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Arrest of Huawei Executive May Affect Korean Companies
Security Concerns over Huawei Equipment Growing
Arrest of Huawei Executive May Affect Korean Companies
  • By Michael Herh
  • December 11, 2018, 10:00
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Korean companies are keeping a close eye on the aftermaths of the arrest of Meng Wanzhou, vice chairwoman of Huawei.

Korean companies are keeping a close eye on the aftermaths of the arrest of Meng Wanzhou, vice chairwoman of China's telecom giant Huawei.

The world's No. 1 telecom equipment provider, Huawei has been seeking to expand its presence in Korea. Korean semiconductor companies are keeping a close watch on Meng's arrest for the possibility of the U.S. suspending semiconductor supply to Huawei. Industry analysts say that there will be no immediate impact on the Korean market but they will closely observe situations as many countries around the world are moving towards suspending contracts with Huawei.

According to the telecom industry on Dec. 10, Huawei has contractual relationships with all of the three major mobile carriers in Korea -- SK Telecom, KT and LG U+. In the wireless sector, LG U + has signed a contract to use Huawei’s 5G network equipment in Seoul, part of Gyeonggi Province and Gangwon Province. The company has already installed 4,033 base stations in Seoul, Gyeonggi and Incheon. The number is up to eight times more than those installed by SK Telecom and KT, which will receive 5G network equipment for the Seoul metropolitan area from Samsung Electronics.

Huawei has secured a firm position in the wired network business in Korea. All of the three mobile carriers are already using Huawei equipment. In particular, KT decided to use Huawei equipment in a NH Nonghyup Bank network upgrade project, which will cost 120 billion won (US$108 million) over five years. The project involves building dedicated lines connecting 6,200 NH Nonghyup Bank branches nationwide with agricultural and livestock cooperatives.

"Generally, banks sign telecommunication network contracts every five years. It is said that as Nonghyup signed such a contract with Huawei, other banks will follow suit beginning next year," a telecom industry official said.

However, Huawei’s increasing presence in Korea is fueling security concerns. "Huawei says its equipment is safe from external hacking. All products from all telecom equipment companies are free from hacking," said an official in the telecom equipment industry. “However, once every three months, Huawei products including those used in Korea send data to the Huawei headquarters in China. No one can know what the data are.”

Korean companies that already signed a contract with Huawei say they will prepare thoroughly to prevent security problems.

The most attention is focusing on LG U+ which inked a deal to buy 5G network equipment from Huawei. LG U+ installed Huawei equipment in the Seoul metropolitan area when it prepared 4G Long Term Evolution (LTE) services. At the time, some LG U+ subscribers of the U.S. Forces Korea (USFK) protested against the installation of Huawei equipment, saying that they would cancel LG U+ services, so the company decided not to install Huawei equipment in and near USFK areas.

LG U+ says that it will maintain its contract with Huawei, but conduct security checks thoroughly. "We will build a system to check source codes of Huawei equipment,” said Ha Hyun-hoi, vice chairman of LG U+, during a parliamentary inspection of the administration in October. "We will address the issue by having Huawei equipment certified by a verification organization in Spain and receive an international certificate from the organization."

At present, LG U+ is compelled to use Huawei products as in the initial stage of 5G services, the network should be compatible with that of 4G LTE. "If LG U+ cannot use Huawei equipment for its 5G network, the company will have to change all of its LTE network equipment," said an industry expert.

Moreover, other 5G equipment vendors, including Samsung Electronics, have been late in developing 5G equipment compared to Huawei. "Other 5G equipment suppliers have been late in preparing software for their products," a telecom industry observer said. "Equipment from companies other than Huawei will be temporarily installed and replaced later."

In the meantime, a possibility has been raised that Silicon Valley companies will stop supplying semiconductors to Huawei. Korean semiconductor companies are on the alert as this could affect their semiconductor supply to Huawei.

Huawei relies on Intel, Broadcom and Qualcomm for parts for mobile telecommunication equipment and mobile phones. U.S.-made components supplied by Silicon Valley companies to Huawei are estimated at US$10 billion a year. Memory semiconductors are supplied by Micron and SK Hynix. Huawei recently put pressure on SK Telecom to use Huawei equipment.