US restrictions on Huawei will reduce South Korean chip exports in the short term

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Chinese manufacturing giant, Huawei, is a top company globally. Huawei’s position as a leading company is more obvious now that it is facing a ban from the American government. The recent ban on Huaweinis causing significant irregularities and adjustments in different sectors globally. The likes of TSMC will have to fill Huawei’s orders which runs into tens of millions. This will not be easy to replace. According to reports out of South Korea, the US restrictions on Huawei may affect some Korean companies that supply chips to Huawei.

Huawei's ban

However, this will only be obtainable in the short run. In the long run, the impact of this measure on the Korean semiconductor industry will be insignificant. This is from a report by the Korean Institute for International Economic Policy (KIEP) via BusinessKorea.

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Huawei can not purchase American technology

For some well-known reasons, the White House has included Huawei and many of its foreign subsidiaries on its list of entities. This prohibits Huawei from purchasing semiconductors or dealing with companies that use American technology. According to KIEP, this is a direct blow to Huawei, and it will affect some Korean companies in the short term. In addition, KIEP also believes that the impact of the ban on China’s entire high-tech industry is also insignificant.

KIEP stated: “China will make more efforts to reduce its dependence on the external semiconductor industry. This means that South Korea needs to pay more attention to keeping ahead of China in technological strength”.

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According to data from the Korea International Trade Association, South Korea’s exports of chips last year were valued at $94 billion. This accounts for 17% of South Korea’s total exports. In addition, nearly 20% of Samsung’s revenue in the most recent quarter is from China. Therefore, there are reports that the restrictions will also affect South Korean companies such as Samsung Electronics and SK Hynix.

Furthermore, chips are the largest single export category in South Korea. Also, mainland China is South Korea’s largest export destination for chips. Of course, these South Korean companies use American technology. Presently, ALL Chinese companies are very careful with the U.S. The American government can ban anyone at any time. This means that Chinese companies currently have one goal – do away with American technology.  While the likes of Huawei are working on this project openly, others are doing it covertly. In time, Chinese companies may no longer need to take chips from South Korean companies that use American technology. The US restrictions on Huawei and other Chinese companies is gradually reshaping the technology industry.

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