Sunday, November 17, 2019
Samsung Electronics and SK Hynix Differently Affected by U.S. Restrictions on Huawei
Samsung Benefiting from U.S. Sanctions Against Huawei
Samsung Electronics and SK Hynix Differently Affected by U.S. Restrictions on Huawei
  • By Kim Eun-jin
  • October 22, 2019, 08:55
Share articles

U.S. restrictions on Huawei affects Samsung Electronics and SK Hynix in different ways. 

U.S. restrictions on Huawei are affecting Samsung Electronics and SK Hynix in different ways although both are struggling with semiconductor prices falling.

SK Hynix’s Q3 earnings announcement is scheduled for Oct. 24 and the company’s Q3 operating profit is estimated at 429.7 billion won. The estimate is about one-fifteenth of its Q3 2018 operating profit and 67 percent of its Q2 2019 operating profit.

SK Hynix’s business performance has been highly affected by Huawei as a major memory chip buyer. The Chinese company’s Q3 sales increased 24.4 percent year on year to 610.8 billion yuan based on anti-U.S. sentiments, inventory handling, etc. In Q2 this year, Huawei’s Chinese smartphone market share rose 10.2 percentage points year on year to 37.3 percent. A high market share is anticipated for the following quarter as well.

However, Huawei’s business performance is likely to deteriorate next year. The United States is urging allies to purchase no 5G equipment from Huawei, mentioning the possibility of information leakage, and Google recently decided not to provide any Android OS update for Huawei smartphones. Huawei CEO Ren Zhengfei said in June this year that the U.S. restrictions would lead to a sales decline of approximately US$30 billion and its flagship smartphone Mate 30 is failing to make a debut outside China. These are headaches for SK Hynix in that about 10 percent of its sales are derived from DRAM supply for Huawei smartphones.
 

On the other hand, the restrictions are having some positive effect on Samsung Electronics. The company’s Q3 operating profit totaled 7.7 trillion won, about 10 percent higher than previously expected, and this was led by its IT & Mobile Communications Division, which posted an operating profit of more than 2.5 trillion won in that period.

The excellent performance has to do with Huawei’s slump. Huawei accounted for 14 percent of the global smartphone market last year, but its European smartphone market share fell from 30 percent to 9 percent in the first half of this year and it recorded a market share of 12.2 percent in Latin America in the second quarter of this year while Samsung Electronics posted 42.8 percent to widen their gap. At present, Huawei smartphones are being significantly affected by the restrictions in every region except for the Chinese and some Southeast Asian markets.
 

Samsung Electronics is overtaking Huawei in the global communications equipment market, too. In 2018, their shares in the market were 6.6 percent and 31 percent, respectively. In Q4, 2018 and Q1 this year, however, Samsung Electronics accounted for 37 percent of the 5G equipment segment of the market while Huawei stood at 28 percent. In addition, Samsung Electronics’ dependence on sales from the Chinese market fell from 17.7 percent to 15.7 percent from last year to the first half of this year and Samsung Electronics’ dependence on sales from Huawei is currently about 2 percent.