[Huawei Sanctions] US Launches Full Sanctions... Is Special Permission Possible?

Re-export via Taiwan and Hong Kong also unlikely
Stockpiled inventory up to 6 months turning point

[Asia Economy Reporter Dongwoo Lee] As the U.S. additional sanctions on Huawei, China's largest telecommunications equipment and smartphone company, took effect on the 15th, semiconductor and display companies worldwide stopped supplying parts to Huawei from that day. Semiconductor companies such as Samsung Electronics and SK Hynix are responding with a two-track strategy by seeking new trading partners to replace Huawei and requesting special export permits from the U.S. Department of Commerce.

◆ U.S. Intensifies Pressure on Huawei... Re-export via Taiwan and Hong Kong Also Unlikely

Last month, when the U.S. Department of Commerce announced the 'Huawei Sanctions Guidelines,' Samsung Electronics and SK Hynix, which had been supplying semiconductor parts to Huawei, immediately stopped additional production. This is because the U.S. Department of Commerce prohibited supplying semiconductors made with U.S. equipment to Huawei without prior approval for sales.

Samsung Electronics and SK Hynix, whose export routes to Huawei have been blocked, recently requested sales approval from the U.S. Department of Commerce, but industry consensus is that the likelihood of approval is slim. Since the U.S. is increasing pressure on Huawei, it is analyzed that sanctions could last for at least one year or more.

The industry expects that if the export ban is maintained for one year, an annual domestic sales impact of about 10 trillion KRW will be inevitable. Last year, South Korea's total semiconductor exports amounted to 112 trillion KRW, so although the proportion is small compared to the overall scale, a short-term sales decline is expected.

Experts judge that the fixed semiconductor trading market with Huawei is virtually closed, leaving open the possibility of some transactions through the spot market. However, even this is expected to be mostly limited to PC products, making semiconductor transactions practically impossible.

Re-exporting by circumventing through Taiwan and Hong Kong also appears unlikely. Song Myung-seop, a research fellow at Hi Investment & Securities, said, "The only mentioned route is re-export through Taiwan and Hong Kong, where companies export to China via Hong Kong, and Huawei purchases through local traders," adding, "Since local traders are also stopping transactions with Huawei, it will be difficult."

◆ How Long Can Huawei Endure the Crisis... Up to 6 Months as a Turning Point

If parts procurement fails, Huawei's supply volume is expected to significantly decrease starting next year. Although the Chinese government plans to overcome the crisis by promoting a domestic demand-driven economy, the possibility of isolation is increasing.

The industry estimates Huawei's stockpile to last from 3 months up to a maximum of 6 months. If the U.S. sanctions continue for more than 6 months, the survival crisis of Huawei's smartphone business could become a reality starting next year. The industry forecasts Huawei's smartphone shipments to drop from 240 million units last year to 190 million units this year, and fall below 100 million units next year.

In particular, if securing memory semiconductors becomes difficult for a long period, there are concerns that core businesses such as mobile communication base stations, servers, and networks could be pushed out of the global market.

Huawei plans to overcome the crisis by utilizing the maximum stockpiles accumulated until the day before, but it is inevitable that it will fall from its leading position in the global telecommunications equipment and smartphone markets.

Market research firm Strategy Analytics (SA) predicts that Huawei's global smartphone market share, expected to be 15.1% this year, will sharply drop to around 4.3% next year.

An industry official analyzed, "If Huawei fails to resolve the semiconductor supply issue, which is its top priority, it is highly likely that its market competitiveness will deteriorate in the shortest possible time going forward."

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