'Keep or Drop?' LG Uplus Caught in Huawei Dilemma

[Asia Economy Reporter Joselgina] "Will the blessing turn into a bomb?" LG Uplus, the only domestic telecom company to have adopted Chinese Huawei's equipment and enjoyed significant cost-saving effects, is cornered ahead of the commercialization of the 'ultra-fast' 28 GHz band 5G network in the second half of the year. This is because the Trump administration in the United States has directly mentioned LG Uplus and is urging the exclusion of Huawei.

Considering compatibility with existing equipment and the burden of 5G investment, LG Uplus should cooperate with Huawei. However, having faced backlash every time anti-China sentiment flared up domestically, LG Uplus cannot help but feel burdened by the U.S.'s large-scale offensive. There are even evaluations that it is effectively carrying a bomb.

According to related industries on the 23rd, the three major telecom companies including LG Uplus plan to formalize the selection of related equipment providers for the commercialization of 28 GHz 5G around November, when President Trump's re-election will be decided. Due to the impact of the novel coronavirus (COVID-19) and other factors, the investment burden has increased, delaying the schedule much later than initially expected. Except for KT, which sent a Request for Proposal (RFP) for the 28 GHz band together when selecting 5G equipment providers in 2018, no RFP has been sent as of the end of July.

Within and outside the industry, attention is focused on whether LG Uplus will send an RFP to Huawei. Previously, when building the 3.5 GHz band 5G network, LG Uplus adopted about 30% Huawei equipment, unlike SK Telecom and KT. When considering only 5G equipment, Huawei's share is understood to be the highest compared to other suppliers such as Samsung Electronics and Nokia. Huawei's equipment is known to be about 30% cheaper despite having similar quality to competitors. This is also closely related to the evaluation that LG Uplus performed well despite the heavy 5G investment burden last year.

Especially with consumption contraction due to COVID-19 and the government's digital new deal adding to the 5G investment burden, LG Uplus faces an increasing need to reduce costs during the nationwide network construction process. From the perspective of handover compatibility between the existing 3.5 GHz and 28 GHz equipment frequencies, using Huawei equipment is easier. The cost burden of replacing new equipment, which could reach trillions of won, cannot be ignored. It is known that LG Uplus has strongly considered ordering Huawei equipment despite the U.S.'s moves to sanction Huawei, taking these aspects into account internally.

However, ahead of the presidential election, the Trump administration referred to SK Telecom and others who did not choose Huawei equipment as 'clean telecom companies,' and now by directly mentioning LG Uplus's name, LG Uplus's burden has inevitably increased.

Robert Strayer, U.S. Department of State Deputy Assistant Secretary for Cyber and International Communications and Information Policy, said on the 21st (local time) during a video briefing explaining the U.S. 5G security policy, "We urge companies like LG Uplus to move away from untrustworthy suppliers to trustworthy ones." He added, "Only then can dictatorships not disrupt the 5G networks that underpin their autonomous vehicles, smart manufacturing, and remote healthcare."

This means that if LG Uplus builds a 5G network using Huawei equipment, autonomous vehicles, remote healthcare, and other services based on it would also be untrustworthy. This statement has placed a heavy burden on LG Uplus, which was planning to actively promote business-to-business (B2B) transactions in the high-frequency 5G domain. The 28 GHz band network, which secures ten times the bandwidth compared to the 3.5 GHz band, is considered essential infrastructure to realize the Fourth Industrial Revolution era, including smart factories and smart cities.

Domestically, the strong 'pro-China company' image associated with using Huawei equipment is also a troubling point for LG Uplus. An industry insider said, "Every time anti-China sentiment arises due to COVID-19, fine dust, etc., LG Uplus's name comes up as well, which is a headache," calling it "a bomb."

Moreover, this U.S.-originated offensive is expected to intensify until the presidential election when President Trump's re-election will be decided. Huawei's side stated that the U.S. claim that Huawei equipment could be used for Chinese government spying is "not true and is a political offensive." An LG Uplus official said, "Nothing has been officially decided yet regarding the 28 GHz band network."

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