Monday, 14 September 2020 09:26

Samsung's Verizon deal means it has chosen the US in Huawei stoush

Samsung's Verizon deal means it has chosen the US in Huawei stoush Pixabay

ANALYSIS Speculation that South Korean conglomerate Samsung Electronics would come to the aid of beleaguered Chinese telecommunications equipment vendor Huawei Technologies and help it to obtain semiconductors for its business has been more or less squashed after Samsung was given a massive deal by Verizon.

Samsung secured a US$6 billion (A$8.23 billion) deal with Verizon for supply of radio equipment and services, primarily 5G RAN gear, putting it clearly in the US camp when it comes to the stoush with Huawei. The deal runs until the end of 2025.

Soon after the US came down with a second round of sanctions in May to block Huawei's ambitions, a report claimed that it would do a deal with Samsung, whereby the South Korean firm would help the Chinese company obtain its requirement of advanced semiconductors in exchange for Huawei ceding a part of its smartphone market share to Samsung.

This rumour about the co-operation between the two companies was given added weight by a story that Samsung had set up an experimental production line for 7nm chips which had no American equipment. This seemed designed for helping Huawei, which under the most recent American curbs cannot source semiconductors from any company that uses American software or hardware in its production of chips.

With the Verizon deal, that path out of the crisis for Huawei has been cut off. Samsung is still cutting its teeth in the 5G business and it is very likely that there would have been some push from the US Government for this deal to go through.

There are other factors that could have been at play, though. One is the fact that Verizon chief executive Hans Vestberg would never have given this deal to Ericsson, given that the Swedish company sacked him a few years ago.

And, industry sources say, there was no chance of the Verizon deal going to the other 5G supplier, Nokia, because Vestberg still does not entertain much love for his former rival.

Samsung is an ideal candidate from the US Government's point of view. In the absence of there being any American 5G gear provider plus Intel's recent announcement that its production of 7nm semiconductors would be delayed for at least six months, the administration has been trying to gain some sort of hold over Taiwan Semiconductor Manufacturing and Samsung, the only two companies in the world that can manufacture both 7nm and 5nm semiconductors.

These chips are needed for defence equipment, apart from other advanced hardware.

The Verizon deal means that the US has taken care of one of these objectives. TSMC, the biggest chip fab, has promised to set up a plant in Arizona but that will take a few years to come to fruition. In the meantime, the company has promised that it will no longer supply Huawei with chips.

It is one more hill for Huawei to climb if it intends to stay in business beyond the time when the chips it has stockpiled runs out.

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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