Samsung Electronics Needs to Learn Lessons from Huawei’s Fall

Huawei has lost its position as China's largest smartphone maker. According to market research firm IDC, Huawei ranked fourth in the fourth quarter of 2020 with an 8.6 percent share in the global smartphone market. It was down 42 percent from a year earlier.

Huawei's status has changed over just a few months. Huawei topped Samsung Electronics and Apple in the second quarter of 2020, but suffered a sharp fall as its chip supply route was blocked starting from mid-September due to U.S. sanctions.

Behind Huawei’s downfall was the power of the United States backed by its fundamental chip technology. The United States banned the supply of semiconductors developed and produced using its own software and technology to Huawei. Although China has secured competitiveness in manufacturing at a rapid pace, it does not have basic technology. This means that any Chinese company, be it Xiaomi or Oppo, can meet the same fate, if it is subject to U.S. sanctions.

The fact that TSMC and Samsung Electronics are considering investing in the United States reflects the powerful muscle of the United States. The United States has many large fabless companies such as Apple, Qualcomm, AMD, and Nvidia.

This fact also has implications for Korea. In 2019, Korean semiconductor and display companies were in trouble due to Japan’s export regulations. This was due to Korea’s high dependence on materials, components, and equipment from Japan. Although the damage has been minimized through efforts for localization and import source diversification, Korea’s reliance on Japan is still high.

If Japan completely sanctions Samsung Electronics, as the United States did to Huawei, it will be virtually impossible for Samsung Electronics to make chips. Although Korea has rapidly grown in size in the field of information and communication technology (ICT), it still has a weakness in basic science.

What the United States and Japan have in common is strength in original technologies accumulated over a long period of time. This is why the two nations retain their technological leadership in the semiconductor and display sectors, even if they have lost manufacturing competitiveness against Korea, Taiwan, and China. To remain a global IT powerhouse, Korea needs to secure basic technologies in the material, component, and equipment sectors.