5/28

[수친구]

South Korea fears side blow in US-Huawei fight

Reminded of THAAD controversy, Korean firms jittery over potential impact

 With the US government ramping up pressure on its allies to reject Huawei Technologies equipment for its 5G cellular networks, South Korea is struggling to come up with a response amid the

escalating conflicts between the world’s two superpowers.

The Trump administration has reportedly urged the Korean government to prevent companies from purchasing Huawei’s equipment. Citing LG Uplus as an example, an unnamed State Department official has demanded a halt to the mobile carrier’s operations in “sensitive areas,” according to news reports here last week.

While acknowledging US security concerns, the Ministry of Foreign Affairs has reportedly withheld its position, as it reluctant to interfere in private companies’ business decisions. A ministry spokesperson told reporters Thursday last week that it has consulted with the US on the matter, but didn’t reveal specifics of what was discussed.

“The US has stressed the importance of ensuring the security of 5G equipment and we are well aware of its position,” the spokesperson told reporters. “Korea and the US have been constantly consulting on the issue.”

The Moon Jae-in administration’s cautious approach appears to reflect a lesson that Korea learned the hard way when it decided to host a US missile defense system despite opposition from the country's biggest trading partner.

Retail giant Lotte Group and its affiliates in China suffered massive business losses in 2017 -- months after the conglomerate sold land to the Korean military to deploy the THAAD anti-missile defense system.

Lotte was not the only company that suffered China’s ire over the issue. Sales of Hyundai Motor and cosmetics maker Amorepacfic also saw steep declines in China. The retaliatory measures appeared to have eased when the Chinese government allowed Lotte to resume work on a shopping mall and leisure facilities earlier this month.

“The US message appears to be simple: We don’t want to rush, but you better come up with your own answer to the Huawei issue,” said a government official, requesting anonymity due to sensitivity of the issue. “Given that the THAAD crisis is still etched in our memory, it’s complicated.”

Yonhap

Chipmakers stuck in middle


While expanding its business in Korea aggressively since entering the market in 2007, the Chinese company has already emerged as a major client to domestic firms supplying components for smartphone manufacturing.

During his meeting with Korean reporters last month, Huawei’s rotating Chairman Guo Ping stressed that it purchased about 12 trillion won ($10.1 billion) worth of smartphone components from Korean suppliers.

The Trump administration’s sanction on Huawei has posed a challenge for Korean chipmakers who sell to Huawei such as Samsung Electronics and SK Hynix. While short-term impacts could be limited, industry watchers worried about how much they can endure if things continue to escalate.

“In the short term, there could be little negative business impact,” said an official from a Seoul-based electronics company, who was not authorized to talk about the sensitive issue. “We are aware that Huawei has stored enough inventory to sustain its business for a few months.”

“But the real problem lies in long-term prospects. If the current US-China standoff persists and Huawei’s chip inventory runs out, it is definitely bad news. All eyes are on how other companies implement would implement US restriction on Huawei.”

It is still not certain that the US would “punish” Korean companies for selling their products to Huawei. The Donald Trump administration’ has added Huawei to “Entity List” -- a measure that makes it harder for companies to do business with the Chinese company.

While it appears to apply only to US tech companies such as Intel and Qualcomm, some officials here are cautious about the possibility that the measure would be extended to third-party entities that have strong links to Huawei.

The US has been ratcheting up pressure on its allies to cut business ties with Huawei. In February US Secretary of State Mike Pompeo warned that continuing business with Huawei would make countries more difficult to “partner with.”

“We are closely watching what kinds of specific measures will follow the announcement of the list,” said another government official, requesting anonymity. “Particularly we are paying attention to whether it would involve a secondary boycott.”

Although there is no official data available, industry watchers estimate China’s share in Samsung’s 2018 revenue was about 18 percent, 2 percentage points up from a year earlier. The world’s biggest chipmaker sold about 43.2 trillion won worth of products in China last year.

In its business report for the period between January and March, Huawei was one of the five biggest sources of revenue for Samsung Electronics. The company said Huawei, Apple, AT&T, Verizon and deutsche telekom accounted for 15 percent of total global revenue. 

SK hynix’s reliance on the market has reportedly grown even deeper than Samsung. Among the world’s third-largest chipmaker revenue at the first quarter of this year, sales in China accounted for 47 percent of total global sales, which was 3.1 trillion won.

“What we are buying from Huawei is much smaller than what we’re selling to them,” said an official from a local telecom company. “The real risk lies in semi-conductor companies and whether they would be subject to US sanctions on Huawei.”

US President Donald Trump. Yonhap

Mobile carriers seek to remove Huawei label 

The country’s mobile carriers appear to have joined the fray. While they have little business presence in China’s telecom markets dominated by local providers, the three leading telco operators are seeking to distance themselves from Huawei due to marketing concerns. 

SK Telecom, KT and LG Uplus have reiterated that they are not going to sell Huawei’s latest smartphones to Korean consumers. Currently, the only available Huawei smartphone is P20 Lite worth 310,000 won and the gadget is being provided by KT. The company said it has yet to decide about stopping sales of the low-cost smartphone.

The telco’s involvement in installing Huawei equipment in a Korean financial institution appears to have been suspended. NonHyup Bank has reportedly withdrawn its plan of pursuing a 120-billion-won business of adopting Huawei equipment in its wired banking system

“Any connection with Huawei looks bad right now in terms of marketing strategy,” said a telco official. “Companies will most likely act fast, faster than one would think, in a direction (that is deemed more favorable) with or without government guidance.”

At the center of spotlight will be LG Uplus that the Trump administration has reportedly accused of installing Huawei equipment in “sensitive area.” The company is the country’s only mobile carrier that uses Huawei equipment for its 5G wireless network.

LG Uplus has repeatedly downplayed the security risks involved and stressed there has been no specific request from the government to remove Huawei equipment. According to the company, it never installed Huawei gear near US military bases in Korea and instead relied on Swedish frim Ericsson to build a network.

Some network security experts said that given the stakes the Trump administration put in its confrontation with China, the Korean companies should be cautious about expecting the US to bury the issue permanently.

“Theoretically speaking, wireless networks could be more vulnerable to outside hacking attempts than a wired network,” a network expert from a Seoul-based telecom company said, requesting anonymity.

“Compared to wireless networking system where a public network is physically isolated from internal ones, hackers can assess USFK military networks from the backdoor in a remote wireless network. Although it has not been reported yet, it is theoretically possible.”



Not the same as THAAD, but...


Experts said while the Moon administration should learn lessons from its previous trade dispute with China over THAAD deployment, it should understand things are not exactly the same as before.

Unlike the THAAD controversy, Korea will not be the only country that China will retaliate against. The United Kingdom, Japan, Australia and others have joined the US-led efforts to restrict Huawei from establishing their 5G networks.

How companies are likely to be affected is also not as clear as with THAAD. For example, Samsung Electronics might end up benefitting from US sanctions as it can increase its share in the world’s smartphone market.

“I don’t think China will retaliate the same way it did during the THAAD controversy,” said a former senior foreign official, who requested anonymity due to the sensitivity of the issue. “There are so much more stakeholders involved than before.”

“I think the government should act on two lessons: whether it would undermine our national security and violate free market principles. In other words, the government should figure out how dangerous Huawei equipment is and let private companies decide on whether to ban it.” 

Given that China’s growing importance in Korea’s economy, the government should remain cautious about doing something that could dramatically hurt relationship with the country’s biggest trading partner.

According to the Ministry of Science and Information & Communication Technology, South Korea sold $119 billion worth of IT products to China last year. It was followed by Vietnam of $27.8 billion and US of $20.5 billion. 

“For a country like South Korea caught between the global superpower, strategic ambiguity is the most important thing,” Hwang Jae-ho, a professor of international studies at Hankuk University of Foreign Studies. “When it comes to dealing with China, it’s better to walk one step behind.

(jasonyeo@heraldcorp.com)

[수친구]

jittery 영어
발음미국/영국 [dʒítəri]
뜻① 신경질적인 ② 초조해하는

[수친구]

ramp up 영어
뜻① 증가시키다 ② 늘리다

[수친구]

cellular 영어
발음미국/영국 [séljulər]
뜻① 셀룰러 ② 휴대전화 ③ 세포의 ④ 이동통신

[수친구]

reportedly 영어
발음미국/영국 [ripɔ́ːrtidli]
뜻① 보도에 따르면 ② 알려진 바에 따르면 ③ 전해지는 바로는 ④ 소문에 의하면 더보기
숙어
Reportedly, he left London a week ago.[＝It is reported that he left London a week ago.] 전하는 말에 의하면 그는 1주일 전에 런던을 출발했다.

[수친구]

ire 영어
발음미국/영국 [aiər]
뜻① 분노 ② 노여움 ③ …을 노하게 하다

[수친구]

etch 영어
발음미국/영국 [eʧ]
뜻① 식각법을 쓰다 ② 식각(蝕刻)하다 ③ 뚜렷이 그리다 ④ (문어) …을 새기다 더보기
숙어
etched glass 식각 유리.

The terrible event is etched in my memory. 그 무시무시한 사건이 내 기억 속에 새겨져 있다.

[수친구]

ratchet 영어
발음미국/영국 [rǽʧit]
뜻① …을 기어의 작용으로 들어 올리다 ② …을 단계적으로 증가시키다 ③ 미늘 톱니바퀴 ④ 깔쭉 톱니바퀴(ratchet wheel)

[수친구]

telco 영어
발음미국/영국 [télkòu]
뜻 전화 회사

[수친구]

stakeholder 영어
발음미국/영국 [stéikhòuldər]
뜻① 건 돈을 보관하는 사람 ② 계쟁물 보관자 ③ 투자자