Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
US sanctions on China lifting Samsung, LG, SK
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By Baek Byung-yeul
By Baek Byung-yeul
Samsung Electronics, LG Electronics, SK hynix and other Korean companies are expected to capitalize on the U.S. government's continued sanctions against Chinese companies, reinforcing the optimistic outlook for local tech firms in 2021, according to industry analysts and officials, Thursday.
Throughout this year, the U.S. has imposed a series of sanctions on Chinese tech companies as part of an ongoing trade dispute. A representative case is Huawei Technologies which was banned from using American technology in its production of semiconductors.
The ban prevents U.S. firms, or companies using American technology or software, from giving material assistance through trade to Huawei in the manufacture of its own chipsets used in its connected devices. Citing national security risks, Washington also recently blacklisted dozens of China's tech firms including its largest chipmaker SMIC.
New sanctions are set to target TCL, one of the leading TV makers in China. U.S. Department of Homeland Security Acting Secretary Chad Wolf recently said his agency was reviewing the Chinese TV maker to see whether it had planted security-bypassing backdoors into its TV sets.
“DHS flags instances where Chinese companies illicitly collect data on American consumers or steal intellectual property,” the acting secretary said before the Heritage Foundation, Dec. 21.
“As an example, the DHS is reviewing entities such as the Chinese manufacturer TCL. This year it was discovered that TCL incorporated backdoors into all of its TV sets exposing users to cyber breaches and data exfiltration,” Wolf added.
Industry officials said that if TCL is restricted from selling TVs in the U.S., Korean TV makers Samsung and LG will obviously benefit from the move. Among the two local TV makers, LG will be specifically able to reap benefits given the company has been fiercely competing with the Chinese firm in terms of global market share.
“Though nothing has been decided yet, LG Electronics' TV business will likely to be boosted in the U.S. market,” said a local industry official, who declined to be named. According to market researcher Omdia, LG's global share came to 11.6 percent in terms of shipments in the third quarter, following Samsung's 23.6 percent. TCL was the third-largest player with a 10.9 percent share.
Industry analysts forecast LG Electronics will continue to see its share price rise next year as expectations are growing that the world's No. 2 TV maker will improve its market share in North America.
LG already succeeded in laying out its future vision to investors Wednesday when the company announced it had agreed with Magna International to establish a joint venture for manufacturing electric vehicle (EV) components. LG said the tentatively named LG Magna e-Powertrain will be launched in July, 2021, with the company owning a 51 percent share in the $1 billion-invested joint venture. Headquartered in Incheon, west of Seoul, the company will produce motors, inverters and onboard chargers.
Based in Canada, Magana International is the world's third-largest vehicle parts supplier. Given the company had been engaged in U.S. tech behemoth Apple's self-driving EV-making efforts, called Project Titan, shares in LG Electronics soared by its 30 percent daily limit-up that day as investors anticipated the joint venture could potentially provide components to Apple's EVs. The iPhone maker recently publicly announced that it plans to roll out its first EV in 2024.
Other than the Apple car issue, an industry official here said LG's future growth could be even higher because its home entertainment division, which supervises the TV business, is expected to directly benefit from U.S. sanctions on TCL.
The North American market is one of the two strong footholds of TCL in terms of TV sales. According to Omdia, TCL's regional sales there in 2020 are expected to account for 31.7 percent of its total and 0.3 percentage points higher than the company would generate from China.
In semiconductors, leading memory chip makers Samsung and SK hynix will benefit from Washington's clampdown on Chinese firms.
Due to the sanctions imposed by Washington, Chinese chipmaker SMIC has been prevented from accessing technology to produce semiconductors at the advanced level of 10 nanometers or smaller and analysts say Samsung's market share in the foundry business will be much bigger in 2021.
SK hynix is also reportedly witnessing increasing orders to manufacture chips based on its 8-inch foundry business because the pandemic has increased demand for image sensors, and power management and display driver integrated circuits.
However, there are also voices of concern over any prolonged sanctions against Chinese firms because Korea has a particular heavy reliance on exports to China, one of the most important markets for Korean companies.