TSMC will benefit from Japan's restriction exports of semiconductor materials to South Korea

In July 1st the Ministry of Economy, Trade and Industry (METI) announced an export control policy that Japan will remove South Korea from the list of foreign exchange export laws (so-called white countries) and conduct export audit to Fluorinated, Resist and High purity hydrogen fluoride, which increased semiconductor market volatility suddenly.
Because the market share of these chemicals supplied by Japan is relatively high, Korean foundries need to take responding measures if the period of export inspections is too long.
Japan has no explicit export ban, but the review period is a big test for use period of chemical materials
For fabs, the impact of photoresists may be the most critical of the chemicals being examined for export Photoresists contain specific volatile components and their chemical properties may change with external factors. Therefore, they should be kept in a well-controlled environment and their service period is limited by a certain time; Even if the material is within the storage period manufacturer recommended, fabs will use it as soon as possible which most of avoid use photoresists that have been stored in factories for more than two months. Given the government's current estimate of 90 days for export inspections, it would be difficult to maintain the usual frequency.

In addition, the use of alternative suppliers to supply raw materials or to extend the frequency of replacement may increase the uncertainty affecting product yield.
The second source generally need 3 months to half a year to verify depended on importance.Moreover, the verification was completed only when the results of yield, electrical, Device and other products were close to the past products and the batch production was started, which could not immediately make up the capacity gap.

Even if the same material is used, it may only shorten the verification time slightly, but once the use time frequency is extended, there will still be changes in the capacity status.Production must be reduced in batches to determine quality, which affects the overall fab capacity and equipment capacity utilization.On the whole, if the Japanese government continues to maintain the censorship decree, the impact on Korean semiconductor factories is really not less.

If the advanced manufacturing process capacity of Korean wafer foundry is affected, clients' options will more variable
Samsung and TSMC face fierce competition in the wafer foundry market, especially the planning and customer status of the 7nm advanced process are most impressive.
According to the current 7nm manufacturing process planning of Samsung and TSMC, Samsung's 7nm manufacturing process is fully introduced into EUV lithography machine. Although it has its own LSI film casting support due to late start, it is not enough for external customers in film casting, so the initial production capacity planning is not high.

By contrast, TSMC leads the world in the development of the 7nm manufacturing process and has been active in customer initiative and film delivery. Thanks to the major supporting factors including Apple, Hisilicon, Qualcomm, AMD, etc, the production capacity planning should not be underestimated and it may break the 100K mark in the fourth quarter of 2019.

Therefore, even though Samsung has a small capacity of 7nm EUV, it has invested a considerable amount of resources in the process research and development. If the future situation is unclear due to Japan's raw material export review, it may affect Samsung's 7nm mass production planning.

On the other hand, the advanced manufacturing process requires more on all stages of wafer manufacturing. If the advanced manufacturing process is developed with alternative factory-branded chemical raw materials, it will definitely increase the time and difficulty of the verification process of alternative raw materials, which makes the market generally believe that TSMC may gain a lot from it.

Judging by NVIDIA's bid for Samsung and the turn of the news, fabs are likely to be full of variables before they are announced. At present, the trend of Qualcomm is concerned in the list of potential Samsung's 7nm customer. After the flagship AP Snapdragon 855 returns to TSMC, the next flagship processor, the Snapdragon 865, is possible to return to Samsung.

However, in terms of the past, Qualcomm estimates that Snapdragon 865 will be on the market in the first quarter of 2020. If Samsung 7 nm capacity is affected or the early use of advanced process of product planning need to be changed, TSMC still have larger possibility to continue contract manufacture Qualcomm Snapdragon 865, which is expected to help strengthen market share of TSMC on advanced process.

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