If there has always been a time for Japan and South Korea to tackle a supply chain spat, this is not there.
Last week, Japan moved to restrict material exports used to make semiconductors and smart phone screens for its North Asian neighbor, citing complaints between the two countries going back seven years. The curbs threaten the flow of components that sustain the hunger of technology for the world's technological hardware. He may also win Beijing's hand.
U-China trade war and the cold war coincides technology that companies have started to discover new ways of sourcing production materials. We already know that manufacturers – not only the American ones – are trying to dilute their presence in China by bringing ABC policy (anywhere but China) to new facilities. It does not necessarily mean that valves have factories on the mainland, but it may mean that the next location is more likely to be built in Thailand or Vietnam.
If you are a CEO of a chemical company from Japan, your first idea is: This is a good thing. The Chinese boys, who are angling to supply materials to the South Korean semiconductor manufacturer that counts you among major clients, are now competing. Korean firms looking to reduce their footprint in China are a step in the right direction.
In fact, clients might be feeling that their sourcing is too concentrated. Samsung Electronics Co, for example, contributes 92% of its procurement expenditure to just 34% of its suppliers. The company has 10 production sites in China, six in South Korea and zero in Japan.
But perhaps South Korean manufacturers are expanding in Southeast Asia looking for ways to relieve Beijing – by getting more agreement from the mainland, perhaps. Suppliers from China, Taiwan, Europe or elsewhere may also see this “ABC” expansion as an opening to enter the line by undertaking to deliver goods quickly and cheaply to sites. new.
Meanwhile, Japanese and Korean suppliers who focused sales on a large number of clients in the other country could be thinking about diversification. With the cold technology now running, new sources of income are starting on the radar in China. These semiconductor, demo and electronics companies are flushed with money and ambition, which is likely to provide growth that North Asian holders cannot offer.
The most recent cash lining in Japan and South Korea is likely to reduce the current downturn in global demand with no impact. But even then, the third quarter is a very difficult time to crush supply: It is right when firms take the lead in the end of year hardware demand.
However, if you look at it, suppliers and technology buyers of old guards are unlikely to be likely beneficiaries from any break in the status quo. As the leaders of both Northern Asian countries consider their next steps, they must remember that nothing driving a ding between Tokyo and Seoul can only help Beijing. There may have been remaining complaints which were justified since the war 74 years ago, but there is still a bigger battle.
To contact the author of this story: Tim Culpan at email@example.com
To contact the editor responsible for this story: Rachel Rosenthal at firstname.lastname@example.org
This column does not necessarily reflect the opinion of the editorial board or the Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Comment Circuitist covering technology. It covered technology for previous News Bloomberg.
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