War on the Korean peninsula would have a catastrophic effect on the electronics industry, according to market research company IHS. Forward-thinking technology firms are planning for such a contingency, since South Korea is home to half of global DRAM production, two-thirds of NAND flash manufacturing, and 70% of the world’s tablet display supply. The worldwide electronics supply chain would grind to a halt, IHS says, and stop the smart-phone, media tablet, and PC markets in their tracks.
Samsung and SK Hynix are headquartered close to Seoul, South Korea’s capital, which is about 30 miles from the North Korean border. The SK Hynix Icheon facility is about 30 miles southwest of Seoul, and Samsung’s Hwaseong manufacturing complex is 24 miles away. These companies are responsible for 66% of industry revenue for the DRAM market and 48% of total NAND flash revenue. Their combined share in the NAND market has remained fairly level for the past three years, while their collective share of DRAM has been steadily rising.
Manufacturers in other regions would not be able to easily or quickly replace such a high proportion of global production, IHS says. In fact, any type of manufacturing disruption of six months would prevent the shipment of hundreds of millions of mobile phones and tens of millions of PCs and tablets, said Mike Howard, senior principal analyst for DRAM and memory at IHS.
Some companies could manufacture products with smaller memories. For example, a smart phone with 32 Gbytes of NAND could be downsized to 8 Gbytes, or an 8-Gbyte laptop could use 4 Gbytes, IHS says. Yet other devices require the memory for which they were designed, especially where DRAM is involved. “A server with only half its intended DRAM is essentially half a server, and a smart phone cannot have its DRAM quantity changed, as it needs to original amount for which it was designed,” Howard said.
Large-sized displays, particularly media tablets, especially depend on South Korean suppliers. LG Display and Samsung Display of South Korea commanded 49.6% of unit shipments of large-sized LCD panels in the fourth quarter of 2012, and South Korea overall accounts for 70% of global tablet display unit shipments. Media tablet display inventory and production capacity are very high right now, IHS says. A short-term disruption would have a minimal impact, then, but a long-term stoppage or reduction could dramatically reduce global tablet supply.
Samsung also dominates the global smart-phone market and leads in total handsets, while LG Electronics ranks sixth in both categories. Together, they account for more than 30% of the cell-phone and smart-phone market, which would see significant disruptions if tensions on the peninsula were to escalate as well.
IHS