Samsung Electronics Vice Chairman Lee Jae-yong (R) inspects the company’s memory chip plant in Xian, China. Photo courtesy of Samsung Electronics
SEOUL, May 20 (UPI) -- Samsung Electronics Vice Chairman Lee Jae-yong visited the company's semiconductor factory in China days after the United States announced a new round of restrictions on Huawei Technologies.
Samsung said that the company's de facto leader inspected its plant in Xian, about 600 miles southwest of Beijing, on Monday and encouraged workers there to overcome the negative economic impact of COVID-19.
"To find new growth engines, Samsung should prepare for upcoming changes in a preemptive manner," Lee said in a Samsung press release. "We don't have the luxury to lose this moment."
Observers said Lee's visit may be related to new U.S. sanctions designed to cut off Huawei's access to U.S. technology and markets.
As a result, foreign chip producers using U.S. chip-making equipment and software will be obliged to get a license before shipping chips to Huawei.
The new rule, which will go into effect in September after a 120-day grace period, is a follow-up to previous U.S. restrictions against Huawei.
In this climate, concerns have surfaced that Washington may press Samsung to join its move to corner Huawei in the global market. The Xian plant is Samsung's only memory chip factory outside South Korea.
"The sales to Huawei, which account for about 10 percent of Samsung's top line, may disappear," Kim Yang-paeng, a senior researcher at the Korea Institute for Industrial Economics and Trade, told UPI News Korea.
"But if other Chinese companies like Oppo, Vivo and Xiaomi purchase more chips from Samsung to compensate for the losses, the damage would not be that big," Kim said.
Kim said Samsung must diversify its sales channels in the world's most populous country. Huawei is the largest smartphone supplier in China, followed by Oppo, Vivo and Xiaomi.
"China has no choice but to use Korean chips, and Korea also cannot ignore the big market," a source in the Korean chip industry said, asking for anonymity. "[Korean] companies will not be able to side with just one country. Hence, they will continue to check the situations of both sides."
Lee's visit to China marked his first overseas business trip after the COVID-19 novel coronavirus became a global pandemic earlier this year.
Last year, Samsung announced that it will invest an additional $8 billion in the Xian factory. The company also sent hundreds of engineers to expand its second plant in the city last month.
Vice Chairman Lee has spearheaded Samsung Electronics after his father, Chairman Lee Kun-hee, collapsed in 2014 from a heart attack. He has yet to regain consciousness.