Growing tensions with North Korea should worry global electronics firms such as Apple Inc as they source key parts from South Korea, but investors are brushing off such concerns and snapping up shares in key exporters, heartened by robust earnings and big investment plans.
US President Donald Trump said on Thursday in an interview that a major conflict with North Korea is possible in the standoff over its nuclear and missile programs, though he would prefer a diplomatic resolution.
South Korea, a US ally and home to major electronics parts makers such as Samsung Electronics Co, LG Display Co and SK Hynix Inc, would be particularly vulnerable to any military attack from its northern neighbor.
Any interruptions to operations could significantly disrupt global manufacturing of smartphones, televisions, computers and tablets. South Korea supplies more than half of components such as memorychips and flat screens.
Despite escalating tensions, investors are pouring money into South Korea’s financial market, and companies are flocking to the stock market to raise billions of US dollars.
“This is mainly just chest-thumping behavior on the part of North Korea and President Trump, but I don’t think it will be anything more than that,” said Geoff Pazzanese, a senior portfolio manager at Federated Investors Inc in New York.
Pazzanese, who owns large positions in Samsung and Hynix, said he would be a buyer if the market sold off as a result of a North Korean nuclear test, partly because the Trump administration has reaffirmed its military support for South Korea.
Seoul’s stock market has climbed 9 percent so far this year to near-record highs, helped by strong earnings by major exporters including Samsung, which yesterday rose 3 percent to a lifetime high after reporting its highest profit in more than three years.
Earlier this week, Hynix and LG Display, both Apple suppliers, reported record quarterly profits and sounded upbeat for the remainder of the year.
“The tension might mean some sentimental risk more than fundamental risk,” Singapore-based Janus Capital Group equity analyst John Teng said. “It might potentially push their customers to restocking earlier, in terms of component inventory. Memory suppliers, they are very disciplined in terms of capacity expansion.”
Allianz Group chief economic adviser Mohamed A. El-Erian yesterday told the Reuters Global Markets Forum that investors should take a more critical look at their exposure, but had been conditioned to set aside such risks.
“And they have been rewarded well by markets for doing so,” he added.
South Koreans have grown used to the threat of conflict with the North after decades of bellicose rhetoric from Pyongyang, and the companies remained unruffled yesterday.
“We think talk of conflict is speculative, and we do not have any plans to react to the current situation,” LG Electronics Co said in a statement.
Hyundai Motor Co, the nation’s top automaker, said it had detailed contingency plans to ensure business carried on under various situations, but could not disclose them.
Any military conflict on the Korean peninsula could have a dramatic effect on the memorychip market in particular, as Samsung’s and Hynix’s main operations are clustered in South Korea.
The pair control nearly 50 percent of the flash memory market and almost two thirds of DRAM chips, widely used in computers, making it almost impossible for customers to find alternative supplies quickly.
As supply of those chips are already tight, any interruptions to their manufacturing operations might cause large customers such as Apple and Lenovo Group Ltd (聯想) to trigger a contractual term known as an “allocation” to get more of their suppliers’ limited supply, according to industry executives.
Those fights often get ugly, with corporate giants throwing their weight around with suppliers, former supply chain executive at H-P Enterprise and Motorola Mobility Trevor Schick said.
“In the memory world, the minute things go into allocation, everyone is in a fight for who gets into the allocation. Scale plays a big role in that,” Schick said.
“Most contracts have a formula for how the allocation happens, but when it does, everyone from the big companies gets on planes to Asia to get in front of those CEOs and lay out their case as to why they should get the memory,” he added.
The ultimate beneficiaries of supply interruptions in South Korea would likely be Japan’s Toshiba Corp and US firms Micron Technology Inc and Western Digital Corp.
However, the geopolitical wild card could be China, Schick said.
“If something did happen in Korea, the massive impact would be in China. Most of that memory goes from Korea into China to be made into tablets, phones and computers,” Schick said.
The vast majority of Apple’s iPhones, for example, are manufactured in China by Foxconn Technology Group (富士康).
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the