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By Baek Byung-yeul
Following the U.K.'s recent announcement to phase out Chinese company Huawei Technologies from its 5G network over looming national security concerns, eyes are on whether Samsung Electronics can actually cash in on the opportunity.
The Korean tech giant has been actively trying to clinch lucrative supply deals of its 5G network equipment in the United States, the U.K. and other advanced countries at a time when other European nations are moving to join the Huawei ban.
Analysts said Monday that Ericsson, which has the second-largest share in the 5G equipment market following Huawei, would be a potential beneficiary of the Huawei ban as the Swedish telecom giant is capable of filling the vacancy of the Chinese firm and has a neutral position in the prolonged trade dispute between the U.S. and China.
"According to the U.K. government policy, telecom companies there are required to use Huawei's equipment for the country's 5G infrastructure with certain limitations. Under the policy, Huawei's market share would be limited to 35 percent," said Choi Nam-kon, an analyst at Yuanta Securities. "For BT as an example, Huawei's share is about two-thirds while Nokia has one-third. For Vodafone, Huawei has a one-third share and Ericsson has two thirds. Given Huawei's equipment will be completely removed from the U.K. by 2027, Ericsson is estimated to gain benefit from the Huawei ban."
According to recent data provided by U.S.-based market tracker Dell'Oro, Ericsson ranked second in the 5G network equipment market with a share of 24.6 percent, following Huawei with 35.7 percent. During the same period, Huawei had the largest share with 35.7 percent, up 0.4 percentage points from the fourth quarter of 2019. The Chinese maker was followed by Ericsson with 24.6 percent and Nokia with 15.8 percent.
However, a chance remains for Samsung, the fourth-largest 5G equipment supplier, as the British government is putting equipment suppliers into a price cut competition as it is desperate to reduce the impact from phasing out existing Huawei equipment from its networks. Samsung ranked fourth in the market with a market share of 13.2 percent in the first quarter, Dell'Oro said, up 2.8 percentage points from the previous quarter.
The British government reportedly asked Japanese firms NEC and Fujitsu to help build its 5G networks. British officials were told to have meetings with their counterparts in Tokyo on July 16, two days after their announcement to remove existing Huawei 5G equipment from their networks by 2027.
Given Japanese firms' global market share in the 5G equipment business is under 1 percent, U.K. officials meeting with NEC and Fujitsu can be seen as a move to cut costs for establishing 5G in the country.
When announcing the Huawei ban on July 14, U.K. Culture Secretary Oliver Dowden said the decision would result in an accumulative delay of up to three years and cost as much as 2 billion pounds ($2.5 billion).
With more devices connected than ever before, many countries see establishing scalable infrastructure for the super-fast network as one of their top priorities in order to buoy their economies.
For Samsung, entering the U.K. market is an important step so that the company can use a supply deal there as a leverage point to promote its network equipment in Europe and other advanced countries.
In pitching itself as an alternative to Huawei, Samsung recently expressed its confidence that it can supply its 5G equipment to the U.K. Before the U.K. announced its Huawei ban, the company's Executive Vice President Kim Woo-june told a committee of British lawmakers last week that the company can definitely supply new 5G equipment to the country.
Samsung aims to improve its share in the lucrative 5G equipment market. The Electronics and Telecommunications Research Institute expects the global market size for 5G network equipment to grow to around $37.8 billion this year, and this will keep increasing as 5G is forecasted to cover more than 40 percent of the world's population by 2024.
Samsung is expanding its influence in the market rapidly, following Washington's expulsion of Huawei. In the last seven months, the company has secured four new 5G contracts including ones with Videotron in December, U.S. Cellular in February and New Zealand telecom Spark in March.
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