Huawei Troubles Spell Opportunity for Samsung as 5G Nears

(Bloomberg) -- Growing security concerns surrounding Huawei Technologies Co. may help Samsung Electronics Co. challenge the Chinese behemoth in the market for fifth-generation wireless communications, an executive at the South Korean giant said.

While Samsung remains the world's biggest smartphone and semiconductor maker, Huawei dominates networking by a large margin. But its market position is under threat as one country after another blocks the use of its 5G products, amid concerns they could be used to spy for the Chinese government. Huawei denies any role in espionage.

“Strategically these concerns help us grab more market share,” S. Abraham Kim, a vice president at Samsung's mobile division, said Wednesday at a conference in Seoul. “Huawei has held dominance in the network market since the fourth-generation LTE era, but we're ahead on 5G technology that goes into smartphones.”

Samsung said Kim's personal views on the networks market don't reflect those of the company as he is part of the mobile phone business.

“Samsung Electronics has been working in the networks industry for decades building trust with our partners,” the company said in an emailed statement. “Our priority is working with our partners across the world to unlock the power of 5G. That is why we have made substantial investments in 5G technology since the mid 2000s.”

Samsung plans to release a 5G-capable handset along with a bendable-screen phone next year, and sees those gadgets as its best shot at reviving sales that have slowed as consumers wait longer to upgrade their smartphones.

But technical challenges remain, Kim said. 5G signals can get obstructed depending on how a phone is held, so that means the need to cram more antenna modules around a phone's already limited real estate, alongside a large battery. Samsung is now studying how a device's innards can be split into two layers while still minimizing overall thickness, Kim said.

Heat poses another challenge because 5G transmits a lot more data and consumes more power, potentially making the phone too hot to hold. Samsung is working to cap the temperature at just over 40 degrees Celsius, Kim said.

Huawei recently replaced Apple Inc. to become the world's second-biggest smartphone maker and is narrowing the gap with Samsung. But concerns about the Chinese company's global business have escalated since Chief Financial Officer Meng Wanzhou was arrested on allegations she conspired to defraud banks and violate U.S. sanctions on Iran. Meng was released on bail Tuesday but faces extradition to the U.S.

To contact the reporter on this story: Sam Kim in Seoul at skim609@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan, Peter Elstrom

©2018 Bloomberg L.P.