categories: those with blanket approval, and those where shipments can be made only as an exception. It created a third category just for Japan.

Fewer than 100 South Korean companies exported items from the list of strategic products to Japan last year, according to the central government in Seoul. Eleven, including Samsung Electronics, were deemed to have established export controls and will be able to continue sending items to Japan without additional screening.

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