Assuming that North Korea actually attacks South Korea, it will damage South Korean infrastructure and create panic amongst the civilian population. Disrupting South Korean output, in turn, — even if it is a trivial as no one showing up to work for a month — will severely and immediately impact on the world economy and trigger a worldwide recession.
South Korean hits way above its weight class in the high tech supply chain. It consumes 20% of global semiconductor fab equipment, even though the country only represents 2% of gross world product. It produces almost 80% of the global supply of DRAMs, the core memory chip in every server, personal computer and tablet. No DRAMs, no tech, no Internet, no Google, no Facebook. 50% of all displays – consumer and commercial – are produced in South Korean. The iPhone would have no touch screen nor microprocessor brain without Korean components.
The vibrant Content Economy of video on-demand, gamification, social networking, instant information and the “cloud” runs on Korean parts and subassemblies. True, they are assembled in China by Foxconn et al, but the widgets in the boxes come increasingly from South Korea. The disruption of the South Korean electronics industry would be a body blow to the tech giants: Apple, Microsoft, Dell, HP and Lenovo. Only IBM is immune, because it exited commodity hardware years ago. It is likely that the stock market will retreat, if not collapse back to Great Recession levels. And there will be nothing the Fed can do.
The other problem is that much of the South Korean tech industry is close to the border. Downtown Seoul is only 25 miles from the border. Hitting big, delicate targets like semiconductor fabs and display factories is not hard at that distance. Borrowing swarm tactics from the Palestinians, the North Koreans could launch tens of thousands of cheap rockets at Seoul and cause widespread terror. South Korea has not Iron Dome. Sure, the North Koreans have medium range missiles with high explosives that the US Air Force can take out in a few hours, but they also have huge inventories of heavy, long range artillery that cannot be silenced with a few bombing runs. Remember 50% of World War II combat casualties were caused by artillery fire.
The US and South Korea will also be faced with a moral dilemma. The US and South Korea militaries have the firepower to kill hundreds of thousands of North Korean soldiers, but do they have the stomach or the will. I can foresee the sad scenario of a massive kamikaze attack swarming over the border; wave upon wave of young brainwashed North Korean men hurdling headlong to their certain death. The bloodshed will be legend. After a few days or weeks, the world will be faced with a new personal best for fratricide.
In the meantime, the world economy will be collapsing. Or at least the high tech part of it.
It is not clear that the North Korean military is smart enough to target the high tech supply chain, instead of military bases and troop concentrations. But an attack on the electronics supply chain would hurt South Korea and the US economy a lot more than a few damaged bunkers.
All-in-all, it is not clear how this saber rattling will end. Kim Jong-Un appears to need constant media and celebrity attention to be appeased. Although Dennis Rodman and Eric Schmidt have failed, perhaps the best way to forestall an attack is to send over a constant stream of heavyweight American celebrities and keep Kim in the limelight. God knows we have enough to go around. Perhaps Barbra Streisand and Dick Van Dyke should go next. Kim Jong-un loves Broadway musicals.