Samsung, SK concerned over US tightened restrictions on Huawei

19-Aug-2020 Intellasia | KoreaTimes | 6:02 AM Print This Post

Samsung and SK have been watching with concern as the Trump administration announced a further tightening of restrictions on Huawei, as the two have been key semiconductor supplier for the Chinese telecom giant.

The new restrictions make it more difficult for Huawei to access commercially available chips that use US software and technologies, which is a major blow to the Chinese company as nearly all semiconductors on the market have some sort of US software or technology embedded within their production line.

The US Department of Commerce is set to expand restrictions preventing Huawei from obtaining semiconductors without a special license, which will also be applied to foreign firms that use US software or technology in their products.

“We dealt a direct blow to Huawei and the repressive Chinese Communist Party by further limiting Huawei’s ability to acquire US technology and compromise the integrity of the world’s networks and Americans’ private information,” Secretary of State Mike Pompeo tweeted Monday (local time).

The specific details of how far the restrictions will be applied are not known, but they could be troubling for Samsung Electronics and SK hynix as they export DRAM and NAND memory semiconductors to Huawei. Many industry watchers believe the restrictions when further strengthened and prolonged could impact the Korean tech giants’ profitability.

Samsung and SK are currently reviewing the implications of the tightened restrictions.

“We are looking into the situation and have to check the legal issues as they are very extensive. We cannot immediately know the impact on us at this point, but we will review the situation both in the US and Korea,” an SK hynix official said.

China’s state-run news agency says the US restrictions legitimise China’s retaliation and the country will impose sanctions against key US companies including Apple, Qualcomm and Boeing.

Washington has called on foreign governments around the world to squeeze Huawei out, arguing that the data it collects is handed over to the Chinese government, which Huawei denies.

“The Trump Administration sees Huawei for what it is ? an arm of the Chinese Communist Party’s (CCP) surveillance state ? and we have taken action accordingly,” Pompeo said in the statement. “We will not tolerate efforts by the CCP to undermine the privacy of our citizens, our businesses’ intellectual property, or the integrity of next-generation networks worldwide.”

The tighter restrictions comes less than a month after the US State Department targeted LG Uplus for using a substantial amount of Huawei equipment for its 5G infrastructure, urging the Korean telecom company to “migrate away from untrusted vendors to trusted vendors.”

SK Telecom, KT and LG became the world’s first to commercialise 5G in April 2019.

SKT and KT both use Samsung’s 5G equipment and only LG implemented Huawei equipment for its nationwide coverage.

“LG went the cheaper way knowing there could be consequences for using Huawei as it is less than half the price compared to Samsung,” an official familiar with the matter said.

Although SKT and KT do not utilise Huawei’s equipment for their 5G networks, the two companies have adopted the Chinese technology giant’s equipment for their landlines.

“It is not meaningful equipment, just a repeater which is a cable transmission device. It is irrelevant to the US sanctions on wireless 5G equipment from Huawei,” a telecom official said.

It would be nearly impossible for LG to switch its vendor with the company scheduled to invest trillions of won in expanding its 5G infrastructure nationwide in the coming years.

“There is not much LG Uplus can do at this point. They will probably just wait out the situation until the US election in November. If Joe Biden wins the race, the restrictions against Huawei could be lifted,” an official familiar with the matter said.

According to the latest CNN poll released Monday, Biden is backed by 51 percent of registered voters nationwide while Trump was supported by just 42 percent.


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