Market Watch

Global Memory Market to Suffer if North Korea Attacked the South

Smartphones and PCs would be severely impacted; entire electronics chain would convulse

April 30, 2013

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A worst-case scenario in which North Korea attacks its neighbor to the south and engulfs the region in war would inflict devastating damage to the global electronics supply chain, ravaging top memory producers Samsung Electronics and SK Hynix while crippling devices like smartphones and PCs, according to a DRAM Dynamics market brief from information and analytics provider IHS.

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

Such overwhelming share of industry revenue in both memory markets is replicated in terms of unit production. The South Koreans last year accounted for approximately half of the output for both NAND and DRAM, compared to the smaller amount churned out by other manufacturing countries, including Japan, the United States, Singapore, China and Taiwan. Japan, the second-largest site for NAND production, had 36 percent share in comparison; while Taiwan, the No. 2 country for DRAM, held 21 percent.

The concentration of such a large portion of the world’s memory manufacturing capacity near Seoul, the capital of South Korea lying just 30 miles of the border to its Communist neighbor in the north, could spell catastrophe if current tensions between the two countries escalate into full-scale war. Even a short-lived disruption of, say, six months could prevent the shipment of hundreds of millions of mobile phones and tens of millions of PCs—all of which require memory—from the highly industrialized South to the rest of the world.

While some gadgets could have their amount of memory reduced—a smartphone with 32 gigabytes (GB) of NAND 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.

Overall, an impact stemming from a conflagration would broadcast severe repercussions all along the electronics supply chain. A half-year absence in South Korea of DRAM manufacturing alone could result in new mobile handset models having to be scrapped or redesigned; the amount of DRAM in a PC could drop by more than 50 percent; and average selling prices for DRAM might soar 200 percent.

These are just some of the highlights of what would transpire, but there are innumerable other implications. And while it is highly unlikely that such events will actually occur, it is worthwhile to identify and consider the potential fallout if such a disaster struck, IHS iSuppli believes. The global supply chain has only become more entwined and connected, and a significant disruption at any node impacts the entire web.

While relative peace has existed between the two Koreas for more than 50 years, flare-ups like the one at present are not uncommon. The current tensions are of particular concern, however, especially as South Korea has emerged to be an electronics powerhouse.

Both Samsung and SK Hynix are located close to Seoul. The Icheon facility of SK Hynix is located approximately 30 miles southwest of the metropolis, while Samsung’s massive manufacturing complex at Hwaseong is within 24 miles of the city.

Read more >> North Korean Tensions Highlight Vulnerabilities in Memory Supply Chain

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Memory & Storage
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