Korean Telecoms Bought Billions Worth of Huawei Equipment

Korea's three major telecoms SK Telecom, KT and LG Uplus have all bought large amounts of communication equipment from Huawei over the last four or five years. Most of the equipment was used to establish fixed-line backbone networks that also link to the mobile infrastructure.

That puts Korea in an awkward position amid increasing U.S. pressure to join its boycott of Huawei as part of its trade war with China. But most of the 36 member nations of the OECD also use Huawei equipment, so Washington may be playing a losing game in the 5G mobile race.

Analysis of global communications equipment data from market researcher Ovum shows the Chinese tech giant sold products to 530 telecom companies around the world. They include 33 OECD members, except only Israel, Estonia and Slovenia.

In Korea, SK Telecom and SK Broadband have W150 billion worth of Huawei equipment, while KT bought W200 billion worth (US$1=W1,187). Huawei started aggressively marketing products in Korea five years ago and now dominates the communications backbone networks here along with Cisco, accounting for around 20 to 25 percent.

An industry insider said, "Communications networks are connected like spider webs, and that level of market share means most phone calls and Internet connections pass through Huawei equipment at least once." 

/Reuters-Yonhap

The U.S. House Permanent Select Committee on Intelligence in a report back in October 2012 warned that Huawei's telecom equipment could be used as a backdoor channel for spying by the Chinese government. 

"Huawei... was unwilling to explain its relationship with the Chinese government or Chinese Communist Party, while credible evidence exists that it fails to comply with U.S. laws," the report said.

Washington's campaign against Huawei started the same year and was only ratcheted up by the administration of President Donald Trump. But Huawei has been on a roll regardless. The U.S. government also leaned on its more pliant allies like Australia, Canada, Japan and the U.K. as well as Korea over the last seven years.

When LG Uplus signed a procurement deal with Huawei in 2013, the U.S. Embassy here voiced concern to the Korean government but was ignored. But in 2016 SK Telecom apparently gave in to U.S. demand to cancel its plans to buy LTE networks equipment from Huawei.

Now Trump has accelerated pressure, the Chinese giant is likely to suffer a fall of 40-60 million units in annual smartphone sales, and there is a strong chance that its communications equipment sales will also drop for the first time.

Huawei chairman Ren Zhengfei admitted in a panel discussion at its headquarters in Shenzhen on Monday that his company is like a "badly damaged plane." But he added that the U.S. moves "will not stop us."

Huawei is fighting back with demands that the U.S.' top mobile provider Verizon pay US$1 billion for using more than 230 patents owned by the Chinese company. There are also rumors that Huawei is pressuring the U.S. government through its American business partners.

Huawei bought $11 billion worth of products from Qualcomm, Intel and Micron last year. Reuters reported Monday that top management officials at Intel and Xilinx met with U.S. Commerce Department officials in late May and asked to "ease its ban on sales to the Chinese tech giant" as smartphone and computer parts "are unlikely to present the same security concerns as [Huawei's] 5G networking gear."