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Japan-South Korea Trade War, Smartphone Prices Increase !! Our Views

Japan-South Korea Trade War, Smartphone Prices Increase !! Our Views

Japan and South Korea have been engaging in a heated trade war that is now impacting component prices of smartphones. This week, Japan announced that it will restrict the exports of base chemicals that are used for constructing semiconductors and display screens across the Sea of Japan in South Korea. This article appearing on CNBC and attributed to Yen Nee Lee points out that some chemicals are dominated by the production methods of several Japanese companies which means that it is difficult for Seoul to find alternatives when their supplies are disrupted by the curbs. South Korean manufactures Samsung Electronics and SK Hynix could be in the unlucky position of not meeting production headlines.

For Apple and Huawei, this means that they will disappoint their customers. Global manufacturing supply chain for for semiconductors could be disrupted – making issues for smartphone makers while they are already dealing with the weight of a slowing world economy, so expect sales of such phones to fade. Those three chemicals that Japan exports are used for making components, including memory chips, microprocessors and integrated circuits that can be found in many modern-day electronic products. Despite sales of semiconductors growing 12.5% to reach $474.6 billion in 2018, semiconductor companies are slashing earnings estimates to address deteriorating demand. Now with the US and China locked in a year-long trade war, global trade and growth are in question.

Our View: Japan and South Korea have worked to show leadership in the region as both countries have enjoyed a similar growth and investment pattern. Both worked with the US to ensure energy and food security, both worked with the US to export their goods into a safe market and both have built strong tech industries and consumer goods for the masses. You would be hard pressed not to find Japanese and Korean consumer products, as well as cars in every major country on the planet. But these two Tigers of Asia must find common ground to forge a new future as China and North Korea will provide challenges in the future.



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