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Business deals

Samsung and NEC team up on 5G as Huawei faces boycott

Korea-Japan alliance will develop base stations, splitting the burden

Samsung and NEC will accelerate the pace of 5G development by sharing different areas of research.

TOKYO/SEOUL -- Samsung Electronics and NEC have agreed to join in developing base stations for fifth-generation mobile communications, as they see an opportunity to gain market share while Chinese rivals such as industry leader Huawei Technologies increasingly face difficulty expanding in the U.S. and other major markets.

The tie-up will allow the two companies to accelerate development of 5G by splitting up the development work, Nikkei has learned. Samsung is expected to develop base stations that use high-frequency bands while NEC will handle low bands, and they will supply those products to each other.

The tie-up also covers joint sales, and the two companies will be looking first at the U.S. and Japan, which will be the frontier markets for 5G.

5G technology, which offers speeds about 100 times faster than existing wireless networks, will form the base infrastructure of an age in which the "internet of things" and self-driving cars take center stage. 

Market shares for base stations have changed dramatically over the years. European companies controlled almost 70% of the base station market in the 3G era, but Chinese players Huawei Technologies and ZTE grew sharply when the world shifted to 4G.

Now Chinese products are facing growing scrutiny. The U.S. Federal Communications Commission decided in April to prohibit American telecommunications companies from procuring equipment from suppliers that pose a national security risk. Although Chinese companies were not named specifically, they are clearly the target. In August, Australia banned the use of 5G equipment from Huawei and ZTE. 

Samsung has been expanding its U.S. market share in recent months as Huawei and ZTE struggle, convincing NEC of the possibilities that lie ahead. Although the Japanese company has failed in its overseas endeavors before, NEC will take another stab through the partnership with Samsung.

Some 5G service has been launched in the U.S. In Japan, wireless carriers are poised to ramp up equipment procurement as 5G technology is commercialized starting next fiscal year. Other parts of the world are likely to make the switch to 5G in 2020 or afterward.

Samsung has a sales network that spans the globe, and it sees the U.S., Japan, South Korea and India as key 5G markets. In Japan, Samsung has delivered products to KDDI, but it hopes to sell 5G base stations to NTT Docomo, a key NEC client.

The global market for base stations is estimated at $37.2 billion, according to IHS Markit. The Fuji Chimera Research Institute forecasts that the figure will expand by 20% within five years with the spread of 5G.

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