Huawei Seeks to Secure South Korean Tech Supply to Offset US Ban

By Frank Fang, Epoch Times
May 29, 2019 Updated: June 4, 2019

Chinese telecom giant Huawei is now leaning heavily on Korean and Taiwanese tech suppliers, after being banned by the U.S. government from buying U.S.-made goods.

An unidentified Huawei executive recently visited its three South Korean suppliers—Samsung Electronics, SK Hynix, and LG Display—to make sure the three companies wouldn’t halt shipments, according to South Korean national broadcaster KBS, in a May 28 report that cited unnamed industry sources.

Other South Korea media had similar reports, mostly citing sources they didn’t identify. South Korean news site Business Korea reported that the Huawei executive flew in from China. 

The three South Korean suppliers told the Huawei executive that “they have no plans to pull back from their relationship with the telecom giant,” according to KBS. 

According to South Korean broadcaster Arirang, Samsung Electronics and SK Hynix supply Huawei with DRAM and Nand Flash memory semiconductor chips that are key components to manufacturing smartphones. Meanwhile, LG Display and Samsung Display, a Samsung subsidiary, supply cellphone screen displays, including OLED, an advanced display technology that provides higher resolution than LCD. 

South Korean companies shipped more than $10 billion worth of tech components to Huawei in 2018, according to Arirang. 

Meanwhile, South Korean daily The Hankyoreh recently reported that Huawei purchases 5 trillion to 7 trillion won (about $4 to $6 billion) worth of Korean-made tech parts annually, citing the Chinese tech giant’s own data. 

Huawei is seeking to secure a continuous component supply because it’s currently under a U.S. export ban. On May 15, the U.S. Commerce Department added Huawei and its 68 affiliates to its “Entity List,” which means U.S. firms are banned from doing business with the Chinese tech giant, unless they are granted special government approval. 

Of the $70 billion that Huawei spent on components and other supplies in 2018, $11 billion went to U.S. companies, according to previous statements by a Huawei spokesperson.

The Commerce Department has granted the company a temporary 90-day license to purchase U.S.-made goods in order to maintain existing networks and provide software updates to existing Huawei smartphones. 

The U.S. ban also affects non-American firms because it applies to goods and services made with 25 percent or more of U.S.-originated technology or materials.

Several U.S. companies have since cut ties with Huawei, including Google, Microsoft, Qualcomm, and Intel. 

Outside of the United States, UK-based chip designer ARM, German chipmaker Infineon Technologies, and Japanese component supplier Toshiba have also severed their ties with Huawei. 

The South Korean government hasn’t provided any instructions to local tech companies regarding Huawei, leaving individual companies to make their own decision, according to South Korean media. 

However, local media have also reported that South Korean tech companies fear that if they were to cut ties with Huawei, they would face a second “THAAD incident,” leading to a boycott of South Korean products in China. 

In 2017, the Chinese regime encouraged citizens to boycott South Korean products and stopped Chinese tourists from visiting the nearby country, after South Korean conglomerate Lotte agreed to offer land on its golf courses for U.S. THAAD anti-missile defense installations. Lotte’s business in China subsequently fell dramatically, with the company eventually closing all retail stores in China in August 2018.

This article previously misstated the number of Huawei affiliate companies that are under the U.S. export ban. The Epoch Times regrets the error.

Follow Frank on Twitter: @HwaiDer