Tensions in Korea could freeze electronics manufacturing: IHS; South Korea owns half of all DRAM, two-thirds of NAND flash and 70 per cent of tablet display production

Tensions in Korea could freeze electronics manufacturing: IHS

South Korea owns half of all DRAM, two-thirds of NAND flash and 70 per cent of tablet display production.

Adam Bender (Computerworld), 01 May, 2013 10:43

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.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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