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South Korea is a relatively small country compared to large industrial states. However, when it comes to electronics business it has an influence that is hard to overestimate as it produces 66% of the world’s DRAM, 48% of NAND flash and 70% of displays. What happens if South Korea’s extremely poor, always hungry and bloodthirsty neighbor from the North strikes? It will be a tragedy for people, but it will also be a catastrophe for the whole electronics industry.

For high-tech companies, this could be the outcome if current tensions escalate to the point of war on the Korean peninsula, resulting in the disruption of South Korea’s technology manufacturing base in the Kaes?ng Industrial Region. While market analysts regard such a major conflagration and disruption as unlikely, forward-thinking technology firms are planning for such a contingency, just as they are preparing for other natural and man-made disasters that could impact their businesses in the future, reports IHS iSuppli.

“South Korea now plays a more important role than ever in the global electronics business. 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,” said Mike Howard, senior principal analyst for DRAM and memory at IHS.

Leading technology firms Samsung and SK Hynix are headquartered close to Seoul, the capital of South Korea, which lies only about 30 miles from the border with North Korea. Both companies have major manufacturing operations in the area as well.

“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,” waned Mr. Howard.

Memory Loss

Fully 66% of industry revenue for the dynamic random access memory (DRAM) market, as well as 48% of total NAND flash revenue, belonged in 2012 to the two South Korean memory titans Samsung and SK Hynix. While their combined share of both in the NAND market has remained fairly level for the last three years, the collective portion in DRAM of the two entities has been steadily rising.

Such a high proportion of global production could not be easily or quickly replaced by manufacturers in other regions.

The Icheon facility of SK Hynix is located approximately 30 miles southwest of Seoul, while Samsung’s massive manufacturing complex at Hwaseong is within 24 miles of the capital.

DRAM plays an essential role in products including PCs, media tablets and smartphones. While some gadgets could have their amount of memory reduced – a smartphone with 32GB of NAND could be downsized to 8GB, or an 8GB laptop reduced to 4GB – other devices must have the memory for which they were originally designed, especially where DRAM is involved.

“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,” noted Mr. Howard.

Display Disaster

An equally bad situation could occur in the large-sized display market, which is heavily dependent on South Korean suppliers, especially in the media tablet market.

LG Display and Samsung Display of South Korea together held a 49.6% share of unit shipments of large-sized liquid crystal display (LCD) panels in the fourth quarter of 2012. Large-sized panels are defined as those that are 10” or larger in the diagonal dimension and are used in products including televisions, notebook PCs and desktop monitors. Also included in the category are and 7” and larger displays used in media tablets.

South Korea accounts for 70% of global supply of tablet display unit shipments.

“Inventory and production capacity for media tablet displays currently are at a high level. 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,” said Sweta Dash, senior director of display research & strategy at IHS.

Phone Hangup

Samsung at present is the global leader in smartphones as well as in total handsets, while fellow South Korean manufacturer LG Electronics ranks No. 6 in both categories. Together, the two companies account for more than a 30% market share for cellphones and smartphones.

Tags: Samsung, LG Electronics, SK Hynix, Hynix, Business, DRAM, Flash, LCD, HDTV

Discussion

Comments currently: 46
Discussion started: 05/01/13 09:29:27 PM
Latest comment: 07/07/13 04:54:07 AM
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1. 
I say is a little overreacting here. While there are a lot of SK companies that provides those services, let's not forget the China, Taiwan, Malaysia or Japan who can refit their factories to provide for the gap.
0 0 [Posted by: TAViX  | Date: 05/01/13 09:29:27 PM]
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2. 
^ remember the Thailand floods and what it did to HDD prices, that disaster was a fantastic windfall for pirates like WD and Seagate so just imagine the free for all price gouging frenzy that would eventuate if electronic component production was adversely affected in SK

1.5K for a 24" screen....................
0 0 [Posted by: alpha0ne  | Date: 05/03/13 12:18:52 AM]
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3. 
agreed
2 0 [Posted by: mudi1  | Date: 07/07/13 04:22:17 AM]
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- collapse thread

 
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0 0 [Posted by: mudi1  | Date: 07/07/13 04:45:05 AM]
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4. 
its ok
0 0 [Posted by: mudi1  | Date: 07/07/13 04:45:31 AM]
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