China Warns Korean Firms Over Huawei Boycott

The Chinese government has summoned the representatives of major foreign companies including Samsung Electronics and SK Hynix to warn them of "dire consequences" should they take part in the U.S.-led boycott of Huawei, the New York Times reported on Saturday.

The move came after Beijing said it is assembling its own list of "unreliable" companies. Korean companies are wary of another Chinese boycott just as they are recovering from the 2017 spat over a Terminal High-Altitude Area Defense battery.

But China has few other sources of technology and parts to turn to amid the U.S. boycott, which has increased its dependence on Samsung and SK after Micron, Qualcomm and Intel cut business ties with Huawei.

Samsung and SK supply memory chips, display panels and other key components to Chinese companies like OPPO and Vivo. Last year, Samsung made a whopping 32 percent of its total revenues from sales to Chinese companies, and at SK the proportion stood at an alarming 39 percent.

Chinese authorities have been probing Samsung, SK, Micron and other major chipmakers for anti-trust violations since May last year. In November, Beijing announced that it discovered ample evidence, but it has yet to take punitive measures.

The probe came amid soaring global semiconductor prices that sparked complaints from Chinese smartphone and computer manufacturers, but prices have since settle down.

Seoul is in a bind as Washington leans on it to join the boycott since China is Korea's No. 1 export destination, while Korea is China's largest importer.

Korean shipments accounted for 9.6 percent of Chinese imports last year, more than those from Japan (8.4 percent) and from the U.S. (7.3 percent). China imports vast amounts of intermediate goods from Korea to manufacture finished products for export. It stands to take a considerable hit if Korean shipments are halted. In 2017, 79 percent of Korea's total exports to China worth US$142.1 billion were intermediate goods.

During the last Chinese boycott, the Hyundai Research Institute estimated the direct and indirect damage Korea suffered at a minimum of W8.5 trillion (US$1=W1,185). Beijing already seems to be yanking Seoul's chain, telling prospective Korea business visitors to submit detailed itineraries for visa requests.