Samsung to gain in short term from Trump-Huawei standoff: analysts

With the Trump administration banning Huawei from selling technology to the US market, and its suppliers cutting ties with the Chinese firm, South Korean companies are scrambling to figure out how the confrontation will impact their business outlook.

Following an executive order that allows the US government to block purchases of what it deems to be security-threatening technology, Google has pulled Huawei’s license to access the Android operation system. 

The Department of Commerce softened the measure Monday with a 90-day waiver for Huawei to upgrade software on its existing smartphones, but speculation is rampant that Intel, Qualcomm, and other US suppliers will follow suit and cut off business ties with Huawei.

While it may be too early to tell which Korean companies will eventually make the most of the intensifying US-China tech rivalry, business analysts say two Samsung Electronics is likely to be one of the biggest benficiaries, at least in the short term.

The sentiment was reflected in the stock market. Samsung Electronics’ stock price rose for two consecutive trading days to close at 43,150 won ($36.12) on Tuesday, 2.74 percent higher than the previous trading session.

“We believe that Samsung Electronics will benefit from (the Huawei issue) in the low-cost smartphone market in Europe and South America,” said Kim Dong-won, an analyst at Seoul-based financial firm KB securities.

The world’s biggest smartphone maker has faced growing challenges from Huawei. The Chinese company has narrowed the gap with Samsung with its business expansion in emerging markets.

According to a report by Strategy Analytics in May, Samsung topped the smartphone market with a 21.7 percent share. But this was largely overshadowed by the progress made by Huawei, which increased its market share from last year’s 11.4 percent to 17.9 percent, boosted by increased sales outside of China.

Given that Google’s own services, such as Gmail and Google Maps, are in widespread use among consumers in Europe and South America, their reluctance to use Huawei smartphones could pose a challenge to the Chinese company.

“It is for sure that there would be little impact on the Chinese smartphone market. … I don’t think Chinese consumers would care much about whether or not Google is unavailable on Huawei smartphones,” said an official from a local electronics company.

“But those smartphone makers using the Android platform, including Samsung, could see short-term benefit from the European and South American markets. It could be an opportunity for them to expand their business.”

Still, the challenges faced by Huawei might be bad news for South Korean companies using the Chinese company’s equipment. Not only does Huawei provide wireless network equipment, but its wired network equipment is being used in public infrastructure, such as subways and financial institutions.

Among the most likely to be hit is LG Uplus, the country’s third-biggest mobile carrier, which has been using Huawei equipment for its fifth-generation cellar network. Most of the Huawei network equipment is installed in LG Uplus’s 5G facilities in Seoul and the surrounding metropolitan area.

Although LG Uplus saw its stock price tumble nearly 4 percent to close at 14,800 won on Tuesday, the mobile carrier firm said it expected little negative impact for the time being from the US sanctions on Huawei.

“We have secured enough (Huawei equipment) for base stations (for the 5G network), we believe there won’t be a problem,” said a LG Uplus official. “We are going to proceed with our plans and be prepared to deal with any other additional issues.”

By Yeo Jun-suk (jasonyeo@heraldcorp.com)