Samsung might lose one of its biggest clients, Huawei, in the next 5 years
Despite the rivalry between Samsung and Huawei, the latter company represents a huge revenue stream for the former, particularly in the semiconductor business where the South Korean tech giant has a strong foothold. But Huawei’s reliance on certain components built by Samsung might come to an end over the next few years, and this will potentially leave Samsung in an odd spot from which it might be difficult to recover.
Huawei might stop being one of Samsung’s biggest clients
Samsung Electronics’ five biggest clients at the end of Q4 2019 were Apple, Best Buy, Deutsche Telekom, Verizon, and Huawei (not in that particular order), according to Business Korea citing an official earnings report. This ranking covers all of the segments in which Samsung Electronics operates, including mobile, semiconductor, display, 5G networking equipment, etc.
As far as the relationship between Huawei and Samsung goes, the former company relies on the latter’s memory semiconductors (DRAM and NAND flash memories) for its mobile division. But the Chinese manufacturing industry is changing and it will shift even further due to China Manufacturing 2025 – an initiative by the Chinese Government to bolster local industries and minimize their reliance on components imported from other markets over the next half a decade.
Samsung could suffer big semiconductor losses in the next 5 years
China Manufacturing 2025 will most likely help Huawei in becoming more self-sufficient over the next 5 years, diminishing its dependence on Samsung. The South Korean tech giant might suffer pretty big losses in the wake of this market shift, particularly in the semiconductor segment. In other words, Samsung could lose one of its biggest semiconductor clients, and that’s bound to leave a mark.
Huawei has a grasp on roughly 50% of the Chinese mobile market, this being one of the main reasons why Samsung’s semiconductor business has enjoyed a lot of success in recent years. But if Huawei will start adopting memory chips from local suppliers, this will inevitably hurt Samsung’s revenues.
Fortunately for Samsung, Huawei is not the only big player who needs its semiconductor expertise. Intel has also become an important client, and the production of 14nm-based Intel CPUs for PCs has reportedly begun in Samsung’s facilities.
Samsung might lose ground in other segments as well
Samsung may have won the battle against Huawei in the mobile segment this year, in large part because of the trade restrictions imposed on Huawei in the West. However, both companies are involved in more than just the mobile segment, and in truth, Samsung and Huawei share the same revenue sources, more or less.
The 5G segment is just one big example of a revenue stream shared by both Samsung and Huawei, and although the Korean company has enjoyed a lot of success in the 5G segment so far, Huawei is combatting this with aggressive pricing and – according to some analysts – even better equipment.
Some analysts speculate that Samsung could also lose ground to Huawei in the 5G race over the next few years. There are plenty of markets in which 5G is in early development, giving Huawei a chance to win new contracts and increase its presence. Now, whether or not this will happen is another matter altogether, but there’s no denying that China Manufacturing 2025 will affect the market in some ways that might hurt Samsung Electronics or even other non-domestic companies for that matter.Join the Discussion