US Sanctions: Samsung will stop supplying Huawei with phone chips

Seoul: Memory chipmakers, including Samsung Electronics, will feel the pinch of additional US sanctions on Chinese telecom giant Huawei Technologies that take effect next week, industry sources said on Wednesday.

The new sanctions, which ban the supply of semiconductors made with US equipment, software and design to Huawei without prior approval from Washington, are set to become effective from next Tuesday, Yonhap news agency reported.

According to South Korean newspaper Chosun llbo, Samsung and memory manufacturer SK Hynix plan to suspend selling parts to the Chinese company on September 15th, reports Engadget. September 15th would be the day new restrictions the US Commerce Department announced partway through August go into effect.

Those restrictions prohibit non-American companies from selling components to Huawei that they developed using equipment or software made in the US. The ban has already affected Huawei's business.

The company's Richard Yu recently said the Mate 40 would feature Huawei's final high-end Kirin processor due to the trade sanctions, says the report by Engadget.

The ban is likely to hurt Samsung and SK Hynix as much as it does Huawei, says the report.

In SK Hynix's case, 40 percent of its $13.3 billion revenue in the first half of 2020 came from exports to China.

The santions will hit the shipments of Samsung Electronics, the world's top memory chip maker, SK hynix Inc. and most other global players will virtually stop shipments to the Chinese company next week, they said.

"I understand that Samsung Electronics will stop shipping chips to Huawei from next Tuesday, though there is a possibility of selling products after winning US approval," an industry observer said.

That is because US technologies are used in almost all sectors of chip production from design software to production equipment, according to the sources.

Huawei is known as one of Samsung's top five customers. SK hynix reportedly depends on Huawei for some 10 per cent of its sales.

The envisioned American sanctions are widely expected to have a negative impact on Samsung Electronics and other industry players over the short term, but they would unlikely have a great impact in the long haul, industry watchers said.

They further said Samsung Electronics could benefit from the US move, as it may come as an opportunity to widen its gap with Huawei in the smartphone market and play catch-up with the Chinese firm in the 5G sector.

The US sanctions come as Washington has increasingly sought to ban the use of Chinese technology, citing national security concerns.

(With inputs from various agencies)