As tensions build on the Korean peninsula, the electronics industry is making preparations for possible shutdowns of large-scale electronics suppliers in South Korea. In our current supply chain, halting production of parts and components in any one region of the world seriously hinders the whole industry’s ability to meet consumer demands for products. While war is not imminent, South Korea is increasingly concerned about continued nuclear testing by North Korea, and is conducting military exercises with allies in the region as a show of military power.
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Much like companies have to prepare for natural disasters affecting the supply chain in any given region, war can halt supply lines. In the case of South Korea, two of the world’s largest suppliers, Samsung and SK Hynix, have headquarters and manufacturing facilities near the North Korean and South Korean border. Together, these two companies own 66 percent of the total revenue for DRAM memory and 48 percent of NAND flash memory.
South Korea produces half of the world’s total DRAM memory (dynamic random access memory), which is used in all types of high-tech devices from desktop computers to smartphones. The country also produces two-thirds of NAND flash memory and 70 percent of the world’s tablet computer displays.
According to Mike Howard, a senior principal analyst for IHS, a six month halt of South Korean electronics manufacturing operations would result in the inability to ship hundreds of millions of mobile phones and tens of millions of desktop and tablet computers.
Though IHS does not expect war to break out on the Korean peninsula, the firm is warning those in the electronics industry to make contingency plans for an interruption or halt in electronics production in the region. Some products, such as servers, could be sold with less DRAM memory. However, devices such as smartphones must have the amount of DRAM they were designed for in order to work properly. [/show_to]
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