Global Supply Chains Threatened by Japan- South Korea Trade War

The Asian market is a critical supplier of electronic parts to the rest of the world. Recent tensions between Japan and South Korea have made electronics companies based in the US wary of potential impacts on global supply chains. Five electronics giants issued a joint letter to the Japanese economy minister Hiroshige Seko and trade minister for South Korea Yoo Myung-hee to refrain from escalating the current trade conflict. Earlier this month, Japan tightened its controls for exports of critical materials for electronic construction to South Korea.

The tightened controls mean that global suppliers of electronic components to handsets and mobile devices may be negatively impacted by the availability of raw materials for construction. The fallout from this impact could inadvertently lead to a rise in prices for consumers as demand outstrips supply. The letter is timely, as US national security adviser John Bolton is in South Korea for talks dealing with adding or removing countries from a list of trusted export locations.

Electronics Supply Chains At Risk

The looming trade war has been at least a month in the making, with Japan slowly pushing the envelope on how it deals with South Korea. Manufacturers in South Korea are raising concerns that Japan might impose export restrictions on new industries. For areas such as vehicle manufacture and battery construction, these export controls can be disastrous to their supply chains and their business models.

However, even though Japan is playing hardball with their coveted materials, companies have already started looking at alternatives. Samsung has reportedly been testing non-Japanese sourced materials to ensure that if the trade war between Japan and South Korea does take a turn for the worse, they still have access to the materials they need to proceed with business. Raw materials have been sourced from places as far away as Taiwan and China, as the company hopes to find materials that they can use in their existing manufacturing process. The electronic giant has never before sourced new suppliers of raw materials, but the current situation requires that an alternative be ready in case it is needed.