Reporter's Notebook Samsung Electronics stuck in US-China trade war
Samsung Electronics' building in Seoul / Korea Times photo by Shin Sang-soon
By Baek Byung-yeul
Samsung Electronics' woes seem to have deepened as the Korean tech giant is apparently stuck in the middle of the trade war between the United States and China.
The world's largest memory chip maker reportedly suspended its supply of semiconductors to Huawei Technologies Sept. 15, the day that Washington's new sanctions on the Chinese tech company went into effect.
This comes after U.S. Secretary of State Mike Pompeo tightened the noose on Huawei, Aug. 17, urging Washington's allies and partners to join its move to restrict the direct or indirect use of U.S. technology by the Chinese company, citing security concerns.
Given Huawei accounted for 7.3 trillion won ($6.14 billion), or 3.2 percent, of its sales in 2019, according to estimates by local brokerage house Eugene Investment, Samsung Electronics is on the verge of losing one of its largest clients.
Regarding the possibility of cutting off Huawei, Samsung has said it could not discuss client-related issues, but industry analysts said the company's revenue will likely suffer in the short term from losing Huawei as a customer. They added Samsung will soon be able to make up the expected losses by selling its chips to other smartphone manufacturers, but it is still apparent that Korea's largest company by market capitalization is in an awkward situation due to external factors.
What could put Samsung in further trouble is China's angry response towards the company's decision to cut off sales to Huawei. A Chinese newspaper lashed out at Samsung and SK hynix, in a Sept. 10 article, for their decision to stop supplying chips to the Chinese firm, warning that revenue at the Korean companies will drop a lot as they could lose the entire Chinese market if they do not supply Huawei.
Citing a comment from Xiang Ligang, director-general of the Beijing-based Information Consumption Alliance, one Chinese newspaper reported, “We all believe Huawei is in trouble, but we don't believe Huawei will fall. Because Huawei is one of the world's largest mobile phone manufacturers, if you lose this partner, what opportunities do you have to grow?”
Not only firms such as Samsung and SK but also other once-bitten Korean companies doing businesses in China have been shifting their attention towards the possible ramifications of Washington's tightened restrictions on Chinese firms.
The Chinese report could be interpreted as a threat, reminding many Korean companies about how much they struggled after China's apparent retaliatory measures to Seoul's decision to allow the deployment of a U.S. Terminal High Altitude Area Defense (THAAD) anti-missile system in 2017.
Hit hard by China's retaliation, one Korean distribution company lost more than a trillion won and was compelled to modify its business strategy. Also, game companies are still unable to directly sell their products in China ― the world's largest game market ― after over four years, as they have repeatedly not been given the proper government licenses required when launching new games.