If war comes to the Korean peninsula, there will be “chaos” for the global electronics supply chain, according to an IHS analyst.
“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 media tablets,” warned IHS analyst Mike Howard.
IHS views that “such a major conflagration and disruption” is “unlikely,” but said the industry should be prepared for the worst, given escalating tensions in the region.
“South Korea now plays a more important role than ever in the global electronics business,” said Howard.
“And with the supply chain having become more entwined and connected, a significant disruption in any region will impact the entire world. Because of this, it is important for companies to understand the magnitude of South Korea’s role in the global electronics market—and to prepare for any contingencies.”
Half of all global production for dynamic random access memory (DRAM), two-thirds of NAND flash manufacturing and 70 per cent of the world’s tablet display supply comes from South Korea, according to IHS.
Samsung and SK Hynix, which last year combined owned 66 per cent of industry revenue for DRAM and 48 per cent of NAND flash, are headquartered close to Seoul, which lies only 30 miles from the border with North Korea, it added.
That level of production couldn’t be easily or quickly replaced by manufacturers in other regions, IHS said.
“A server with only half its intended DRAM is essentially half a server—and a smartphone cannot have its DRAM quantity changed, as it needs the original amount for which it was designed,” Howard said.
South Korean companies LG and Samsung combine held a 49.6 per cent share of unit shipments of large-sized LCD panels in the fourth quarter of 2012, IHS said. South Korea accounts for 70 per cent of global supply of tablet display unit shipments, it said.
A short-term disruption wouldn’t affect the display market as badly, but a long-term disruption could have major impact, according to IHS analyst Sweta Dash.
“Inventory and production capacity for media tablet displays currently are at a high level,” said Dash. “Because of this, a short-term disruption of South Korean production would have a minimal impact. However, a long-term stoppage or reduction of production would have a major effect and dramatically reduce global tablet supply.”
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