Korea Specialty Chemical Market

Korea’s leading market position in IT and electronics industry has generated high demand for advanced chemical materials used in the production of IT goods and electronics. Korean companies import raw materials and process and re-export to 3rd countries. Japan’s recent export restrictions to Korea on essential chemicals for semiconductor production has prompted Korean manufactures to develop mid-to-long-term strategies for supply channel diversification. This situation will create market expansion opportunities for American chemical companies for IT and electronics materials at a period when Japanese firms have been the predominant supplier. 

In 2018, the overall size of Korea’s specialty chemicals market was estimated to be USD 54 billion, of which imports satisfied 31 percent of Korea’s total demand.  The U.S. holds a 21 percent share of the import market with a total of 3.5 billion.  Korea’s specialty chemical industry has matured by focusing on the development of finished multi-application products.  Accordingly, Korea heavily relies on imports for high-tech raw and intermediate chemicals that require the accumulation of fundamental core technologies and substantial R&D investments.

Korea has been a proven market for U.S. chemical materials for pharmaceuticals, cosmetics, and surfactant products.  However, U.S. raw and intermediate materials have relatively limited penetration for Korea’s top export items such as semiconductors, electronics, flat displays, and computers.  Enjoying geographical proximity and first-comer advantage, Japanese chemical companies have been the principal chemical suppliers within the IT and electronics sectors.  The global demand for chemical materials for semi-conductor production was valued at USD 51.8 billion in 2018.  Korean demand was the 2nd largest with USD 8.7 billion, of which 50% are satisfied by imports.  Japan has met 50% import demand.  For photo-chemicals, Japan’s market share has reached 68%.

However, Japanese dominance on electronic chemical materials may change. In July 2020, Japan announced stricter export controls on three high-tech chemical materials to South Korea.  The restricted chemicals were fluorinated polyimide, resist, and high-purity hydrogen fluoride that are essential for smartphone displays and semiconductor productions.  To effectively mitigate future business risks, Korean manufacturers are re-examining their existing supply structures to find ways to lower dependence on any sole or predominant sources.  For instance, they are closely seeking alternative material suppliers for entire production stages of semi-conductors.   The affected chemical materials include silicon wafer, photomask, blank mask, process subsidiary materials (PR, SOC, SOD), wet chemical special process gas, sputtering targets (aluminum, titanium, coppers, etc.), other new materials (dielectric material, precursor, cu-solvent etc.) and ceramic parts(Si, SiC, AI Quartz). 

Korean manufacturers have long been conservative in changing supply channels that often require the modification of the production process.  However, Korean manufacturers are now more receptive than they have ever been for alternative supplies.  Their efforts on supply source diversification will not be limited to semi-conductor production but will also expand to cover overall electronics production.  This movement presents new growth potential for U.S. chemical producers of highly innovative materials targeting the IT and electronics sectors.

For questions, contact the U.S. Commercial Service Korea at the U.S. Embassy in Seoul:
Name: Daniel Lew, Commercial Officer           Name: Young Hee Koo, Commercial Specialist
Email: Daniel.Lew@trade.gov                            Email: younghee.koo@trade.gov