Imminent Huawei risk awaits South Korea

At a time when presidential impeachment is the talk of the town, it is regrettable that uncertainties surrounding the upcoming Trump administration seem to be somewhat overlooked, although U.S. President-elect Donald Trump is set to begin his second term in less than a month. More worryingly, little attention appears to be paid to preventing risks concerning Huawei. After all, South Korea will be pressured to opt out of Huawei telecommunications equipment during Trump's second presidency with greater intensity than during his first term.

Trump has a deeply seated distrust of Huawei. Back in 1987, Ren Zhengfei, a former officer of the People's Liberation Army, founded Huawei to produce telecommunications equipment. Washington has been concerned that its products could be used to steal confidential information in the interest of Beijing. After sending verbal warnings for years, it took practical action with Trump at the helm by putting Huawei and its 70 subsidiaries on the export control list in May 2019.

From the perspective of the United States, with a tight grip on global information across international telecom networks, satellites, and undersea cables, the last thing it would want is to see Chinese telecom equipment spread and facilitate data leaks. Not surprisingly, Trump is highly likely to move against Huawei again, representing China’s efforts to ensure self-reliance in the telecommunications industry.

Washington requested that its allies take the same degree of action. In “Underground Empire: How America Weaponized the World Economy,” a book on how Washington has secured its control of the digitized world, the author depicts Trump having a call with then-British Prime Minister Boris Johnson in February 2020. As Prime Minister Johnson declined a request to block British carriers from exporting Huawei equipment, Trump got so infuriated that he could nearly faint, furiously criticizing him. His anger escalated beyond mere shouting, the book recalls. Under such heightened pressure from the United States, many countries, including Japan, Australia, and France, decided to exclude Huawei equipment from their purchase list. Meanwhile, South Korea stubbornly insisted that it should be a matter for businesses to decide on their own.

Consequently, U.S. action against Huawei slowed down its sales in 2020 and even slashed its figures in the following year. However, the company has turned around since last year. Market research firm Omdia found that Huawei topped the global telecoms equipment sector with a market share of 31.3 percent, followed by Ericsson (24.3 percent), Nokia (19.5 percent), ZTE (13.9 percent) and Samsung Electronics (6.1 percent) as of 2023. It is recovering despite U.S. sanctions.

Although Huawei only accounts for 10 percent of the South Korean telecoms market, it has constantly tried to increase its market presence with sharp price cuts and cost-free removal of existing telecom equipment. Reportedly, a local carrier has recently decided to replace old systems with Huawei products and completed a system check.

The South Korean government seems to be in an awkward position to decide whether to talk businesses out of using Huawei products or to let them decide. It is virtually impossible to hold back private sector investment solely due to national security concerns because diplomatic relations with China also matter. Huawei is also a client of Samsung Electronics and SK hynix that buys DRAM and NAND Flash products worth trillions of won a year.

However, the Trump administration could threaten to withdraw U.S. troops from South Korea if Seoul takes a backseat. The U.S. Congress later in 2020 added to the National Defense Authorization Act a provision requiring that before sending U.S. troops overseas, it should be considered whether the host country uses 5G mobile technology supported by Chinese businesses such as Huawei.

If the government finds it difficult to intervene, it may be a great idea for businesses to adopt a “Buy Korea First” approach. Companies could consider prioritizing domestic products when they upgrade their mobile infrastructure systems and build AI networks. Such supportive action will be a much-appreciated gift from Santa that helps boost local telecom equipment producers, most of which are small and medium-sized enterprises.