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Huawei ban puts South Korea in a familiar spot: caught between the U.S. and China

SEOUL (Reuters) – Less than a week after Huawei Technologies, was on the black list of the United States, more than a hundred South Korean politicians and business leaders by the Chinese tech giant’s headquarters, and the spacious new campus outside of Shenzhen.

FILE PHOTO: A woman checks her phone as she walks past a Huawei store in Beijing, China-May 16, 2019. REUTERS/Thomas Peter/Photo File

Managers of companies such as Samsung Electronics looked at demonstrations of high-speed robotics and smart city simulations powered by Huawei’s next-generation 5G network equipment. The event was part of a Seoul-backed forum aimed at building a tighter tech ties between China and Asia’s fourth largest economy.

But the meeting was overshadowed by the US decision earlier this month to ban American tech and telecom companies to do business with Huawei, and a push to get companies around the world to follow.

The campaign against Huawei, and the wider U.S.-China trade war, landed export-driven South Korea in a familiar bind, caught between its key security ally and trading partner.

Major global tech companies are suspending sales of parts and software to the Chinese company and the various mobile providers are delaying the launch of the new Huawei devices. But in South Korea, business leaders and politicians said they see little opportunities to do business with China as usual.

For Samsung, South Korea’s national tech champion, the benefits it can win in Washington move against Huawei would be offset by the pain of lost business, experts said.

Samsung could increase share on Huawei’s costs in smartphones and telecom equipment in the network, and its share has ticked up modestly since the U.S. ban was announced. The wider working class can the bone of the emergence of new Chinese rivals in chips and smartphone screens.

But Huawei is also one of the largest customers of Samsung memory chips, and the South Korean company has several factories in China where a plethora of customers. Samsung Vice President Yoon Boo-keun was one of the people who took part in the Huawei tour.

“They compete, but they are important partners too,” said Min Byung-doo, a South Korean ruling Democratic y member of parliament, who was part of the tour, referring to Huawei and Samsung. He told Reuters that South Korean companies had “no alternative” for maintaining business relationships with Huawei.

Samsung declined to comment.

‘MOMENT OF TRUTH’

South Korean government officials and tech company executives say there is enough to worry about in the long term. China is South Korea’s largest trading partner, accounting for 26.8% of the country’s exports in 2018, compared with 12% for the United States.

Huawei just bought $10.7 billion worth of South Korean products last year, accounting for about 17% of the country’s electronics components exports to China, according to data from the South Korean government and Huawei.

South Korea’s SK Hynix, the world’s No. 2 memory chip maker, which counts Huawei as the top of the customer.

Some experts believe that South Korea will not be able to walk the line between the two superpowers in the midst of an intensification of tech trade war.

“South Korea has to face the moment of truth – the choosing of the United States or China,” said Han Suk-hee, a professor of Chinese studies at Yonsei University and former South Korean consul-general in Shanghai.

“What if the US not only to ask not to use Huawei products, but also not to export South Korean semiconductors to China? The government needs to prepare for the worst-case scenario.”

Washington has warned the allies that the introduction of Huawei technology in 5G networks could cause US to curtail the sharing of information.

South Korea’s presidential office said that it does not comment on the discussions with Washington.

A South Korean government a source close to the situation said: there are no easy answers.

“Sorry, we are not the United States, and not just do the same as what the US does to China,” he said when asked whether the country will join the AMERICAN campaign against Huawei. “We can’t jump to a simple conclusion.”

LG Uplus Corp, is the only one in South korea telecom company to use Huawei equipment for the 5G network, declined to comment.

For its part, Huawei said it plans to open a 5G lab in South Korea on Thursday as a sign of his commitment to the partnership.

“Huawei is a In Korea, Korea advance of the philosophy,” Huawei’s head of the Asia-Pacific region, Feng Tian, was quoted as saying by South Korean officials who participated in the tour.

CHINA ‘ S INFLUENCE

Memories are still fresh in South Korea of how harmful retaliation by Beijing.

Angry about Seoul’s decision to make use of a U.S. THAAD anti-missile defense system in 2016 against North Korea, China informally banned group tours to South Korea and the floating construction projects by retail giant Lotte.

Samsung’s smart phone market share in China will be halved in 2017, a year earlier, according to Strategy Analytics. Hyundai Motor’s sales fell by a third as a result of the missile dispute.

In some South Korean companies, officials grumble that their government is powerless against China and has not done enough in the face of what they see as unfair subsidies and other trade practices.

“We feel as if we are left alone to fight to survive, not able to get any support from the government when the Chinese government is all there to advance their high-tech industry,” an official at a large South Korean display maker said, asking for anonymity due to the sensitivity of the matter.

“Our government is in disarray, without any pre-emptive plans in the THAAD situation, while our businesses continued to bleed in China”, said the chief executive of a South Korean company that supplies parts for Huawei smartphones, which also refused to be named. “This time around, I hope that our government can provide a clear vision and protect our businesses.”

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FILE PHOTO: A Samsung employee controls the new Samsung Galaxy S10e, S10, S10+ and the Samsung Galaxy S10 5G smartphones at a press event in London, great Britain February 20, 2019. REUTERS/Henry Nicholls/File Photo

Huawei is one of Korea Inc top customers (interactive) tmsnrt.rs/2W7oVHU

Huawei is one of Korea Inc top customers tmsnrt.rs/2W7oWLY

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Reporting by Ju-min Park and Heekyong Yang; Additional reporting by Hyunjoo Jin; Editing by Jack Kim, Jonathan Weber and Edwina Gibbs

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