Foreign companies face Korea risk
Annual military drills between the US and South Korea this week could reignite tensions after Kim Jong Un and President Donald Trump traded barbs. For foreign firms that count on South Korea for significant revenue, any escalation that curbs commerce could leave them vulnerable.
As the world braces for another round of accusations, here are three charts that highlight some of the companies with the most business at stake in South Korea, according to their financial statements.
South Korean President Moon Jae-in said last week North Korea was approaching his nation’s “red line.” Tens of thousands of troops from the US, South Korea and several other countries will conduct drills over the next few weeks to prepare for a possible war with Kim’s regime. The exercises routinely spark condemnation from North Korea, which said on Sunday it was “reckless behaviour” that would lead to the brink of an “uncontrollable nuclear war,” according to news agency Yonhap.
A serious flare-up between North and South Korea would cause a huge disruption to commerce. It would create ripple effects for corporations and the global economy because of South Korea’s importance in the supply chain on everything from smartphones and cars to flat-screen televisions. Companies with manufacturing plants and employees in the country, within range of Kim’s missiles, would bear the brunt of a conflict.
Not surprisingly, technology features prominently in the list of foreign companies that get more than $1 billion from South Korea. San Diego-based Qualcomm, the biggest maker of chips used in mobile phones, and Silicon Valley semiconductor maker Applied Materials both get about 17 per cent of their global sales from the Asian nation. Europe’ s largest semiconductorequipment maker, ASML Holding, derived about a quarter of its worldwide revenue from the country.
“South Korea is a big exporter of intermediate goods, so it’s a huge part of the global electronics supply chain,” said John Davies, Londonbased global commodities strategist at BMI Research. “If operations in the country were suspended or set back for a long time due to destruction of facilities, that would disrupt the supply chain of companies around the world.”
Representatives for Qualcomm, Applied Materials and ASML declined to comment.
Many other companies are also vulnerable, either through direct investment in the world’s 11th largest economy or as part of the international supply chain.