Impact of US Sanctions on China's Telecom Equipment Influence... "Need to Respond to Reorganization of Trade Order"

China's Market Share in U.S. Telecom Equipment Drops Sharply to 19% in H1 Due to U.S. Sanctions

The Huawei booth set up at the "3rd International Artificial Intelligence Expo (AI EXPO KOREA 2020)" held at COEX, Gangnam-gu, Seoul in 2020 [Image source=Yonhap News]

[Asia Economy Reporter Kim Pyeonghwa] As the United States strengthens its restrictions against China in the telecommunications sector, the influence of Chinese telecommunications equipment, including Huawei, has diminished. China once held over 40% of the U.S. telecommunications equipment market share, but this shrank to 19% in the first half of this year. Experts advise that since this restructuring of trade order could expand into advanced industries such as semiconductors and batteries, domestic countermeasures need to be prepared.

On the 14th, the Korea International Trade Association’s International Trade and Commerce Research Institute announced the release of a report titled "The New Trade System Led by the U.S. and the Telecommunications (5G) Industry: The Unusual Trade Part 1," containing these findings.

China’s Share in Telecommunications Equipment Market Shrinks Due to U.S. Sanctions

The report stated that in recent years, the U.S. has sought to solidify its industrial hegemony from the perspectives of supply chains, alliances, and security by restraining China. The 5th generation mobile communications (5G) industry was highlighted as a representative sector where U.S. restrictions are prominent. It explained that the U.S. imposed comprehensive sanctions on China’s 5G industry, citing security risks such as infrastructure control and eavesdropping, with Huawei, a Chinese IT company, as a key target.

Since 2019, as U.S. sanctions against China intensified and international cooperation followed, dependence on Chinese telecommunications equipment has decreased. The share of Chinese products in the global telecommunications equipment import market steadily increased after 2012 but dropped from 44.7% in 2018 to 39.2% last year. In the U.S. telecommunications equipment market, China’s share increased until 2018 but then fell sharply from 49.2% in 2018 to 24.5% last year and further down to 19% in the first half of this year.

During this process, Huawei lost market share not only in telecommunications equipment but also in the smartphone market. This was due to ongoing U.S. regulations, including prohibiting global semiconductor companies from exporting semiconductors to Huawei. Once a major player challenging Samsung Electronics for the top spot in the global smartphone market, Huawei’s share shrank to 3% last year.

As China’s Influence Declines, South Korea’s Opportunities Increase

The report noted that although there were initial concerns about declining performance among related companies due to semiconductor export restrictions targeting Huawei, sales of major semiconductor companies in South Korea, the U.S., and Taiwan have increased since 2020. While U.S. sanctions did not directly bring windfall benefits to domestic companies, they could expand overseas business opportunities in the future.

In fact, unlike the decline in China’s equipment market influence including Huawei, South Korea’s telecommunications equipment exports rose from $770 million in 2019 to $1 billion last year. Samsung Electronics, the country’s leading first-tier telecommunications equipment company, has recently expanded orders in multiple countries including the U.S., India, Canada, New Zealand, and the U.K. Recently, major overseas companies such as Ericsson and Nokia have sought to avoid China by requesting domestic manufacturers to supply equipment, which is expected to increase overseas expansion opportunities for small and medium-sized domestic companies as well.

Cho Sanghyun, head of the Korea International Trade Association’s International Trade and Commerce Research Institute, said, “The unusual trade order led by the U.S. is emerging in various areas, including the telecommunications sector,” and added, “To secure practical benefits, our companies must maximize export opportunities for telecommunications equipment and components and create competitive advantages in smartphones.”

He also emphasized, “The restructuring of trade order aimed at securing industrial hegemony may occur in key advanced industries such as semiconductors, batteries, and artificial intelligence (AI) in the future. We must closely monitor trade issues and seek countermeasures.”

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