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Japan-South Korea rift

South Korea intends to end reliance on Japan for 20 products

Seoul to spend $6.42bn to support industry's research and development efforts

(Montage by Hidechika Nishijima)

SEOUL -- The South Korean government on Monday said it will wean its industry off a reliance on 20 Japanese exports within a year as a diplomatic and trade dispute between the countries threatens its electronics sector.

The announcement came after the Japanese government formally decided to remove South Korea from a "white list" of 27 countries that are granted preferential trade status.

The 20 items include hydrogen fluoride and two other materials used in the making of semiconductors that Tokyo began strictly controlling in July.

It is unclear, however, if South Korea can achieve its goal; the ability to produce high-tech components and materials requires long periods of research and development.

South Korea's Ministry of Trade, Industry and Energy on Monday released a list of the 20 items, calling the move part of a policy to "reinforce materials, components and equipment competitiveness." It called for achieving a stable supply from non-Japanese sources within a year.

Japan has supplied South Korean industry with 70% to 90% of its demand for these items.

In all, the South Korean ministry designated 100 items as strategic. This broader list covers items that go into semiconductors, display panels, automobiles, electronics, machinery, metals and basic chemicals.

Items on the broader list were not made public, but the policy calls for achieving stable supplies of them from non-Japanese sources.

This will be achieved by expanding imports from countries other than Japan and by ramping up domestic production.

The South Korean government plans to spend 7.8 trillion won ($6.42 billion) over seven years to support businesses' research and development efforts. To increase domestic production of the listed items, the government will encourage joint development projects between large clients, such as Samsung Electronics, and domestic component makers. The policy also calls for speeding up customs procedures by offering round-the-clock service and for cutting taxes.

A source in South Korea's electronics industry, however, said that although the government is setting targets, they do not appear to be "realistic."

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