Samsung inks $6.6B mega deal with Verizon

Korean exports down: Pedestrians walk past a Samsung store in Shanghai. Photo: AFP. Sketched by the Pan Pacific Agency.

SEOUL, Sep 7, 2020, The Korea Times. While Chinese telecom firms are seemingly slowing down their installation of fifth-generation (5G) base stations amid a deepening trade war between the United States and China, Samsung Electronics is staying on track, signing a massive order with long-time business partner Verizon Wireless for such equipment, The Korea Times reported.

In a regulatory filing to the Korea Exchange (KRX), the Korean tech giant said its affiliate Samsung Electronics America had inked a deal with Verizon to provide it with 5G network equipment over the next five years.

The total value of the deal is 7.9 trillion won ($6.6 billion), the single largest in the country’s telecom industry.

“The contract is significant because the telecom business is part of the infrastructure industry, and making a sizable contract in that area only comes based on long-term mutual trust,” a Samsung official said.

Samsung will also maintain the 5G equipment as per the contract; and follows on a 2018 agreement with Verizon, AT&T and Sprint to jointly promote the related business in the United States.

The timing of the announcement is noteworthy as in June, China’s Huawei, the leader in the global 5G equipment sector, told some suppliers to reduce shipments of “certain” 5G base station products, possibly buying time to redesign and modify some equipment to remove U.S. components.

With Huawei facing order cancellations from U.S. clients ― after Washington broadened its sanctions on the Chinese company ― the contract between Samsung and Verizon could be seen as expectations for the Korean firm to fill the void, as the U.S. speeds up efforts to expand the installation of 5G base stations in major cities.

Samsung officials said the contract will lift the company’s share in the lucrative 5G telecom equipment market. In the first quarter of 2020, Samsung was the No. 4 equipment supplier with a 13.2 percent market share compared to Huawei’s 35.7 percent.

The Verizon deal is good for Samsung as the U.S. is seeking the expansion of self-driving automobiles, smart factories, AI-enabled robotics, telemedicine and edge computing, an evolution of cloud computing. The improved latency ― the time it takes for a network to respond ― of 5G networks is crucial for such complicated sectors.

Analysts note, however, that while this is a “very impressive start” for Samsung, the company needs to clinch additional deals, as the sanctions on Chinese companies could be “temporary,” given China’s ambitions in growing 5G businesses, and a resolution to the Washington-Beijing dispute could be found before or after the U.S. presidential election.

By Baek Byung-yeul, Kim Yoo-chul

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