South Korean Chip and Display Panel Makers Halt Sales to Huawei: Reports

September 9, 2020 Updated: September 9, 2020

Several South Korean suppliers to Chinese tech giant Huawei allegedly will stop shipping their products to the Chinese company next week in response to U.S. sanctions.

Yonhap News Agency, citing unnamed industry sources, reported on Sept. 9 that South Korean chipmakers Samsung Electronics and SK Hynix will “virtually stop shipments” to Huawei beginning on Sept. 15.

According to one of the unnamed sources, it was possible that Samsung Electronics would sell its products to Huawei again after applying for U.S. government approval.

The companies are complying with sanctions announced in May, in which the U.S. Department of Commerce blocked Huawei from obtaining semiconductors from global chipmakers made with U.S. technology. The sanctions will take effect Sept. 14. On Aug. 17, the department broadened the restrictions imposed in May, in an effort to protect U.S. national security.

Secretary of State Mike Pompeo, in a statement, said that the August rule change “will prevent Huawei from circumventing U.S. law through alternative chip production and provision of off-the-shelf chips.”

Semiconductor chips are found in practically all modern devices, from computers and cellphones to missiles and fighter jets. China still heavily relies on foreign chips for its tech manufacturing, although Beijing aims to domestically produce 70 percent of its semiconductor needs by 2025, under its industrial policy of “Made in China 2025.”

Separately, a total of 152 Huawei and its affiliates are now on the U.S. trade blacklist, meaning that U.S. companies need to obtain special licenses in order to do business with them. Huawei and 68 of its affiliates were first added to the blacklist in May last year on national security grounds.

Several other South Korean media outlets also reported on the decision made by Samsung Electronics and SK Hynix, citing their unnamed sources, including local newspaper The Hankyoreh.

In addition, South Korean panel makers Samsung Display and LG Display would also suspend its shipments to Huawei beginning next week, according to The Korean Times.

SK Hynix declined to comment in an email response to The Epoch Times. Samsung and LG did not respond by press time.

Taiwan-based TSMC, the world’s largest contract chipmaker, also said that it will not ship chips to Huawei after Sept. 14.

According to a report by Seoul-based brokerage Eugene Investment and Securities, in 2019, Samsung earned 7.37 trillion won (about $6.2 billion) from selling chips to Huawei, which made up about 2.3 percent of the company’s total sales. Meanwhile, SK Hynix earned about 3 trillion won (about $2.5 billion) from its chip sales to Huawei last year.

Kuo Ming-chi, an analyst in the smartphone sector, told The Korea Times that Huawei could quit the smartphone business if the U.S. sanctions turned out to have a severe impact on its business operations.

A less severe impact could see Huawei lose its smartphone market share, Kuo added.

Park Hyung-woo, an analyst at Seoul-based Shinhan Financial, estimated that Huawei’s sales of smartphone units would drop to about 190 million this year from 240 million in 2019, according to The Korea Times. Next year, the number could dip below 100 million units.

Follow Frank on Twitter: @HwaiDer