SEOUL (Reuters) - Shares in South Korean memory chipmakers Samsung Electronics Co Ltd and SK Hynix Inc rose on Wednesday as investors bet on production cuts due to curbs on the export of key materials from Japan, analysts said.

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Samsung and SK Hynix are the companies hardest hit by the Japanese restrictions, the latest salvo in a diplomatic row between Seoul and Tokyo over wartime forced labor.

While the curbs will make it difficult in the short term for South Korea’s memory giants to find alternative supplies of the materials, they also could lead to reductions in stockpiles and production which is good news for chip prices.

“In light of Japan’s retaliatory action against us, it could be a chance for us to clear out those chips sitting longer on our storage and utilize this opportunity to keep inventory from piling up,” a source at a major South Korean chipmaker said, requesting anonymity due to the sensitivity of the matter.

Samsung shares were 1.9% higher and SK Hynix stock was up 4.6% as of 0537 GMT, while the broader index was up 0.6%.

Samsung and SK Hynix were considering reducing NAND flash production from as early as this month, the Korea Economic Daily newspaper reported late on Tuesday, citing an unnamed industry source.

The companies denied the report but did not provide further comment.

Prices of NAND flash memory chips have fallen sharply over the past year as output grew faster than demand and the U.S.-China trade war played havoc with global markets for electronics like smartphones.

NAND chips are found in mobile devices as well as memory cards, USB flash drives and solid-state drives.

“Our chipmakers are trying to minimize the impact from Japan’s action, but on the other side it can be good timing for our chipmakers to level down their three months of inventories,” said Park Jea-gun, head of the Korean Society of Semiconductor and Display Technology.

Japan said last week it would stop preferential treatment for shipments to South Korea of three materials used in the production of semiconductors and smartphone screens - photoresists hydrogen, fluoride fluorinated, and polyimides.

As a result, Samsung Electronics and SK Hynix are seeking to buy more of the materials from countries like Taiwan or China.