South Korea is one of the world centers for electronics and technology. The country is home to one of the world’s biggest tech giant Samsung. LG Display Co. has a production line in the small city of Paju, just 20 miles to the north of Seoul. The world’s premier manufacturing center for large OLED (organic light-emitting diodes) panels stands in the city. LG has announced plans to spend over 10 trillion won ($8.9 billion) on the OLED manufacturing facility. It is no secret that every major mobile phone company including Samsung and Apple are using the same OLED panels in their next flagship phones. Everything is great except the fact that the city lies near the Demilitarized Zone that separates South Korea from North Korea.
Pyongyang has an easy, and rather scary access to Paju which does not only hold the expensive OLED plant but also a population of 442,000 civilians. The city’s team leader for the civil defense, Hang Sung-hee says, “We, of course, get affected psychologically when more media reports hint there could be a provocation by the North.” The city does have shelters equipped with gas masks, heating, and cooling systems, and cooking facilities but these do not have a capacity of more than 200 people. “They’re temporary shelters where people can hide for 24 to 48 hours,” Han says. They’re designed “for partial war, not an all-out war.”
North Korea’s nuclear program is going strong putting South Korea is a very fragile position particularly in terms of its industries and manufacturing facilities, and these are not limited to electronics. Samsung BioLogics Co. and Celltrion Inc. are Korea’s biggest drugmakers, housed in the city just 25 miles away from the frontier. Korea’s key automaker Kia Motors Corp. plant is not too much of a distance away from the vulnerable border either.
Pyongyang has tested plenty of short and intermediate range rockets in the recent times, to which Seoul could become an easy target. The acting head of the Strategic and Defence Studies Centre at the Coral Bell School of Asia Pacific Affairs at Australian National University, John Blaxland says, “We know that North Korea’s forces are on a hair trigger for quick offensive action against South Korea.”
You might think South Korea is far away, a little country in some tiny corner of Asia but what you might not imagine is how a war between North and South Korea would affect your life. It would cut off the supplies of ships, smartphones, and the vital components of all the electronics in the world, may it be displays or the semiconductors.
You might not realize, but Korea alone produces two-thirds of all the memory semiconductors in the world. SK Hynix and Samsung Electronics Co. are responsible for most of it. Even Qualcomm-the largest manufacturer of semiconductor chips for phones gets its chips manufactured by Samsung. If Korea is going down, so is the rest of the world. The vice president with IDC Research Inc. Kyoum Kim says:
“If Korea is hit by a missile, all electronics production will stop.”
According to Bloomberg’s supply chain data, Apple gets 12% of its supplies from South Korea with LG as its biggest Display supplier. Rumors say the new iPhone 8 will have an OLED screen, and the LG facility in Paju is the only one in the world that manufactures it. If the companies consider turning back to LED displays, 40% of even those are imported from Korea. According to Alberto Moel, Sanford C. Bernstein & Co. analyst for high-end displays, the cost of replacing the display manufacturing capacity of LG and Samsung alone will $50 billion.
Tech is not the only area where Korean war will affect the world. The country is also home to the largest three shipbuilders in the world, namely Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries, and Samsung Heavy Industries. Daewoo and Hyundai build warships for the Korean military which makes them a vulnerable target to the North Korean warheads. The same companies supply the tankers that transport liquefied natural gas (LNG), the need for which is expected to rise to about 180 by the end of 2030.
Hyundai Motor Co. and the major steelmaker Posco have their factories far from the demilitarized zone, but their exports will be affected as much as any other industry due to the shipping hinderance. Dennis Halpin, who is a visiting scholar at US-Korea Institute of Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies says, “Cargo vessels would be wary about sailing if there were missiles flying. The Pacific would be shut down as a highway for global trade.” Not to forget that 9 of the world 10 busiest container ports are in Asia, one of which is Busan (No. 6) in South Korea.
The fear of war from the Northern side is not new to the Koreans. The people have learned to live with the threat. Civilians have been practicing emergency drills for years. If both the sides manage to resolve their disputes in peace, there won’t be too many economic damages, but an economist at NatWest Markets Singapore says, “We have had this kind of issues crop up in the past with some degree of regularity, and businesses and consumers know how to handle this. But if things get out of hand, then all bets are off.”
If South Korea gets hit by war, it will engulf the entire world’s economy along with it. Whether or not it will happen, no one knows for sure.
Source: Bloomberg