They gave up the idea of full-scale conventional war. That is why they are obsessed with strategic weapons. With nukes delivered by missiles, they think they can scare away U.S. because those missiles can hit U.S. bases in Japan and Guam, and U.S. mainland. Then they will intimidate S. Korea. They create military provocation and threaten to nuke S. Korea if S. Korea tries to retaliate. They attempt to offset their deficit in conventional arsenal with strategic weapons. Their goal is to intimidate S. Korea enough to become its satellite. Probably an implausible goal, but none the less the one they have been pursing for a long time.
Of course, they also see it as the only way to protect their regime.
They may look intimidating, but while Kim Jong-un it trying to consolidate his power, there may be enough people in North Korea who want to end the Kim dynasty that something has to give sooner or later.