By now we're all familiar with the noise coming out of Pyongyang. The young dictator in the North Korean capital has canceled the truce with South Korea and has declared war on the United States. (To catch you up, here's a handy infographic of events that have transpired recently.)
It might be mostly bluster. But it's being taken seriously enough that the US has stepped up its military activity in the region and China has begun massing troops along its border with North Korea.
Let's assume it is mostly bluster coming from a young man who feels the need to consolidate power in his nightmarish regime. But what if it's all not bluster? What if Kim Jong-Un feels the need to strike out?
If he does, it's going to be South Korea and its economy that's going to feel the brunt of that attack. And it's going to have implications for economies around the world and for electronics supply chains.
South Korea is a significant player in electronics supply chains. Its two largest producers of DRAMs, Samsung Electronics and SK Hynix Semiconductor, alone had nearly two thirds of the global market share at the end of last year according to IHS iSuppli.
Another problem is that much of South Korea's tech industry is close to the border. Downtown Seoul is only 25 miles from the border -- not very hard to hit with North Korean rockets.
Speaking of Samsung, its global headquarters are just south of Seoul. Samsung is the world's largest manufacturer of liquid-crystal display panels, memory chips, and mobile phones, and is second only to Intel Corp. in overall semiconductor production.
A Missile's Throw From the Border
Samsung, an enormous player in the global electronics market, is
headquartered just 25 miles from the border of saber-rattling North Korea.
Just about every major global technology company relies on a supply-chain connection to Samsung to some degree. Apple, Hewlett-Packard, Dell, Verizon, and AT&T Inc. bought around $40 billion worth of products from Samsung last year, from dislays to DRAMs to chips and handsets. Samsung also makes chips for Qualcomm and Texas Instruments, which are used in many other smartphones and tablets.
Not all of Samsung's production takes place in Korea. But the company's 1,000-acre liquid-crystal display production facility is also within range of North Korean air and sea attacks.
Military experts believe that US and South Korean forces won't be able to defeat North Korea quickly. Bruce Bennett, a Korea expert at the Rand Corporation, quoted in US News, said, "It could easily take months." Bennett estimates that the North could damage or destroy 10 percent to 15 percent of South Korea's GDP.
No doubt this will cause some disruption to the pace of manufacturing in South Korea and to electronics supply chains but that doesn't mean that the technology industry will come to a screeching halt. US firms have the experience of finding alternative suppliers, much as they did in the wake of the earthquake and tsunami that struck Japan in 2011.
The auto industry, for one, is on record as having started making contingency plans. "You've got to start to think about where you have the continuity of supply and safety of your assets and your employees," said General Motors CEO Dan Akerson in the Detroit News.
Let's hope managers of the electronics supply chain are doing the same.