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Huawei crackdown

South Korea caught in US-China crossfire over Huawei

Washington is pressuring Seoul to join its campaign against the Chinese tech giant

SEOUL -- The U.S. is pressuring South Korea to join its campaign against Huawei Technologies, putting Seoul in the awkward position of having to pick sides between Washington and Beijing in their intensifying trade war.

South Korea's Foreign Ministry said on Thursday it is in talks with the U.S. about national security concerns over the use of Huawei's equipment.

"We know very well that the U.S. is emphasizing the importance of securing safety in 5G networks," ministry spokesman Kim In-chul said in a briefing. "South Korea and the U.S. have consulted over this issue continuously."

The U.S. Department of Commerce last week put Huawei and 70 of its affiliates on its Entity List, which restricts exports of products incorporating U.S. technology, such as chips and crucial materials.

The U.S. is asking allies -- it has a military alliance with South Korea -- to join its boycott against Huawei. President Donald Trump said on Thursday that American complaints against the company could be resolved as part of a broader trade deal with China, but called Huawei "very dangerous" from military and security standpoints.

Going along with Washington's demands to take action against Huawei would put Seoul at risk of political and economic retaliation from Beijing. The deployment of an American missile shield in South Korea in 2017 prompted countermeasures by Beijing, as well as consumer boycotts.

Hyundai Motor, Lotte Shopping and other South Korean companies were hit hard by the Chinese authorities, suffering from negative consumer sentiment and suspension of operations. Among other steps, Beijing also briefly banned group tours to South Korea.

"It is not easy to ignore such demands [from Washington] because it is a matter of economy which affects many private companies," said Park Won-gon, a professor of international relations at Handong Global University in Pohang.

"We need to keep pace with other countries, such as the U.K., Germany and France. We also should explain this to China and persuade it to understand this," Park added. "This is a lesson that we should learn from the THAAD issue," he said referring to the missile defense system.

U.K.-based chipmaker ARM this week decided to cut its ties with Huawei, dealing a blow to the Chinese company that uses the British firm's chips for its smartphones. Germany's Infineon is also halting certain deliveries and services for fear of violating the new rules.

South Korea's presidential Blue House said it acknowledged the U.S.'s stance against Huawei, but declined to elaborate on discussions between the two countries. Trump plans to visit Seoul next month for a summit with South Korean President Moon Jae-in to discuss North Korea, but there is a possibility that the American leader turns the screws on Moon over Huawei.

South Korean media have reported that U.S. officials demanded that Seoul make LG Uplus stop using Huawei equipment for its 4G mobile services and its growing 5G coverage. Shares of LG Uplus, a unit of the LG Corporation conglomerate, hit a three-month low of 13,650 won ($11.45) in midday trading on Friday, after falling 6.35% the previous day. It closed on Friday at 14,100 won, up 0.71%.

Other countries in Asia have confirmed discussions with the U.S. about the Chinese company.

In Malaysia, where Huawei is involved in the country's 5G initiative, Communications and Multimedia Commission Chairman Al-Ishsal Ishak told the Nikkei Asian Review that it will work with Washington to "minimize potential risks and disruptions to services."

Amazon Japan has stopped selling Huawei products through its online store, and Japan's three biggest mobile carriers, SoftBank, KDDI and NTT Docomo, have stopped taking orders from the company. The issue is likely to be on the agenda when Trump visits Tokyo this weekend.

Meanwhile, Singapore will remain "objective" regarding the use of Huawei equipment, a government official told the Nikkei Asian Review on Wednesday.

Some analysts say that certain South Korean companies will benefit from the dispute between the world's two largest economies.

"We expect Samsung Electronics' global network equipment business to also get a boost," said SK Kim, an analyst at Daiwa Capital Markets. "We assume that Samsung Electronics can achieve its target market share of more than 20% in 5G network equipment versus to its less than 10% in 4G."

But others in the industry are more concerned.

"I cannot predict what direction the trade war will take," said a manager at a large tech company that does business with Huawei, asking to be identified only by his surname, Lee. "I want to see such a dispute related to Huawei resolved smoothly and quickly."

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