Huawei ban puts South Korea in a familiar place – caught between the U.S. and China


SEOUL (Reuters) – Less than a week after Huawei Technologies was blacklisted by the United States, more than a hundred South Korean politicians and business leaders toured the Chinese tech giant’s headquarters and its lavish new campus outside Shenzhen.

Executives from firms such as Samsung Electronics watched demonstrations of high-speed robotics and smart city simulations powered by Huawei’s next-generation 5G network equipment. The event was part of a Seoul-backed forum aimed at building tighter tech links between China and Asia’s fourth-largest economy.

But the gathering was overshadowed by the U.S. decision early this month to ban American tech and telecom firms from doing business with Huawei, and a push to get companies around the world to follow suit.

The campaign against Huawei, and the broader U.S.-China trade war, have landed export-driven South Korea in a familiar bind, caught between its crucial security ally and biggest trading partner.

Key global tech companies are suspending sales of parts and software to the Chinese firm and several mobile carriers are delaying the launch of new Huawei handsets. But in South Korea, business executives and politicians said they see few alternatives to conducting business with China as normal.

For Samsung, South Korea’s national tech champion, any advantages it could gain from Washington’s move against Huawei would be outweighed by the pain of lost business, experts said.

Samsung could increase share at Huawei’s expense in smartphones and telecom network equipment, and its stock has ticked up modestly since the U.S. ban was announced. The broader trade war could also blunt the rise of new Chinese rivals in chips and smartphone screens.

But Huawei is also one the biggest customers for Samsung’s memory chips, and the South Korean firm has multiple factories in China serving a plethora of customers. Samsung Vice Chairman Yoon Boo-keun was among those who took part in the Huawei tour.

“They compete, but they are important partners too,” said Min Byung-doo, a South Korean ruling Democratic Party member of parliament who was part of the tour, referring to Huawei and Samsung. He told Reuters that South Korean companies had “no simple alternative” to maintaining business relationships with Huawei.

Samsung declined to comment.


South Korean government officials and tech company executives say there is plenty to worry about in the long run. China is South Korea’s largest trading partner, accounting for 26.8% of the country’s exports in 2018, compared with 12% for the United States.

Huawei alone bought $10.7 billion worth of South Korean products last year, accounting for about 17% of the country’s electronics parts exports to China, according to data from the South Korean government and Huawei.

South Korea’s SK Hynix, the world’s No.2 memory chip maker, counts Huawei as its top customer.

(Graphic: Huawei has become one of Korea Inc’s top customers,

Some experts believe South Korea will not be able to walk the line between the two powers amid an intensifying tech trade war.

“South Korea has to face the moment of truth – choosing the United States or China,” said Han Suk-hee, a professor of Chinese studies at Yonsei University and a former South Korean consul general in Shanghai.

“What if the U.S. is not only asking not to use Huawei products but also not to export South Korean semiconductors to China? The government needs to prepare for that worst-case scenario.”

Washington has warned allies that adopting Huawei technology in 5G networks could lead the U.S. to curtail intelligence sharing.

South Korea’s presidential office said it cannot comment on discussions with Washington.

A South Korean government source close to the situation said there are no easy answers.

“Sorry, we are not the United States, and can’t just do the same as what the U.S. is doing to China,” he said when asked whether the country will join the U.S. campaign against Huawei. “We can’t jump to a simple conclusion.”

LG Uplus Corp, the only South Korean telecom firm to use Huawei equipment for its 5G network, declined to comment.

For its part, Huawei said it plans to open a 5G lab in South Korea on Thursday as a sign of its commitment to partnership.

“Huawei has an ‘In Korea, for Korea’s advancement’ philosophy,” Huawei’s head of Asia-Pacific, Tian Feng, was quoted as saying by South Korean officials who took part in the tour.


Memories are still fresh in South Korea of how damaging retaliation by Beijing can be.

Angry over Seoul’s decision to deploy a U.S. THAAD anti-missile defence system in 2016 to counter North Korea, China informally banned group tours to South Korea and suspended construction projects by retail giant Lotte.

Samsung’s smart phone market share in China halved in 2017 from a year earlier, according to Strategy Analytics. Hyundai Motor’s sales plummeted by one-third as a result of the missile dispute.

At some South Korean companies, officials grumble that their government is powerless to counter China and has not done enough in the face of what they see as unfair subsidies and other trade practices.

“We feel as if we are left alone to fight to survive, not being able to get any government support when the Chinese government is all out there to advance their high-tech industries,” an official at a major South Korean display maker said, asking for anonymity due to the sensitivity of the matter.

“Our government was in disarray without any pre-emptive plans in the THAAD situation, while our companies kept bleeding in China,” said the chief executive of a South Korean firm that supplies parts for Huawei smartphones, who also declined to be named.

“This time around, I hope our government can provide a clear vision and protect our companies.”

Part of a Peloton gym bicycle
Image copyrightGETTY IMAGES

Fitness start-up Peloton plans to raise up to $1.3bn (£1.1bn) in an initial public offering, the latest loss-making firm gearing up for its market debut.

The US company sells expensive stationary bikes and provides on-demand workout sessions.

Peloton said it would price shares at up to $29, giving it a potential market valuation of more than $8.2bn.

The planned Nasdaq listing follows disappointing debuts from Uber and Lyft.

Founded in 2012, the New York-based company sells fitness equipment – with bikes priced at around $2,000 – fitted with touchscreens.

Users then purchase a subscription to access classes streamed live and on-demand. The firm said it has more than 1.4 million members.

“On the most basic level, Peloton sells happiness,” founder John Foley previously said.

In a regulatory filing, the firm said it plans to offer 46 million shares, priced between $26 and $29 per share. That would give the company a market value of up to $8.2bn.

Peloton’s most recent earnings report showed a rise in revenues but the company fell short of turning a profit.

For the year ended 30 June, revenues more than doubled to $915m while its net loss widened $195.6m from $47.9m.

Media captionHow can a company be valued at billions, but not make any profit?

The planned listing comes on the heels of several high-profile US stock debuts.

Uber and Lyft both went public this year but drew criticism over their heavy losses.

WeWork’s stock market debut – one of the most hotly anticipated financial events of the year – is also in doubt.

The company rents office space for the long-term, subletting that space to firms and individuals on more flexible lease terms.

SoftBank, the Japanese investment firm that owns about 30% of WeWork, has reportedly urged the property company to drop its flotation plans.

The pressure follows signs that outside investors do not value the much-hyped firm as highly as SoftBank did when it invested last year.

DJ Koh, President and CEO of IT & Mobile Communications Division of Samsung Electronics, announces the new Samsung Galaxy Fold smartphone during the Samsung Unpacked event on February 20, 2019 in San Francisco, California.
Image copyrightGETTY IMAGES

Samsung’s first foldable smartphone will go on sale in September after problems with the device delayed its initial release.

The April launch of the Galaxy Fold was postponed after early reviewers reported broken screens.

Samsung said it had made “improvements” to the nearly $2,000 (£1,603) device which would be sold in “select markets”.

The firm has been racing to launch a folding smartphone before its rivals.

“Samsung has taken the time to fully evaluate the product design, make necessary improvements and run rigorous tests,” the firm said in a statement.

Improvements include extending a protective layer to make it clear it is not meant to be removed, as well as strengthening the hinge area with new protection caps.

One explanation for the broken screens  appears to have been that some reviewers removed a film which they thought was a typical protective layer that came with the phone when first bought.

Media captionWATCH: Hands-on with the Samsung Galaxy Fold

The defects with the device proved a source of embarrassment for Samsung which has seen declining smartphone sales and faces growing competition from rivals including China’s Huawei.