Samsung Electronics has clinched a $6.6bn deal with Verizon to help it build 5G networks in the US, highlighting how the technology group can benefit from the Trump administration’s targeting of China’s Huawei.
The South Korean company said on Monday it had signed a contract to supply wireless telecoms equipment to the US operator until the end of 2025. The components will be used for Verizon’s 5G telecom services, according to people familiar with the matter.
The deal comes as the US increases sanctions on Huawei. Washington last month banned sales of any chips using US technology to the Chinese company, hitting Huawei’s 5G equipment and handset businesses.
“More companies will be turning to Samsung for their 5G equipment because of the US restrictions against Huawei and Nokia’s quality issues,” said Kim Young-woo, an analyst at SK Securities. “There are not many alternatives other than Samsung and Ericsson if you rule out Huawei and Nokia.”
Mr Kim expects Samsung to expand its global 5G market share by winning more deals in the US, Europe and Middle East as it takes advantage of Huawei’s woes.
Huawei has struggled to roll out its 5G networks globally as Washington has pressured other countries to follow its lead in freezing out the Chinese company. Under growing US pressure countries including the UK and India are phasing Huawei equipment out of their 5G infrastructure.
Samsung has a relatively small global presence in the telecoms equipment market with a 3 per cent share in 2019, according to research firm Dell’Oro Group. That compares with Huawei’s 28 per cent, Nokia’s 16 per cent and Ericsson’s 14 per cent.
The South Korean company has invested heavily in research and development as global telecoms equipment makers compete for dominance in 5G. Samsung believes 5G is an important future growth driver as the global smartphone market — one of its biggest revenue streams — stalls.
The group’s network business has taken on added importance as the coronavirus pandemic has hit global demand for its devices. Samsung has made a series of recent acquisitions to boost its 5G presence and has previously said it plans to increase its market share to 20 per cent by the end of this year.
Samsung has supplied 4G and 5G network equipment to US operators including AT&T, Sprint and Verizon, and is working with Japan’s NTT DoCoMo and KDDI to develop 5G business models. It has increased its market share in South Korea, which launched the world’s first 5G mobile service in April last year.
Shares in Samsung were up 2.1 per cent on Monday morning in Seoul.