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By Jun Ji-hye
Korean companies, especially those in the IT sector, are facing growing uncertainty following the Donald Trump administration's sanctions on Huawei amid the escalating U.S.-China trade row, industry analysts said Friday.
The U.S. government has been pressuring Korea through various channels to join moves to boycott the Chinese tech giant, according to diplomatic officials.
A number of Korean firms including LG Uplus, Hyundai Motor and the state-run Korea Electric Power Corp. (KEPCO) maintain deals with the Chinese company.
"The U.S. side has stressed the importance of ensuring the security of fifth-generation (5G) equipment, and we are aware of the position," a foreign ministry official said. "Korea is consistently consulting with the United States regarding the issue."
Korea is one of the major allies of the U.S., but at the same time has close economic ties with China.
Other U.S. allies including Japan have sided with the U.S. in the anti-Huawei campaign ― in Japan, KDDI and NTT Docomo as well as Softbank's low-cost carrier Yahoo Mobile said they would delay their plans to sell a new series of Huawei smartphones.
Korean companies are cautious because if they suspend ties with the Chinese firm in response to U.S. pressure, they have to brace for possible economic retaliation from China.
Korea has already experienced Beijing's economic retaliation against the deployment of a U.S. Terminal High Altitude Area Defense (THAAD) battery on Korean soil in 2017.
According to a report by Hyundai Research Institute, Korean companies suffered a loss of 8.5 trillion won ($7.1 billion), directly and indirectly, due to China's economic retaliation against THAAD deployment.
LG Uplus is apparently in the most awkward position as it chose Huawei as one of its equipment partners in constructing 5G networks.
A local newspaper reported Thursday that a U.S. State Department official singled out LG Uplus, arguing that the telecom company should not provide its communications service in "sensitive areas" and that the firm should exclude Huawei totally at some future day.
This has raised concerns that LG Uplus may face serious setbacks in securing components from the Chinese company necessary to construct 5G networks nationwide on time. Amid concerns, stock prices of LG Uplus fell 6.35 percent on that day.
An LG Uplus official attempted to allay the concerns, saying, "We have already secured sufficient products from Huawei."
Chipmaker SK hynix is also on the verge of suffering a blow from U.S. pressure to join its anti-Huawei campaign as the firm's supply of semiconductors to the Chinese company takes a huge part of its sales.
"Among chipmakers, SK hynix has been a major supplier to Huawei," Korea Investment & Securities analyst Cho Cheol-hee said. "Inevitably, SK hynix will be negatively affected by U.S. sanctions in the short term."
Yuanta Securities Korea analyst Choi Nam-gon noted, however, that it is unlikely for the Korean government to impose a ban on dealings with Huawei as a number of companies here have already used equipment from the Chinese company.
