Semiconductors, Huawei's 'Brief Boom' Special

US Sanctions Deferred for 120 Days... Huawei Likely to Focus on Chip Stockpiling
Short-Term Demand Surge Possible for Semiconductor Suppliers like TSMC, Samsung Electronics, and SK Hynix

A man operating a smartphone at the Huawei store inside a shopping mall in Beijing, the capital of China, on May 29.
[Image source=Yonhap News]

[Asia Economy Beijing=Correspondent Sunmi Park, Reporter Changhwan Lee] Chinese telecommunications equipment company Huawei is expected to focus intensively on stockpiling semiconductor chips during the 120-day grace period granted amid the US government's sales sanctions. This has raised hopes for a short-term boom for companies supplying semiconductors to Huawei, such as Samsung Electronics, SK Hynix, and TSMC.

According to foreign media and industry sources on the 19th, global semiconductor manufacturers, including Taiwan's TSMC, the world's largest foundry (semiconductor contract manufacturing) company, are planning production strategies focused on supplying Huawei during the 120-day grace period of the US government's Huawei sanctions.

The first signal came when TSMC received a semiconductor chip order worth $700 million from Huawei just before the US Department of Commerce announced its sales sanctions decision. TSMC is known to be concentrating all efforts on producing 5-nanometer and 7-nanometer chips ordered by Huawei in this emergency order.

An industry insider said, "Huawei's semiconductor order was placed last week, just before the US Department of Commerce announced the sanctions," adding, "(To supply within the grace period) the remaining time is short. From now on, it is a matter of speed."

On the 15th, the US Department of Commerce regulated that even semiconductors manufactured in third countries cannot be sold to Huawei if they were produced using US technology. This is a stronger measure than the one in May last year, which blacklisted Huawei and required semiconductor companies with production facilities in the US to obtain prior approval to trade with Huawei.

Instead, the US allowed a 120-day grace period during which quantities already ordered by Huawei can be shipped as scheduled before mid-September. Huawei is likely to place similar emergency orders not only with TSMC but also with other semiconductor foundry companies during the grace period, and these companies are also expected to supply the ordered quantities within the 120-day grace period.

There is also a possibility that domestic semiconductor companies such as Samsung Electronics and SK Hynix will see increased orders from Huawei during this period. As of last year, Huawei accounted for about 3% and 15% of the total sales of Samsung Electronics and SK Hynix, respectively. It is analyzed that SK Hynix, with a larger sales proportion, could benefit more in the short term.

Researcher Geunchang Noh of Hyundai Motor Securities explained, "During the 120-day grace period, Huawei is expected to strongly accumulate inventory of key components," adding, "SK Hynix, which has a high proportion of Huawei orders, may see better-than-expected short-term performance."

Researcher Kyungmin Kim of Hana Financial Investment also stated, "Huawei is likely to accelerate securing component inventory in response to the US government's strengthened sanctions," and "SK Hynix, with a high proportion of Huawei sales, may have good short-term performance."

However, the foundry business is less likely to benefit domestic companies. Huawei is currently understood to entrust most of its foundry volume to Taiwan's TSMC and China's SMIC. Since US direct regulations are focused on foundries, many expect orders to be concentrated on TSMC in the short term.

An official from the domestic semiconductor industry said, "Currently, US sanctions are focused on Huawei and TSMC, and direct damage to Korean semiconductor companies is expected to be minimal," adding, "Huawei, the core target of the sanctions, will secure as much volume as possible from TSMC."

This content was produced with the assistance of AI translation services.