US curbs on Huawei may impact S Korea's recovery
NEW US restrictions against Huawei Technologies Co threaten to weigh on South Korea's economy, which is counting on chip exports to China to drive its rebound from the coronavirus pandemic.
The US Commerce Department said this week it would further
restrict the Chinese company from access to commercially available chips,
adding that even foreign firms will be affected if they use US-made design
software and gear.
Both Samsung Electronics Co and SK Hynix Inc, South Korea's
two biggest exporters, use US-made equipment while generating a large share of
their earnings by trading with Huawei and other Chinese firms. Samsung earned
almost 20 per cent of its revenue from China in the latest quarter, while Hynix
generated almost 40 per cent.
"US curbs on Huawei can lead to smaller Chinese tech
exports that contain South Korean semiconductors," said Kim Yang-paeng, an
analyst at the Korea Institute for Industrial Economics & Trade in Sejong,
South Korea. "South Korea's exports may never be the same with chip demand
slackening from China."
China is South Korea's biggest trading partner, and chips
are the country's largest single export category - worth US$94 billion last
year, or 17 per cent of total exports, according to the Korea International
Trade Association.
Huawei has risen as a major buyer of South Korean chips in
recent years as it expands its lineup of devices from smartphones to wireless
networks. The company expected to buy more than US$10 billion from South Korea
in 2019, ZDNet Korea reported last year, citing a Huawei official.
Huawei's decline may still prove a boon for some South
Korean sectors such as smartphones, an industry where Samsung competes with the
Chinese company for the top spot globally.
But other Chinese rivals may take Huawei's place,
potentially limiting the benefits for South Korea from the US move.
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