Every player will lose
The author is the head of the industry 2 team at the JoongAngIlbo.
The U.S. Department of Commerce announced that all items containing more than 25 percent U.S.-origin technology and parts will face U.S. government sanctions if the products are sold to Huawei or its subsidiaries. Naturally, global IT companies are busy calculating possible gains and potential losses and need to decide which side to take.
Huawei purchases $70 billion worth of components from the global market. Among 92 key suppliers to Huawei, only 25 are Chinese companies. Of the rest, 33 are U.S. companies, which could be directly subjected to sanctions, 11 are Japanese and 10 are Taiwanese. Korea’s Samsung Electronics and SK Hynix are also on the list of key parts suppliers. The list also includes leading Japanese companies like Sony, Murata, Panasonic and Fujitsu.
One might expect Japanese companies to be anti-Huawei, following Japanese Prime Minister Shinzo Abe’s moves to please U.S. President Donald Trump, but, in fact, they are carefully watching the situation. Panasonic and Toshiba posted on their Chinese websites denials of reports in the Japanese press saying the companies stopped supplying parts to Huawei. They explained that, following legal advice, they resumed business as the transactions posed no legal issues.
U.S. companies in the sights of the Department of Commerce are showing signs of dissension. The Financial Times reported that Google, which was temporarily allowed to do business with Huawei for 90 days, is lobbying the U.S. government, saying it would be a greater threat to U.S. security if Huawei makes its own operating system (OS). If Huawei uses its own OS on its smartphones, the phones could be more vulnerable to hacking and privacy attacks, and it would lead to greater problems if the messages are sent to Android phones or iPhones. Until Aug. 19, when the temporary permit expires, Google is expected continue making the argument.
It is uncertain whether the rhetoric will be convincing enough. But it shows that stopping business with Huawei incurs significant losses for global IT companies. Even U.S. and Japanese companies are very confused, and Korean companies are more frustrated. The Blue House repeatedly stated that our companies need to make their own decisions, and their concerns are growing. Samsung Electronics finds it awkward that some believe the Huawei situation could benefit Samsung Electronics in the short term. Another IT company claimed that the Huawei issue is beyond its judgment and wants the government to keep companies away from the fray. Regardless of who benefits in the short term, long-term uncertainty is growing, and the overall IT market is bound to be hurt. Every player in the supply chain is likely to lose.
JoongAng Ilbo, June 12, Page 29