Conflict Affecting Korea and Japan Could Disrupt Electronics Manufacturing for Years - Global Trade Magazine
  October 16th, 2017 | Written by

Conflict Affecting Korea and Japan Could Disrupt Electronics Manufacturing for Years

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  • Supply chain mapping organization based conclusion on data collected from 5,000 high-tech companies.
  • Electronics manufacturing globally could take several years to return to normal after conflict.
  • Resilinc: Military activity affecting South Korea and Japan will impact many industries.

A military conflict that brought violence to South Korea, even using traditional weaponry, would not only bring global supply chains to a grinding halt, but the time to recover back to current levels could take several years. This prediction from Resilinc is based on an analysis of several tiers of the global high-tech electronics industry supply chain.

It’s not merely hypothetical, as President Donald Trump’s verbal and tweet rhetoric have suggested that war with North Korea is on his mind.

Resilinc has amassed vast amounts of supply chain mapping intelligence since 2010, having mapped global supplier locations for over 40,000 suppliers and tracked over 2,000,000 parts across 90,000 factories in more than 130 countries. The company is a global supply chain mapping intelligence organization with a focus on the high tech, automotive, life sciences, pharmaceutical and medical devices industries.

South Korea: The Electronics Supply Chain Hotspot

Over 200 suppliers have reported sites they are dependent on within range of artillery in the area of Kaesong base, and over 1300 suppliers have reported dependence on sites within the high-risk zone of a coordinated attack. Further, an analysis of over 1500 high tech electronics products, their bills of material and parts mapping data shows that almost every product depends on at least one South Korean site, in the direct tier 1 supplier base or indirect tier 2 supplier base. Resilinc highlights multiple failure points in the Seoul and Incheon areas that are vital to the electronics manufacturing.

Understanding Semiconductor Manufacturing

Each of these products have semiconductor devices or integrated circuit (IC) chips. These chips follow Moore’s Law. Intel’s Gordon Moore predicted in 1965 that the number of transistors per square inch on integrated circuits would double approximately every 18 months. This law has held true until about the last five years, but continues to have tremendous implications for supply chains, and is one reason for the massive capacity constraints Resilinc predicts will be experienced in even a small incident in this area of the world.

IC manufacturing is a highly precise and complex process, which begins in a highly controlled, vibration and climate sensitive, clean room environment called a wafer fab. Here, hundreds of ICs are made on a thin slice of silicon and then cut into chips. These chips are then shipped to an assembly and test facility where they are packaged into the black box with pins sticking out we are familiar with.

Because of Moore’s Law, about every two years, new lines with smaller manufacturing footprints are brought online, and made to scale to produce tens of millions of ICs.

Given the complexity of the process, bringing a fab online is billions of dollars in investment and can take several years. And, because of this ubiquitous consumption of electronics components in our products today, each fab today runs at 95 percent plus capacity. Therefore, one fabrication facility’s capacity being taken off of the market could result in massive impacts on capacity, supply and pricing. This is particularly so given that almost 40 percent of worldwide wafer capacity is located in South Korea and Japan, the countries most threatened by North Korea.

“We may think that in a Japan and/or South Korea conflict scenario, 37 percent of the wafer fab capacity could be impacted,” said Bindiya Vakil, CEO. “What people don’t always realize is that the Taiwan wafer capacity could effectively go down. This is because Resilinc’s part site mapping data shows that almost 75 percent of parts that are wafer fabricated in Taiwan, are shipped to South Korea’s assembly test sites for packaging. This means that almost 50 percent of IC capacity could be at risk if wafers produced in Taiwan could not be processed.”

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