South Korean chipmakers and display manufacturers will lose a major client in China when US trade sanctions targeting the technology giant Huawei Technologies Co. come into effect on Sept. 15.
Last month, the US Commerce Department imposed licensing requirements on foreign semiconductor companies who export US items and technology to the Chinese company. The intent was clear: to cut off Huawei’s access to semiconductors as almost all semiconductor companies include US items or technology.
Major Korean chipmakers, including Samsung Electronics Co. and SK Hynix Inc., have registered for licensing, but none had received approval as of Sept. 14, the day before the sanctions take effect.
Samsung Electronics and SK Hynix fetch a combined 10 trillion won ($8.4 billion) annually by supplying DRAM and NAND Flash to the Chinese tech giant. US sanctions against Huawei will inevitably create a dent in the Korean chipmakers’ short-term revenue, but unlikely to have a serious effect in the mid to long term.
Korean chipmakers are on the move to find a replacement, setting their sights on other Chinese companies, including Xiaomi Inc., Guangdong Oppo Mobile Telecommunications Corp. and Vivo Communication Technology Co.
“Xiaomi and Oppo need to purchase chips and display panels to make smartphones, meaning Korean companies won’t be affected in the long run unless China’s smartphone market sees reverse growth,” said an industry source.
The trade war between the US and China is shaking up the IT industry landscape. The attack on Huawei is likely to fuel heated competition between industry rivals to take over the Chinese company’s leading position in the global telecommunications equipment and smartphone market.
Huawei is widely expected to see its smartphone shipments plunge below 100 million units in 2021 due to the sanctions. According to market research firm SA, the company is predicted to drop from the second to the fourth place in the global smartphone vendor market by 2021.
Huawei’s presence in the telecommunications equipment market should also shrink as it will likely be shut out of 5G infrastructure bids in countries on friendly terms with the US such as Canada, Japan, and Australia.
For the time being, Korean companies may not be heavily hit by the US sanction against Huawei, however, uncertainty remains the biggest hurdle given that the US may expand trade sanctions to other Chinese companies, triggering a battle for survival among domestic suppliers, according to industry sources.
“We are completely recreating our business strategy for China,” said a source from the semiconductor industry.
Just last week, Chinese foundry business Semiconductor Manufacturing International Corporation was added to the US trade blacklist on grounds that the company may be involved in China’s military defense program.
Also starting on Sept. 20, the US will ban the Chinese messaging app WeChat to prevent installs on Apple’s iPhone. WeChat has over 1.1 billion users in China alone, and industry players say that the sanction may stop Chinese consumers from purchasing iPhones.
Korea’s two largest display panel makers – Samsung Display Co. and LG Display Co. – are widely expected to suffer from the ban as they are known to supply up to a combined 72 million OLED display panels to Apple.
By Hyung-Suk Song and Seung-Woo Lee
<Edited by Danbee Lee>